Insolvency copyright / asset transfer

Discussion in 'Insolvency' started by Richard Dastardly, Mar 7, 2020.

  1. Richard Dastardly

    Richard Dastardly UKBF Newcomer Free Member

    2 0
    Hi All

    I need some help / advice on a potential insolvency.

    I have a couple of businesses, both ltd companies, and have run them for about 15 years. One is a shored office space business (Company A) and the other is a music business (Company B). I am the sole director and shareholder.

    The shared office space Company A is now my main business and is in financial trouble, the music company B is still going but has been petering out over the last few years.

    The office space business company A can no longer let the spaces out despite my best efforts and I’ve effectively run out of money. There is about £18k in the bank right now but £8k of this is my tenants deposits, and the rest is owed to other creditors. The effective balance once all those are paid is £-432:

    - I have a lease at £40k pa for another 3.5 years.

    - I have business rates of £20k for 2020/2021

    - I’ve got a corporation tax bill of £4K coming in October (which is accounted for in the £18k in the bank account outlined above).

    - VAT of about £2k due May (again, accounted for in above figures).

    This month is make or break as if I can’t let the spaces I am going to be spending cash that I hold which doesn’t belong to the company. Seeing as I have had a 6 month void already on one of our units, with another 2 becoming vacant at the end of March, I am staring at big losses going forward, particularly with the Coronovirus scare. The business isn’t viable anymore due to the drop in new tenants and the increase in competition from other office operators.

    An additional, and most worrying problem for me, is that I have some music copyrights tied up in this office letting company A. The rights turn over up to £3k per annum so it’s not huge but I don’t want to lose them in an insolvency.

    So how can I get these rights out of the company A and transfer to my other ltd company B without breaking any rules? I suppose it would be the same as wanting to transfer logos or pictures, or a url or any other copyrighted material?

    I was thinking to do a copyright assignment from company A to company B, and then licence the copyrights back to company A (so company A won’t actually own them and if they go insolvent then the rights remain with company B). And I was thinking to backdate this agreement to January 2019 so it won’t look like I’ve just off loaded the assets at the last minute.

    I understand there is an obstacle with undervaluing assets which can subsequently be overturned by a liquidator, and directors can become responsible for debts. So what price should I use to value the music assets? I’d like to do it for £1 ! But they make £1500 - £3k per annum.

    (As an aside, the reason I have not separated the music rights and the shared office space company before was because up until about 2-3 years ago the music company was making virtually zero so there was no point - it’s only in recent years that it has started to turnover at least something, combined with a new lease with no breaks, and it’s caught me by surprise.)

    After I have solved the music rights conundrum, could I go down the Spongebob route?

    Any help and advice gratefully received.

    Cheers

    Richard Dastardly
     
    Posted: Mar 7, 2020 By: Richard Dastardly Member since: Mar 7, 2020
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    22,064 2,593
    Company B buys the assets from company A. Get it professionally valued?

    Company A then has some money to pay creditors or pay for insolvency.

    Would recommend getting professional advice from an insolvency practitioner.

    Is there any personal guarantee on the lease?
     
    Posted: Mar 7, 2020 By: Mr D Member since: Feb 12, 2017
    #2
  3. Richard Dastardly

    Richard Dastardly UKBF Newcomer Free Member

    2 0
    Thanks
    No, there’s no personal guarantee
    No idea who can value a small music catalogue..?
     
    Posted: Mar 7, 2020 By: Richard Dastardly Member since: Mar 7, 2020
    #3
  4. KAC

    KAC UKBF Ace Free Member

    1,156 260
    Whatever the motives, backdating an agreement is never a sensible solution. :eek:

    I wouldn't have thought Spongebob would be appropriate because of the lease. Best have an initial discussion with an insolvency practitioner.
     
    Posted: Mar 7, 2020 By: KAC Member since: May 7, 2017
    #4
  5. Mr D

    Mr D UKBF Legend Free Member

    22,064 2,593
    Someone in the music business?

    Whatever value is found, get evidence. If someone later queries selling for too cheap a price you can prove the measures taken to get market price.

    If business is insolvent the company will have to cease trading.
     
    Posted: Mar 7, 2020 By: Mr D Member since: Feb 12, 2017
    #5
  6. Kevin Hanson

    Kevin Hanson UKBF Regular Full Member

    100 16
    You can transfer the music copyright out but the transfer would have to be for market value otherwise the transaction could be invalidated by the appointed insolvency practitioner. Best bet is to get some professional advice on this before doing anything or you could lose the music copyright anyway.
     
    Posted: Mar 8, 2020 By: Kevin Hanson Member since: May 4, 2015
    #6
  7. eteb3

    eteb3 UKBF Regular Free Member

    166 25
    @UK Contractor Accountant told me a good year ago that revaluation of intangible assets is not required under GAAP.

    I'm no accountant, but as far as I can see that means if the property company paid £nil for the music rights, it can assign them at £nil to the music company.

    If I've understood correctly, that would make sense: the benefit of the rights is purely contingent, and future value all but impossible to determine, as OP says.
     
    Posted: Mar 8, 2020 By: eteb3 Member since: Jul 18, 2019
    #7
  8. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    3,486 436
    You really should speak to an IP.

    If the Company enters a formal insolvency procedure, such as Liquidation, then Company B can buy the assets off the Liquidator, at market value, (whatever that might be).

    They can also probably arrange for the valuation too through professional agents.
     
    Posted: Mar 9, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #8
  9. Mr D

    Mr D UKBF Legend Free Member

    22,064 2,593
    Would that apply more to assets that don't give an income rather than assets currently bringing in an income of 4 figures?
     
    Posted: Mar 9, 2020 By: Mr D Member since: Feb 12, 2017
    #9
  10. eteb3

    eteb3 UKBF Regular Free Member

    166 25
    Pass! The context was a pre-emption right in a property, so perhaps you're right. And anyway there may be a distinction between book- and market values in play. Sorry, perhaps I wasn't that helpful.
     
    Posted: Mar 9, 2020 By: eteb3 Member since: Jul 18, 2019
    #10
  11. Mr D

    Mr D UKBF Legend Free Member

    22,064 2,593
    Information is always worth having.
    Sometimes it works across circumstances.
     
    Posted: Mar 9, 2020 By: Mr D Member since: Feb 12, 2017
    #11
  12. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    11,477 2,366
    So are you contemplating stealing the deposit rather than paying it back, that's how your post comes out

    Are deposits not meant to be in a seperate account
     
    Posted: Mar 9, 2020 By: Chris Ashdown Member since: Dec 7, 2003
    #12