Navigating Bona Vacantia

When a company is dissolved, its intellectual property rights do not simply disappear; they become ‘bona vacantia’, ownerless property, and pass automatically to the Crown. Businesses often only realise their IP rights have been lost once a problem arises, for example if a business seeks to enforce or license the rights. At the same time, this mechanism can present a commercial opportunity for third parties looking to acquire established IP rights. Fortunately, all is not lost. There are two routes available to recover IP rights from the Crown, though both can be time-consuming and costly. 

Route 1 – Restoration by an Order of Court

Restoration by an order of court allows a dissolved company to be restored to the Companies House register, effectively treating it as though it had never been struck off. Once restored, the company regains ownership of its IP rights and can transfer them to another entity before being wound up again. 

This route applies to limited liability partnerships and companies that have been voluntarily struck off by the Registrar of Companies for being defunct. An application to the Court for restoration can be made within 6 years of a company’s dissolution date, typically by a former director, member, creditor or liquidator of the company, though others may be eligible.

The process to restore a company is as follows:

• An application is made by claim form to the relevant county court, such as the Bankruptcy and Restoration Court of the Central London County Court.
• The Court will require a witness statement comprising a range of evidence focused on details about the company and the dissolution, as well as the reason for the desired restoration and details of the IP rights.
• All documents must be served to the other parties, including the Registrar of Companies, the Treasury Solicitor and the solicitor dealing with the IP. Evidence of this is required by the Court.
• Undertakings from a director regarding post-restoration steps, including filing outstanding confirmation statements or accounts, payment of costs and asset management must also be provided to the Court.

If the Court decides to restore the company, the court order must be delivered to the registrar. Once completed, the company will be deemed to have continued existing as if it had not been struck off.

Beyond the procedural requirements, applicants should be prepared for the costs associated with restoration, which can be substantial. The Court may require payment for the costs of dealing with the IP during the dissolution period, costs of the restoration proceedings and any unpaid penalties and filing fees.

Route 2 – Purchasing Bona Vacantia Rights from the Crown

As an alternative to restoration, or where Route 1 is time-barred (i.e. more than six years have elapsed since dissolution), a former member, shareholder or liquidator may purchase IP rights back from the Crown’s Bona Vacantia Division (BVD). 

The process to purchase IP rights from the Crown is as follows:

• A referral form is submitted to the BVD, including evidence of ownership of the IP rights, and an explanation of the reasons for purchasing.
• Once received, the BVD will investigate and value the IP to decide the most appropriate terms of disposal. This may require professional valuation.
• If the BVD decides to sell back the IP, a fee must be paid, which includes any professional valuation costs in advance. The purchaser will also be responsible for paying any fees encountered to register the assignment.

Upon completion, the rights are reassigned. If an offer is made, the registration will not include any goodwill that may be associated with it. 

Regarding pricing, the BVD charges the open market value, starting from £1,000 plus an additional cost of £300 per IP right. The BVD may commission a professional valuation at the buyer’s expense. If the total value exceeds £10,000, proof of identity and address will be required before the offer is made. 

There is no guarantee that the BVD will sell the IP right back to the original owner. It may sell on the open market for better value, retain the right themselves or disclaim it. This often happens where the IP is involved in a dispute or litigation. 

Opportunities for Third-Party Purchasers

Purchasing rights from the BVD is not exclusively available to the dissolved company and the strategic buyer can use this to their advantage. Third parties with no prior connection to the dissolved entity may also apply to purchase IP rights that have vested in the Crown as bona vacantia. This presents a valuable commercial opportunity for businesses seeking to acquire established IP rights, without the need to negotiate with a private seller or engage in a competitive bidding process.

Where the BVD determines that sale to a third party represents the best value or appropriate means of disposal, it may offer the rights on open market terms. For prospective purchasers, the advantages can be significant, including the ability to acquire rights with:

• An existing registration history, which bypasses the uncertainty and costs of examination of opposition risk;
• Established priority dates, which can provide a significant headstart over competitors seeking to register similar rights; and
• Potential residual brand recognition in the marketplace, where prior use may have generated consumer awareness that the acquirer can build upon.

In practice, this process for third parties mirrors that outlined under Route 2. Prospective buyers should submit a referral form to the BVD setting out their interest in the relevant rights and the basis on which they wish to acquire them, before this is considered by the BVD. As with any IP acquisition, however, careful due diligence should be undertaken to assess the scope, validity and enforceability of the rights in question before committing to purchase.

For businesses with a clear commercial strategy, acquiring bona vacantia IP rights can represent a valuable route to securing established intellectual property assets, particularly where equivalent rights may no longer be available for registration or negotiation through conventional channels. 

Key Takeaways and Practical Tips

Before dissolving a company, it is vital to conduct a thorough review of all IP rights and ensure that they are properly assigned to a new owner prior to dissolution, to avoid them falling into bona vacantia. Goodwill is notoriously difficult to restore or recover once lost, so any assignment of IP rights should include express provision for the transfer of associated goodwill. 

As the two routes above illustrate, recovering IP rights after dissolution is invariably costly, uncertain and time-consuming. Prevention is significantly more efficient than cure, so taking proactive steps to manage and protect your IP portfolio before a company is wound down will save considerable time, cost and commercial disruption further down the line. Equally, dissolution can present strategic opportunities to acquire established IP rights through the BVD, often at a fraction of the cost and complexity of a conventional acquisition. Whether you are facing a situation where IP rights may have been lost on dissolution, planning to dissolve a company and want to ensure your IP is properly safeguarded, or looking to capitalise on the commercial opportunities that bona vacantia rights can offer, our team would be happy to guide you through the available options.