What's the issue?
Before dissolving a company, thought should always be given to assigning out IP rights. Where that does not happen, those rights become "bona vacantia" – ownerless goods in the eyes of the law – and automatically pass to the Crown.
Often businesses only realise that rights have been 'lost' in this way when there is a problem, such as a competitor adopting a similar right. Fortunately, it is often possible to recover rights later, but the process can be challenging and costly. Here, we outline the two processes by which recovery can be carried out.
Company restoration through the County Court
This process is available for companies that have, for example, been voluntarily struck off or struck off by the Registrar of Companies for being defunct. It also applies to limited liability partnerships.
Generally, an application for a restoration order must be made within six years of the date of dissolution (unless the reason for restoration is a personal injury claim, when there is no time limit). The process is as follows:
- An application for a restoration order needs to be made by a claim to the Bankruptcy and Restoration court of the Central London County Court.
- The claim must be accompanied by evidence (by way of a witness statement), setting out the company's background, circumstances for striking off, reasons for the restoration (including a list of all relevant IP rights), and the financial position of the company. It is very important that the evidence provided is clear and accurate – otherwise, the Court will ask for clarifications and further evidence, leading to delays and increased costs. If there are any other reasons for restoration aside from retrieving IP rights, these should also be covered.
- The Registrar of Companies must also be served with the claim, and a bona vacantia 'waiver letter' obtained from the Treasury Solicitor. The letter is a statement from the Crown consenting to the company's restoration and recovery of IP rights.
- A director of the company must also provide undertakings regarding the steps that will be taken once the company is restored, such as assigning the IP rights out to a new entity. The undertakings should also cover any outstanding confirmation statement or accounts obligations, payment of costs and asset management in accordance with the company's obligations (such as paying any creditors).
- Once the order is made by the Court and that order is delivered to the Registrar of Companies, the company is deemed restored. The IP rights revert to the company at that point, and can then be transferred to another entity through the usual assignment documentation.
- After all actions are taken, the company is wound up again within three months of restoration.
Government guidance on the process can be found here.
Bona vacantia purchase from the Crown
If the above County Court process is time-barred, this is the only viable route to retrieving IP rights from a dissolved company.
An entity that wishes to purchase back these IP rights must do so from the Crown's Bona Vacantia Division (BVD), which is entitled to charge the open market value for assignment, with a minimum of £1,000 per IP right. The BVD may sell the IP right to someone else, retain it, or disclaim it. There is no guarantee that the BVD will sell the IP right to you, even if you were the original owner.
To purchase bona vacantia IP, prospective buyers must provide the following information to the BVD:
- the name, company number and last registered office of the dissolved company
- details of the IP right and evidence that the dissolved company owned it
- details of why they are interested in purchasing the IP
- details of any past or current disputes relating to the IP and
- who is currently using the IP.
If the BVD makes an offer to sell the relevant IP, it will not include any goodwill that might be associated with it.
Government guidance on this can be found here.
What this means for you
If you are considering dissolving a company:
- Carefully review any IP rights it holds and assign them to a new owner before dissolution. Even if it doesn't seem a priority at the time, this is an important safeguard for the future, especially if strategies change. Ensure these rights are transferred out of the company well before dissolution. Trade mark, design and patent register searches are a good place to start to identify relevant IP rights. Unregistered rights like copyright and unregistered designs should also be considered carefully using internal records. Assigning goodwill should also be considered.
- Recovering IP rights later can be costly and time-consuming. A straightforward company restoration with the County Court takes around three months. If further clarifications are required, it can become complex, costly and iterative. The bona vacantia purchase from the Crown can take several months to over a year to complete, and there is no guarantee the IP will be sold to you.
- All assignments of IP rights should include a provision for transfer of goodwill. It is essential that any goodwill is formally covered in the assignment document (eg goodwill associated with a trade mark), as it is otherwise very difficult to restore or recover.
The above applies to companies registered in England and Wales. There is a different forum (Court of Session) and there are some procedural differences when dealing with companies registered in Scotland.
