Licence agreement to enable continuation of trading

The IPA recently investigated a complaint that, among other things, raised concerns regarding post appointment trading liabilities for which the Voluntary Administrators were not accepting responsibility. 


The Voluntary Administrators wrote to suppliers on appointment notifying them that they intended to enter into a licence agreement with a third party, namely the director or a related party of the director, to continue to trade the business and did not accept any responsibility for ongoing supplies.


Despite verbal assurances from the director, the licence agreement did not proceed which caused uncertainty regarding who was responsible for post appointment trading liabilities. 

 

No disciplinary action was considered necessary by the IPA in this matter, however the IPA recommended to the members that any similar licence agreements proposed in future be in place prior to any trading being undertaken by the proposed licensee.  If this is not possible a heads of agreement, or similar, should be executed to ensure complete understanding of the arrangement and ramifications should the licence agreement not proceed.

 

In this instance, a Deed of Company Arrangement was put in place which ensured that any post appointment liabilities were discharged.