January 13th, 2017



Josie Pennicott


Sale of Intellectual Property in Administration

We were appointed over a Company which created holographic illusions for events organised by its customers. It also sold the rights to the use of this technology under licence to third parties in various countries.

Two directors of the Company and a third former director suffered a major falling out, principally as a result of a dispute over who possessed the rights to use the Company’s intellectual property.

A former Director of the Company triggered insolvency by presenting a winding-up petition in July 2013, following which, one of the Company’s then current directors sought to appoint administrators on 23 July 2013 under powers contained in a debenture.

The former director, who was also party to the debenture, objected to the appointment of ourselves as administrators and the effect was that the administrators were discharged and subsequently reappointed (with effect from 23 July) by the High Court on 9 August and at the same time conflict administrators from a different firm were also appointed. As can be seen the relationship between the directors was one of mistrust and hostility on both sides.

The administrators jointly sought to preserve the business as a going concern through a sale. A number of parties expressed interest in purchasing the Company’s business and assets (including related parties) resulting in a number of offers being received.

Given the complexity of the Company’s intellectual property and the disputes over its ownership, as well as disputes over a number of other assets owned by the Company, it was imperative that the sales process was carefully managed by the administrators in both ensuring that the sale resulted in the best outcome for creditors, and that the various stakeholders were managed carefully with the result of the sales process being beyond reproach.

The fixed and floating charge debenture appeared to secure circa £15,000 of directors’ loans, so it was necessary for the administrators to obtain the consent of either the debenture holders or the court to sell the intellectual property assets that were subject to the fixed charge. One of the debenture holders did not consent and opposed the administrators’ application to court.

A sale was negotiated under difficult circumstances where offers were continuously revised, withdrawn and reinstated. However, it was subject to the administrators obtaining the necessary consent or court order, without which there would be no going concern sale and realisations would be limited to liquidation values. This consent was granted by the High Court with the administrators being permitted to sell any assets subject to the fixed charge.

The Company’s former director having been permitted to appeal took the decision to the Court of Appeal and the appeal was dismissed in its entirety. The administration involved working with a number of differing characters and dealing with complex issues around the Company’s intellectual property and licences it had granted.

The administration concluded in December 2015.