How does a sale-and-licence-back of IP work?

Full Explanation

A sale-and-licence-back releases cash tied up in intellectual property while letting the company carry on using it. The company sells or assigns its IP to a funder for an upfront sum, then takes an immediate licence-back to continue trading exactly as before. Economically it behaves much like secured borrowing: the company gets liquidity now and pays over time through licence fees or royalties, while the funder holds the asset as its security. It is a form of non-dilutive funding, because no equity changes hands. The legal mechanics matter. A true sale transfers title to the funder, so the same discipline that governs any IP financing applies first: clean, unencumbered title, a documented chain of title with contractor and employee rights properly assigned, rights in force, and charge searches at Companies House and the UK IPO. The licence-back is what keeps the business operating, and its terms (duration, scope, exclusivity, buy-back options) determine how much control the company retains. Where the structure is documented as security rather than an outright sale, expect an assignment by way of security with a licence-back, registered at Companies House within 21 days under section 859A of the Companies Act 2006, or the security is void against a liquidator or administrator, and also recorded at the UK IPO. Pricing follows the same conservative logic as other IP-backed lending. Valuation is prepared to a credit standard under IVS 210 (Intangible Assets) and the RICS Red Book, using a liquidation premise and cautious inputs, with the advance driven by the IP's saleability, separability and legal strength. There are consequences to weigh: tax treatment of the sale and the ongoing licence, VAT, the accounting presentation, and the risk of losing the asset if licence payments are missed. These deals reward careful structuring. Your practical next step: before entertaining a sale-and-licence-back, confirm your title is clean and your IP is genuinely separable and saleable, then take combined legal, tax and valuation advice so the licence-back terms protect your ability to keep operating.

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