Values in crisis – Intangible assets and insolvency

The value of an intellectual property right or other intangible asset is often dependent on how the asset is used or can be used within a particular business. In the event of bankruptcy, operations often cease because the business is no longer profitable, and the company’s assets must then be realized to satisfy creditors’ claims. In the process that follows, the starting point is that the assets should be liquidated, which includes their sale. If chains of title, registered ownership, licenses, and security interests can be identified quickly, the process is simplified and the assets can be marketed, structured, and transferred for reasonable compensation. However, since intangible assets lack physical form, this work can be challenging, and without structured documentation there is a risk of oversight and loss of value.

Within corporate groups, it is common for intellectual property rights to be separated from operational activities and placed in an IP holding company that licenses the rights to the operating company. In this way, ownership of the rights may be protected from operational risks. However, in an insolvency situation, restructurings, transfers, or other separations of intellectual property that have not been carried out in a timely manner and on arm’s-length terms may be subject to clawback by the bankruptcy estate. In such cases, the assets must be returned to the estate, and the acquiring party risks being left without compensation.

A well-considered IP strategy requires business understanding as well as knowledge of how different intellectual property rights function, complement each other, and how intangible assets that are not covered by IP protection can nevertheless be safeguarded. The same understanding and expertise are important both before and after an insolvency situation to avoid assets being subject to clawback or loss of value.

At Advokatbyrån Gulliksson, we offer comprehensive business law advice with strong specialization in both intellectual property law and insolvency law. Please feel free to contact Niklas Hellsten or Mounir Gallouze if you have questions regarding your IP portfolio, specific intangible assets, or require assistance in insolvency matters.