Corporate mistakes your business may have made

...and what you should do about them.

Corporate requirements can be fiddly and, sometimes, unintuitive. It is easy for businesses to trip up on corporate issues. In this series we look at 10 of the most common corporate mistakes companies make, and, more importantly, what they should do about them.

When does it happen?

Often when a business is in “start up” mode, it wants to get admin done quickly, so founders can focus on client work and pitching. Corners are cut and the budget for legal advice is limited or non-existent.

What mistakes are made? 

It is easier than you think for your business’s assets to legally be in the wrong name. We see this in the following scenarios:

  • Creatives are engaged as freelancers (rather than employees), but don’t have proper IP assignments in their contracts. This may mean that freelancers or consultants could have an argument that they own the work they have created for you which could be your logo, website or proprietary software – which is not ideal, especially if they have moved on!
  • To get things done quickly, employees/directors put business assets in their own name. This could be IT equipment, domain names or even contracts! This can be particularly messy if those employees/directors leave your business.
  • Founders buy equipment / enter into client contracts in the name of a limited company before it has been legally incorporated. The legal effect is that the business doesn’t own them.
  • Businesses strike off subsidiaries they aren’t using, but those subsidiaries held assets that were not properly assigned to the trading company. The effect: those assets are technically owned by the Crown!

Why does it matter? 

If you don’t own your assets you can’t enforce your rights! For example, if a client didn’t pay a bill under a contract that wasn’t in your name, then it would be difficult for you to take action to enforce that bill.

The individual or company that does own the assets may seek payment for using their assets or even stop you from doing so.

If you wish to sell your business in the future, then the prospective buyer is likely to want all key assets transferred back into your business before signing on the dotted line. At the very least, they are likely to want you to be liable for any issues that arise.

You client contracts will often transfer to the client IP created for them once the client has paid the invoice – if that IP has been created using freelancers with inadequate contracts you may be in the awkward place of having sold IP to a client which you don’t own.

What can you do about it? 

Get your assets back into the name of your company. The quicker you act the better. The precise steps will depend on the circumstances, but may include seeking IP assignments from freelancers who have created key IP and/or restoring old subsidiaries back into existence (which is messy, but possible!).

Interested in reading what other mistakes you business may have made? You can read the full article with #1 – 10 here.