You may decide to restructure or rebrand your business for a number of reasons. For example, you may start running your business as a sole trader, where you personally own the business assets including the trade marks. You may then decide to set up a company to separate your business assets from your personal assets, as the business expands. Alternatively, you may start out as a company, but as your business grows and the company’s liability increases, you may decide to move to a two or three-tiered company. Whatever your situation, if your original entity is no longer the owner of the trade mark, you should know what happens to the trade mark during a business restructure.
This article explains what you should do with your trade mark when you restructure your business.
Transferring Your Trade Mark in a Business Restructure
When restructuring your business, you should ask:
- what is the best structure for my business;
- where should I hold my shares and assets;
- what are the costs and tax implications; and
- who do I need to inform?
When focusing on your assets, you should consider your business’ trade marks. If you are registering a new or additional company or trust, you must ensure the trade mark is transferred to the new entity. Without this transfer, the trade mark is not legally owned by the new entity. This means that if you try to sell your business, merge with another company or licence your brand to others, the trade mark will not be the business’ to give.
How to Transfer Your Trade Mark
There are two steps to transferring a trade mark:
- fill out a form to notify IP Australia of the change in ownership; and
- submit an IP assignment agreement to IP Australia as evidence of the transfer.
When you assign a trade mark, you are transferring the rights associated with that trade mark to the new entity. This means the original owner no longer has the right to use the trade mark. An assignment is most common when you are dissolving the original company or selling your trade mark to a new entity.
Alternatively, you might decide to keep the trade mark under the current entity and licence it to the new entity. Licensing a trade mark means the original owner retains the rights and is merely allowing the new entity to use it. A licence is common where you have registered a holding company or other multiple-tiered company structures. A licence to each associated company gives it the rights to use the trade mark. It does not matter that the companies are related. If it has a different Australian Company Number (ACN), it needs a licence to use the trade mark legally. IP Australia does not need to be notified of a licence agreement.
When considering whether to assign or licence your trade mark, you need to ask yourself whether the original owner of the trade mark still requires use of and access to the trade mark.
Keep a Record of Your Transfer
Whether you decide to assign your trade mark or license the rights, it is important you record the transfer of your trade mark during a business restructure. Without being able to show a verifiable chain of ownership, the trade mark is at risk of being abandoned or becoming redundant.
This is especially important when you are looking to attract investors or selling your business. It is also better to organise the legal transfer of a trade mark earlier rather than later; the expense and complexity of a transfer increases as the value of the trade mark grows.
Minor Changes in Company Details
Minor or common changes to a company do not require a transfer of assets. Such changes include a:
- new company name;
- new address; or
- restructure of shares.
This is because the ACN remains the same. Therefore, the same entity still holds assets such as a trade mark. These minor changes are relatively straightforward and can be done online through the Australian Securities and Investment Commission’s (ASIC) website.
It is extremely important you know what to do with your trade mark during a business restructure. You should organise to transfer your trade mark, either by way of assignment or licence, if you are considering a business restructure. If you have any questions, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.
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