Re-use of domain in new phoenix company

[jasonwright]

Hello all,

I'm aware that under insolvency laws, if a Phoenix company is setup then the the new Ltd. company can't be called the same as the old company (or near to the same). Equally, of course, assets can't be transferred.

My question revolves around this area but is a little more complex...

If the director of company A (going into liquidation), had licensed a domain name (and so the accompanying brand) to that company A, yet it still remained technically owned by the director, then its not a company asset, right?

So, when new company B is setup by the same director, can he simply license that domain to the other company instead, thus the transfer of assets law doesn't even come into effect?

Admittedly, its more of a grey area - because company A actually changed their Ltd. company name to reflect this domain name once it was licensed - merging them somewhat. Although the value is in the domain itself, and that's always been owned by the director.

If new Ltd. company B was a completely different new name, but started using the domain - would that be illegal in any way?

Thanks
Jason

 

[akirk]

likely to be an area of concern.

liquidators of the first company may well consider that the domain was in fact an asset of the first company - depends on all sorts of things - such as:
- did the director own the domain pre involvement with the company
- who paid for the domain
- what is the registration history of the domain

it might be an area for concern and I would be wanting to check with the liquidators their thoughts...

Alasdair

 

[KM-Tiger]

It's common scenario for assets to be owned by directors and leased to companies, a common example being bricks and mortar buildings where the ownership is protected in the event of the Ltd going into liquidation.

I don't see why a domain name should be any different.

 

[moduslegal]

The simple answer is: check with the insolvency practitioner. His or her word is effectively law in this situation.

I just want to address some of the other concepts:

1 The director has a personal contractual right to utilise the domain name. It is similar to, for example, renting a premises - you have a right to occupy for a particular amount of time, in exchange for making a payment, and you can usually transfer that right on to someone else

2 All a domain name does is 'point' at a website. Whatever people see and hear when they look at the website - brand, copyright, look and feel, trademarks, logos etc are entirely separate intellectual property rights. Who owns those rights will depend on the contract with whoever developed the website and will normally be who paid for it. If company A paid for development of the website then the correct legal position is that company B will have to purchase those rights from company A.

Looking on the bright side - those rights will probably be useless to anyone else, if company B purchases them from company A with the approval of the insolvency practitioner then company B can use all the rights entirely legitimately and prove ownership of them and finally assuming the director always held the domain name individually he can freely lease it to company B

Hope that helps

 

[jasonwright]

Thanks for your comments, but the plot thickens a bit...

The registration goes back several years and timing etc. weren't known. Having checked, we now know the original registration was in fact made in the name of Ltd. company A - so I guess that changes everything.

So:

Is this likely to be picked up by the liquidator at all (by the way, there's none appointed yet, and we'd be waiting for the bank or Customs & Excise to initiate)?

So this idea of a new co. B taking over the domain and similar website would be done before the company A is liquidated. Company B would have a new site designed so the branding etc. wouldn't be the same - it'd just be the domain pointing to a site called the same.

Is it safer to for the director to appoint an insolvency practitioner himself, and try and buy the domain (what if he couldn't acquire it)?

(There's no other company assets either).

Thanks
Jason

 

[akirk]

I would be cautious here...
doing something like this before liquidation, but in anticipation of liquidation could be seen as directors pulling a fast one / stripping assets out of a business - I think that this is not a good move...

I would also be slightly concerned about why you are looking to set up a new business doing the same thing and using the same brand (domain name) that seems to be against the principle if not the actuality of this area of law...

the only reason for re-use of the domain is to make use of the previous brand - to put a company into liquidation (causing loss for some) to then profit from its brand etc. doesn't seem very ethical... I would check with the liquidator as it may not be allowed.

Decisions of this nature can be reversed, so it is better to ask first... even if the liquidator doesn't notice, others might...

Alasdair

 

[Robert Moore]

Be aware that if the domain is in the company's name and it is a .co.uk domain Nominet will not allow a transfer of a domain belonging to a liquidated company. The domain will have to expire and be reregistered. So need to transfer before the liquidation..

 

[toddle2u]

Either appoint your own IP or wait for the bank to appoint or the OR from compulsory liquidation. Then buy the assets and IPR from the liquidator. This will make it all above board as what you are trying to do at the moment could cause you problems in the future.

Also do not use the same or similar name for the new company without taking proper legal advice as this can cause a whole host of problems under s216 of the IA which could ultimately make you personally liable for future debts if the new Ltd company folds

 

[Robert Moore]

I have just asked the licensed Insolvency Practitioner next to me at KSA group this question and this is what he said!

It is not unusual for IPR/brands to be owned by third parties and individuals and effectively licensed to companies for use. Usually the terms of the licence would provide for the licence to expire should the company go into liquidation and hence the domain could be thereafter licensed to another company. This type of set up and ownership does not seen untoward and is quite common.

However, S216 of the Insolvency Act prohibits a director of the company that has gone into liquidation from being a director (or shadow director) or being concerned in the management of another company that uses the same name as the liquidated company or a trading name that it used or one so similar that is suggests a clear association. So company B may well have a different name but if it uses the same name as the previous company (whether or not it has a licence to use the domain) and the director is also a director or involved in the management of company B then he will be committing an offence. As always the law is not an exact science as there are certain provided exemptions from this rule.

 

[Alan R Price]

Jason

Ignoring any ownership aspects, it seems to me to depend on whether a domain name should be considered a trading name of the company. If it is (and I believe it is), then s216 comes into play.

An IP has a duty to get the best price he can for the company's assets so the fact you appoint your "own IP" should have no bearing on the outcome.

Call me if you want to discuss this. My number can be found on our website www.marshmanprice.co.uk.

 

[Tabbie]

so if company A is going into liquidation, can company B use the same logo but different name?

 

[akirk]

so if company A is going into liquidation, can company B use the same logo but different name?

possibly - depends on the logo / whether the combination of logo and name is the mark of trade / brand, or whether the log on its own was sufficient to identify the company...

e.g. a company with a cat's head and the name cat grooming
mves to a cat's had and the name feline grooming

would be less issue than a big brand logo being reused (e.g. Nike Swoosh)

if the logo on its own was trademarked / trademarkable then no, otherwise possibly yes - but still safest to tweak

Alasdair

 

[Alan R Price]

Tabbie

The formal restriction on re-use of names is on the name only although the logo could of course contain the name and so section 216 would kick in if it did.

Logos, trade marks, website, patents, designs etc. are the legal property ("intellectual property") of the company and strictly speaking cannot be used unless they have been properly acquired from the liquidator. A liquidator could sue somebody using the company's intellectual property without his consent or get an injunction against that person. It is unusual but it could happen.