I have a client here in the UK who is considering bankrupcy and has concerns over the website which I built for them. If they go into liquidation they would like to continue trading under a new business name with the website.
Any ideas how they stand legally? Will the website be taken as assets to the old company?
IANAL
The website is property of the company, and as such can be sold by creditors to recoup their losses from the bankruptcy.
IANAL
I agree with tke, its part of the business and was paid for by the business and so counts as an asset.
In the US, this would be up to the judge who sees the bankruptcy. It could be a reorganization, in which some assets of the company will remain intact so that the company can continue running. But, it sounds like they intent to start trading under a different name, presumably as a new entity altogether.
Do they own the website design and content outright? If you still have rights to it, you could grant it to the new company for a fee. Or, they could sell the designs, etc. back to you prior to liquidation with hopes of getting it back, which could work but could also be considered evasion.
What type of web site is it? To be considered an asset, it will need to have a sell-on value to a third party. Many web sites are nothing more than an online brochures (i.e. this is our company, this is what we do, here are our contact details), so would have no real value to anyone other than the company they are current set up to advertise. Most likely the web design costs of such a site would have already been written down as a pure advertising expense - however a liquidator may still wish to assess the situation in more detail to see if there would be a way to get something for it.
If it’s an ecommerce site, it’s more of a grey area. The site itself may still have no real value to a third party, as it may rely on third party software (most likely transfer/sale of existing licence to a third party prohibited, so a new licence would need to be bought) and may also be selling products specific to the company currently behind the site. But if it could be sold as a viable ongoing concern, then the liquidator will want to value the site and find a suitable buyer.
However in this case, it’s quite likely that the liquidator will consider the existing directors of the company to be the most suitable buyers of the site, as they have expressed a desire to continue using it for it’s original intent and would therefore probably pay more for it than any other third party. That of course would mean your client has to purchase the site from the company at the value set by the liquidator, but that seems fair - some debts can get paid off, and your client gets to continue trading the business under a new legal entity.
TBH, your client should be discussing this with an accountant, not their web designer!
Thanks for the input.
What you’ve said shadowbox seems to be the way they’re going to go having had advise from liquidators. It is an ecommerce site, and it sounds like once the company has gone into liquidation they will have the option of buying it back.
Be interesting to see how the liquidators value the site.
You could probably work around it. Have you been paid for the items in question (and has the contract been fulfilled)? If not you could always adapt the agreement due to the lack of a company to be in business with (in the sense that it no longer exists as a trading entity) to sign the work into the payee’s name for use however they see fit (exclusively) so it’s essentially transferable from the old business to the new one. IANAL however if the business is no longer in a position to fulfil the contractual obligations, as long as the contract is still open and withstanding you may have the option of using the “get-out” clause in your contract to sack the business and redefine the contract (as it stands) to the new business - if you have the clause (justify the drop as their inability to complete the deal due to non-trading / ownership status). Though I’m not sure how the liquidators would like that, but as long as you still have ownership over the site until it’s been fulfilled you should be perfectly fine for retaining and adjusting the terms of the contract in agreement with the people in question you were working with. 