When you are selling a business, a buyer usually wants to make sure that they can benefit from the “goodwill” that has been created around it.
Goodwill is an intangible asset, generally recognised as being “the benefit and advantage of a good name, reputation and connection of a business or the attractive force that brings in custom” (IRC v Muller & Co’s Margarine [1901] AC 217 (HL)).
The value of Goodwill will sit on your balance sheet and include proprietary or intellectual property, brand recognition and other aspects of a company that are valuable but not easily quantifiable.
Some Goodwill receives automatic protection under the law of copyright, which arises under the Copyright, Designs and Patents Act 1988. As well as covering more obviously copyright protected works, such as books and artwork, this can also cover names and logos and other branding and unique and original systems and processes, that exist within your business.
However in order to avail yourself of the protection of copyright, you have to first prove the works are unique and have been authored by you or on your behalf with the copyright assigned to you, in order to benefit.
This can be particularly difficult to achieve when you have had designers working on your behalf.
Its much better to protect your intangible assets with proper registration where you can. A lot of branding can be protected by registering at the Intellectual Property Office as a trademark. Some designs can be protected as a Design Right and Patents although complex, are a very good way of protecting inventions.
Depending on where your business is situated, you might also need to consider protecting abroad under with the European Union IPO or the World Intellectual Property Office.
If you DON’T invest in these protections, your Goodwill will not be as valuable as it might otherwise have been.
And if it comes out in due diligence that you have not fully and properly registered for protection, a buyer would be quite within their rights to come back and reduce the amount of their offer.
If you are thinking of selling your business, this is yet another reason to do a full audit to make sure that you have all the relevant systems and process, paperwork and other compliance taken care of, to ensure you get paid as much as you can for what you have built.
We can help with this to make sure that your house in full order.
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