What Is Intellectual Property — and What Happens to It When a Company Is Liquidated?
WHY THE ASSETS YOU CANNOT SEE MAY STILL HAVE SIGNIFICANT VALUE
When people think about the assets of a business, they tend to picture things they can see: property, machinery, vehicles, equipment or stock.
But some of a company’s most important assets may not be physical at all.
A recognisable brand name, a piece of software, a patented product, original website content or even the design of a product can all form part of a company’s intellectual property (IP). For some businesses, these assets can have considerable commercial value. And when a company enters liquidation, they do not simply disappear.
Understanding what intellectual property is, who owns it and what happens to it during insolvency can therefore be important for directors — particularly where a business has spent years developing its brand, products, technology or creative work.
WHAT IS INTELLECTUAL PROPERTY?
Put simply, intellectual property refers to creations of the mind and the legal rights associated with them.
Unlike a desk, vehicle or piece of machinery, intellectual property is generally intangible. You cannot physically touch a trademark or copyright, but the rights attached to them can still be owned, licensed, transferred and, importantly, sold.
Under UK law, there are several forms of intellectual property protection. Some rights arise automatically, while others need to be formally registered.
The four types most business owners are likely to encounter are:
Trademarks — protect elements of a brand, such as names, logos and certain other distinctive signs. A trademark can become particularly valuable where a business has developed strong brand recognition.
Copyright — protects original creative works including written material, photographs, artwork, music, films, software and certain databases. In the UK, copyright generally arises automatically when a qualifying work is created; there is no formal copyright registration system.
Patents — protect qualifying inventions and technical innovations. A UK patent must be applied for and, if granted and maintained, can generally provide protection for up to 20 years.
Design rights — protect aspects of the appearance of a product. Depending on the circumstances, designs may benefit from registered or unregistered protection.
A single product or business can have several forms of IP protection at the same time.
For example, a technology company might have a trade mark protecting its brand, copyright in its website and software, a registered design protecting the appearance of a product and a patent protecting the technology inside it.
Intellectual property can therefore represent far more than an abstract legal right. It can form part of the underlying commercial value of a business.
WHO ACTUALLY OWNS THE IP?
This is where things can become more complicated.
A company using intellectual property does not necessarily mean that the company owns it.
Ownership can depend on how the IP was created, who created it and what agreements were in place.
For example, work created by an employee in the course of their employment will usually belong to the employer, subject to the relevant law and any agreement to the contrary.
The position can be different where work has been produced by an external freelancer, developer, designer or consultant. Businesses should not simply assume that paying somebody to create something automatically transfers every intellectual property right to the company.
Similarly, a company may only have a licence to use certain software, imagery, technology or other intellectual property rather than owning the underlying rights itself.
That distinction becomes particularly important if the company later experiences financial difficulty.
A QUICK IP Q&A
Is a company name automatically a trademark?
No. Registering a company with Companies House is not the same as registering a trademark. Trademark protection is a separate form of intellectual property protection.
Does copyright need to be registered in the UK?
Generally, no. Copyright protection arises automatically when a qualifying original work is created.
Can intellectual property be sold?
Yes. Intellectual property rights can be valuable assets. Depending on the right involved, they can potentially be sold, assigned or licensed to another party.
Can a website or software contain intellectual property?
Yes. Website copy, graphics, photographs, databases and original software may all involve intellectual property rights. Ownership will depend on the circumstances in which they were created and any relevant contracts.
Can a domain name have value?
Potentially. Some domain names can have significant commercial value, particularly where they are closely associated with an established brand or business.
Does IP still matter if the company has stopped trading?
Potentially, yes. The trading business may have stopped, but valuable intellectual property owned by the company may remain an asset capable of being realised.
WHAT HAPPENS TO INTELLECTUAL PROPERTY WHEN A COMPANY IS LIQUIDATED?
When a company enters liquidation, an appointed liquidator takes control of the company's affairs.
One of the liquidator's key functions is to identify, secure and realise company assets so that the proceeds can be dealt with in accordance with insolvency law.
That can include intellectual property.
A liquidator may therefore need to establish:
what intellectual property exists;
whether the company owns it;
whether the rights are registered and remain in force;
whether there are licences, restrictions or third-party interests affecting them;
whether the IP generates royalties or other income; and
whether there is a market for selling or licensing the rights.
Intellectual property and other intangible assets including: copyright, patents, designs, trademarks, software, domain names and, in appropriate circumstances and goodwill, may have a value that can be realised during insolvency. Where intellectual property has a realisable value, it may be sold to an interested buyer. Depending on the circumstances, that could be an unrelated third party or a party connected with the previous business, provided the appropriate insolvency requirements are followed.
This means that a brand, piece of software or other intellectual property developed over many years could potentially continue under new ownership even though the company that originally owned it is being wound up.
WHAT IF THE IP HAS LITTLE OR NO VALUE?
Not every intellectual property asset will have a buyer. Its value will depend on factors such as commercial demand, whether the rights remain legally enforceable, ownership and any licences or restrictions attached to them.
Goodwill can be particularly difficult to realise once a business has stopped trading, as its value is closely connected to the reputation and ongoing operation of the business.
There is also an important legal distinction between liquidation and dissolution. A company in liquidation still exists. Once a company is formally dissolved, however, any remaining company-owned assets can pass to the Crown as bona vacantia. This can include intellectual property such as copyright, trademarks and patents. Directors should therefore ensure that company assets, including IP, are properly identified and dealt with as part of the appropriate insolvency or closure process.
CONCLUSION: VALUE DOES NOT HAVE TO BE PHYSICAL
When a business is under pressure, attention naturally turns to cash flow, creditors, stock and physical assets.
But what a company has created can sometimes be just as important as what it physically owns.
For directors, the key is to understand what belongs to the company before decisions are made about its future.
At VOSCAP, we work with directors to understand the full position of a business, including its assets, liabilities and the restructuring or insolvency options available. Seeking advice early can provide more time to understand what value remains within a business and determine the most appropriate route forward.
If your company is facing financial pressure, or you are concerned about what may happen to its assets if the business cannot continue, our team is here to help.
📞 020 7769 6831
✉️ help@voscap.co.uk
🌐 voscap.co.uk
⏱️ Take your 60-Second Free Financial Health Check:
👉 https://www.voscap.co.uk/financial-health-check
This article is intended as general information and should not be treated as legal advice. Intellectual property ownership and insolvency issues can depend on the particular circumstances of a company and its contractual arrangements.
ABOUT VOSCAP
Voscap’s primary objective is to save your business. Our team of experts’ knowledge in restructuring and turnaround assignments is invaluable when assessing the best option available to your needs. With experience spanning several decades, we have the skill and resources to provide viable solutions within all industry sectors. All organisations go through difficult times and we are here to help. From small to multi-million turnover businesses, we have dealt with the most complex of cases. We offer an initial free assessment in analysing your financial position and providing clear and precise advice making your experience a simple non-complicated process.