Ensuring the Proper Transfer of IP During Business Restructuring

Author: Ian Aldridge, Progressive Legal

Attention all Australian accountants and business owners:

When incorporating a business from a sole trader to company, it’s vital to make sure that all the intangible Intellectual Property (IP) is moved from that sole trader to the company as soon as it is set up.

Remember, it’s a completely new and distinct legal entity. So any assets need to be moved over, including the IP. Sometimes, that is all that needs to be moved because the business doesn’t really have any other assets. The same applies if you’re changing corporate structures or putting in IP holding companies.

We’re finding it is getting missed left, right and centre!

The importance of a proper transfer of intellectual property

The danger for the client is if it comes time for enforcement of that IP or a sale of the business, technically, it doesn’t own the IP so it can’t enforce a legal right it doesn’t have. It also can’t sell something it doesn’t own. 

Executing a deed of assignment

That can be easily fixed by way of a Deed of Assignment, which needs to be done properly to make sure all is assigned and all the correct language is used from a legal perspective, to perfect that assignment. 

We can assign over all IP including trade marks, domains, social media handles, logos, copyright, designs, patents, confidential information, know how, trade secrets etc so there is a documented transfer of those assets from one organisation to the next.

Best practices and timely actions

Best to get it done and dusted at the time so nothing comes back to bite later! Because this is normally taking place at a busy time (e.g. end of financial year or at a really busy period), we completely understand why this is getting left behind. However, it’s becoming more important now as that IP is more valuable than ever.

Once it is assigned over, if it needs to be assigned back to say for instance the trading entity, then an IP licence agreement also will be required. Those are becoming more prevalent as we are seeing more complicated structures being put in place and holding companies being set up to put all the IP into.

Contact Progressive Legal for help

Let us know if we can assist any of your clients with getting their house in order and make sure they are protected. We love working with accountants to protect Australian small businesses. If it’s already taken place, don’t worry, we can document the transfer of those assets legally as at the date they were transferred – i.e. a confirmatory deed of assignment. 

That can be done now to ensure that it is documented that the transfer took place on that date. We can also assist with other services surrounding that organisational change, see the below diagram for more information.