Considering resurrecting an old company? Here’s how

With Woolworths possibly coming back to the UK, accountants discuss the process of resurrecting a dissolved company, and the considerations around intangibles such as intellectual property.

Back in January, it was reported that Woolworth CEO Roman Heini was considering bringing the Woolworth brand back to the UK.

The brand – known as Woolworths in the UK – went into administration at the end of 2008 but was later purchased by The Very Group as part of their portfolio of online retail stores. The website closed in 2015 and was then bought by Woolworth Deutschland, a separate German chain of the original brand which is continuing to expand across parts of Europe.

The rumoured move to bring the Woolworth(s) back to the UK raises interesting questions from an intellectual property perspective which can, by its very nature as an intangible asset, get rather messy.

• How easy is it to resurrect an old company like Woolworths?
• What happens if business partners fall out – who has the IP rights?
• Are there restrictions on directors re-using similar trading names to a dissolved company?
• What happens if the IP was not properly documented or explicitly transferred during the dissolution process?

We spoke to several accountants with experience in intellectual property as an intangible asset for their views.

Ease of resurrecting a company depends on legal aspects of the dissolution

Karen Feltham MAAT, Owner, Aligned Accountancy

It can be challenging to revive a dissolved business and its IP so it’s essential to ascertain whether the IP was properly documented and legally transferred or retained during the dissolution process.

If IP rights were explicitly transferred to one of the partners or a third party, resurrecting the company may entail negotiating the return or licensing of these rights.

The ease of resurrecting an old company depends very much on legal and contractual aspects of the dissolution. If the dissolution agreement clearly addresses the disposition of IP, including provisions for re-establishment, the process is smoother. However, if the agreement doesn’t address these matters, disputes and legal hurdles may arise.

Another consideration is things like trademarks. One partner, having agreed with partners to dissolve a company, may wish to revive and utilise its trademark. This is one of the most common situations I’ve encountered. Such instances have required a renewal and ongoing maintenance during the period of dissolution to remain valid.

Failure to give sufficient attention to this has resulted in a loss of these rights.

Verdict: The resurrection of a dissolved business and the fate of its IP depends on the thoroughness of legal documentation during the dissolution process. Clear agreements regarding ownership, transfer or licensing of IP can significantly ease the process, while ambiguity may lead to complications.

Catalogue all company IPs on formation and deal with them before dissolution

Bai Cham, Partner, Begbies Traynor

Intangible assets are inherently difficult to deal with. Accountants must work with their clients to ensure that they can identify all IP, understand where it is held and – if it is tech-based – be sure who has the source codes, etc. Accountants should be able to help identify, list and catalogue all IPs of a company on formation, which would help with resurrecting it.

It’s worth considering the best method of dissolution. In most instances, a solvent winding-up process may be more appropriate to dissolve a company thus enabling a distribution of the assets of the company to the shareholders, especially where those assets include unrealisable assets such as IP.

Any assets owned by a company that has been dissolved become Bona Vacantia and rest with the Treasury Solicitor who acts for the Crown. Any IP will form part of those assets and reinstating a company back on the Register of Companies is not an easy task. It requires instructing solicitors to make an application to court, supported by a witness statement seeking to restore the company. Therefore, it is important to make sure that all of the company’s assets are dealt with before dissolving a company.

Verdict: It’s not easy to reinstate a company back to Companies House – accountants need to ensure they help clients to identify and understand all IP and where they’re held.

It’s fairly straightforward to resurrect an old company but IP can get messy

James Hopkirk, Restructuring Partner, Kreston Reeves

Practically speaking, it’s fairly straightforward to resurrect an old business. You do need to check if the old name is available at Companies House as anyone could have incorporated a new company with that name following dissolution. It’s also important to check if there are any registered trademarks or web domains which might restrict trading using a certain name.

If the old company was insolvent and entered liquidation, there are also restrictions on directors re-using a similar trading name for five years unless they are exempt. IP may also have been sold to someone else but that should be clear from company records if they are accessible.

If the old company was wound down on a solvent basis and then a shareholder resurrects a business trading in the same way within two years of receiving distributions from the old company, there may be tax implications.

To look at real-life examples: one business partner might have had the ideas and feels a personal connection to the IP, whereas another partner may have provided financial backing. If the business partners went their separate ways but there is no agreement already in place, the parties would need to agree a split of assets – but there may be a great deal of uncertainty as to how much value to ascribe to the IP.

I’ve seen situations where the original founder (Mr A) sells his business (to Mrs B) then later the business fails. Mrs B might approach an insolvency practitioner with a view to buying some of the business including the IP but the insolvency practitioner has a duty to maximise recoveries and publicise the opportunity, which would include contacting Mr A and other competitors to try to generate competitive bids.

Verdict: It’s fairly straightforward to resurrect an old company but checks and balances need to be performed and dealing with IP can get messy.

Annie Makoff is a freelance journalist and editor.