IP holding company

Gannons helped establish a separate holding company for our client’s unique IP and technology solution, enabling them to protect and exploit their intellectual property. If you need advice on structuring your business to protect your IP, please get in touch.

What we were instructed to do and why

Our client provides business process, debt recovery and enforcement services. It had also developed an advanced case management software solution for private and government organisations, representing unique IP with significant commercial potential. The client asked us how best to exploit the software while protecting it from business risks elsewhere in the group.

Putting IP into a separate holding company – what are the benefits?

Holding IP, such as software rights, trademarks, patents, copyright, trade secrets and proprietary know-how, in a separate company can offer several benefits:

• Ringfencing – Holding IP in a separate legal entity can help protect it from risks affecting operating companies, including litigation, financial difficulties and insolvency. The IP may remain outside the operating company’s insolvency estate, subject to the circumstances and any applicable security or other rights.
• Consistency – Centralising IP ownership reduces the risk of rights being held informally across different group companies without appropriate licensing or royalty arrangements. Formal licences can also clarify ownership of improvements and new developments.
• Retaining IP in the event of sale – The owners may be able to retain the IP by keeping the holding company outside a sale of the operating business.
• Different shareholdings – Shareholders can hold different interests in the operating company and IP holding company, reflecting their investment preferences or contributions, including to the creation of the IP.
• Administration – Centralising IP filings, renewals and licensing can make administration more efficient and allow the relevant work to be handled by staff with appropriate expertise.
• Balance sheet – The holding company can record relevant IP assets and licensing income, helping investors and lenders understand the value and revenue associated with the portfolio, subject to applicable accounting requirements.
• Jurisdiction – In some circumstances, the holding company may be established in another jurisdiction for commercial or tax reasons, subject to the relevant legal and tax requirements.

Case study – solution employed

We recommended that our client hold its intellectual property in a separate company, which we helped establish for this purpose. The intention was for the group’s IP and technology assets to be held by this company and licensed to the core trading business in return for licence fees.

This structure separated the IP from risks affecting the trading company and allowed it to be exploited independently.

Assignment of IP to the new company

After our client assigned the relevant IP rights to the new holding company, it could focus on exploiting the rights in its Case Management Solution. This included licensing the software within the group and to third parties that did not compete with our client.

Tax advantages of a separate IP holding company

For our client, establishing the IP holding company improved the group’s overall tax position. The structure allowed the group to consider relevant tax reliefs, including Patent Box and R&D tax relief, subject to the applicable conditions. In this case, separating the IP holding company from the original operating company was considered the appropriate structure. However, care was needed to ensure that the arrangements did not jeopardise any EIS relief.

Results

The controlling shareholder subsequently sold the technology group for more than £24 million. Part of the valuation was attributable to the IP portfolio built around the Case Management Solution, which supported business transformation and enabled the group to target a wider market.