Consequences and contractual options
How do you safeguard your interests if you find yourself dealing with a company that enters an insolvency process or is at risk of insolvency, whether as a contract counterparty or in a dispute? Conversely, if you find prospective contract counterparties raising concerns about your company's solvency, what protections might you be able to offer your counterparty in order to continue the relationship?
Licensors of intellectual property rights may soon be unable to terminate licences where the licensee has gone into an insolvency process.
What are ipso facto clauses and why do they matter?
As the impact of COVID-19 is felt throughout the economy, even those companies able to weather the storm are likely to feel the effects of corporate insolvency as collaborators, customers and suppliers find themselves in financial difficulty. This article focuses on the impact of insolvency on IP licences from the perspective of both licensors and licensees. It also contains our top tips for mitigating the risks.
As a rule, Belgian insolvency law does not tackle the issue of IP rights or licensing agreements in the event of insolvency proceedings. Their fate will therefore be subject to the general provisions of Belgian insolvency law, which vary depending of the type of insolvency proceedings concerned.
The ongoing COVID-19 pandemic has profoundly reshaped the global business landscape. Some companies that only months ago seemed unstoppably profitable have been brought to an existential brink by extended lockdowns, supply chain failures, and other obstacles caused by the pandemic. Other companies who have experienced less disruption (or in some cases windfalls) stand at the threshold of opportunity even as they prepare themselves for the challenges of the 'new normal'.
What’s changing?
Businesses like safeguards when they enter into any venture with a third party. For example, they like to have the option of exiting an arrangement with a business that has run into financial difficulties – so that they can avoid any related obligations and risks. UK contracts therefore often include a mechanism to allow termination of an agreement if a party enters into an insolvency process (e.g. administration). However, an imminent change to UK law means that this will not always be an option in the future.
Lexology Pro Compliancetakes a look at some of the most informative articles published on Lexology this fortnight for compliance teams to stay up-to-date, including key guidance from regulators around the world and practical tips to help businesses adapt to a new normal.
IP licensing and insolvency reform: ipso facto clauses
Licensors of intellectual property rights may soon be unable to terminate licenses where the licensee has gone into an insolvency process.
What are ipso facto clauses and why do they matter?
On November 1, 2019, amendments to the Bankruptcy and Insolvency Act,R.S.C. 1985, c. B-3 (BIA) and the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 (CCAA) came into force. Among other changes described in our previous publication, these amendments expand the protection offered to intellectual property (IP) licensees in the event that the licensor enters insolvency.