Company closure and intellectual property
Discussion
I currently work PAYE for a small company that is privately owned by the two directors. This company has 20 ish employees and would be valued at a few million.
A few years ago, I invented a derivative product of the main product I’m employed to produce (software developer). I did this on my own time and presented it to the directors (only hoping for a bonus!). The outcome was a second small company being created that I own 30% of. Intellectual property rights were transferred to the new company in return for 50% of revenue for the first 3 years (which has now passed). This new product currently produces sales of about £15k/year so I get about £4k/year dividends due to the minimal overheads. All sales are driven via a partner-like relationship to the parent company, through its marketing activities.
I have now resigned from my PAYE job and the plan by the other directors is to shut down the small company and amalgamate the technology back with the parent company.
What happens to intellectual property when a company closes in a controlled way (rather than going into receivership)?
Does the large company have to buy the intellectual property for a fair price?
Can the majority shareholders of the small company just value the intellectual property at £1 and I have no say?
Do I have any claim over the intellectual property after closure to re-use it myself?
The reason for this is that I'm expecting nothing, but hoping for something! Do I have any leverage for them to buy me out, rather than just leave me with nothing?
A few years ago, I invented a derivative product of the main product I’m employed to produce (software developer). I did this on my own time and presented it to the directors (only hoping for a bonus!). The outcome was a second small company being created that I own 30% of. Intellectual property rights were transferred to the new company in return for 50% of revenue for the first 3 years (which has now passed). This new product currently produces sales of about £15k/year so I get about £4k/year dividends due to the minimal overheads. All sales are driven via a partner-like relationship to the parent company, through its marketing activities.
I have now resigned from my PAYE job and the plan by the other directors is to shut down the small company and amalgamate the technology back with the parent company.
What happens to intellectual property when a company closes in a controlled way (rather than going into receivership)?
Does the large company have to buy the intellectual property for a fair price?
Can the majority shareholders of the small company just value the intellectual property at £1 and I have no say?
Do I have any claim over the intellectual property after closure to re-use it myself?
The reason for this is that I'm expecting nothing, but hoping for something! Do I have any leverage for them to buy me out, rather than just leave me with nothing?
alock said:
What happens to intellectual property when a company closes in a controlled way (rather than going into receivership)?
It's an asset of the business, just like the furniture or the computers - so they'll be sold to whoever the shareholders agree to sell to. Your vote's worth 30% towards that simple majority decision.Yes, there should be a fair valuation, and you should receive 30% of the net value of the company after the assets are sold and all the liabilities are settled.
What's the IP worth to you? Might be worth negotiating that off in return for your shares?
You should probably seek some legal advice.
If the separate company is making ~£12k/year of profit before tax, then selling the trade and assets (i.e. the IP) back up to the main company should be done at a reasonable valuation. Often done on a "Price/Earnings ratio", which could be anywhere between 5 and 15 depending on the industry.
(What that means is that the value of the company is "x" times the annual PBT, so e.g. 5x£12k = £60k)
Essentially, if they do it above board then the sub company should get between £60k and £150k (and I wouldn't like to guess where in that range) as sale consideration. Your shares are then worth 30% of that. Thing is, you've not got a ready market to sell your shares...
...which is why I say you should find a good solicitor. I know a bunch of the accounting around it but none of the legalese required to protect you / get you the money that should be yours. Get involved sooner rather than later before any Agreement is drawn up.
Good luck! And keep it amicable with the Directors - yes you've resigned but you don't need them to play hardball / silly-beggars with you ref the other company...
If the separate company is making ~£12k/year of profit before tax, then selling the trade and assets (i.e. the IP) back up to the main company should be done at a reasonable valuation. Often done on a "Price/Earnings ratio", which could be anywhere between 5 and 15 depending on the industry.
(What that means is that the value of the company is "x" times the annual PBT, so e.g. 5x£12k = £60k)
Essentially, if they do it above board then the sub company should get between £60k and £150k (and I wouldn't like to guess where in that range) as sale consideration. Your shares are then worth 30% of that. Thing is, you've not got a ready market to sell your shares...
...which is why I say you should find a good solicitor. I know a bunch of the accounting around it but none of the legalese required to protect you / get you the money that should be yours. Get involved sooner rather than later before any Agreement is drawn up.
Good luck! And keep it amicable with the Directors - yes you've resigned but you don't need them to play hardball / silly-beggars with you ref the other company...
Thanks. It's good to know I should be due something more than just a final share of the cash in the bank account, because the IP has value.
I think my next step is to have an initial-thoughts type informal conversation with them to see if they already have anything in mind, and then speak to a solicitor if I sense they are taking the piss.
I think my next step is to have an initial-thoughts type informal conversation with them to see if they already have anything in mind, and then speak to a solicitor if I sense they are taking the piss.
desolate said:
Does the company currently holding the iP rely on the other company to carry out it's business?
Yes it does. The large company generated the sales. A £100k deal might have £5k of products from the smaller company.The small company has no assets (other than IP) and no costs (other than accounts at year end). It was created to provide a mechanism to pay me some extra money and to try and bind me to the job (which worked for a few years).
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