Transfer of software license

CapedCrusader

Hi folks,

I'm a director and principal shareholder of a company (Company A). I want to wind it up and go into business with some other partners in a new company - Company B. I would have a shareholding in this.

Company A owns a perpetual software license bought for c. €10k. This could be transferred to company B and I would like to be able to do this as my capital investment in company B.

I'm thinking at the time of wind-up - this software license has no value for Company A anymore, i.e. if the license isn't transferred, 10k of value just vanishes.

Is this possible? Are there tax implications. How would it be accounted for?

Cheers

CC

micosoft

Many companies write off software after a single year (i.e. it no longer has any book value). The reason for this and the key issue is that typically perpetual licences give the named company a right to use the software but not resell it. Check the licence agreement to see if you are allowed transfer/sell the licence to another entity.

CapedCrusader

Thanks for that - very helpful.

I have enquired and mentioned that the company will be restructuring and they said there would be no problem transferring the license on a once-off basis.

Anything wrong in this scenario?

Company A purchases software. Software gets written off in Company A. Company A dissolves. License is transferred to company B. I am credited with the purchase value of the software license and receive shares accordingly?

Cheers,

CC

Peterdalkey

In thoery at least, you are making a disposal at the value of the shares issued in exchange, and thus have created a taxable gain. In reality, the value is probably the deciding factor as to whether it is appropriate to report it as such. If it is a substantial number, you should seek advice from a taxation practitioner or the Revenue helpline!

CapedCrusader

Thanks for this.

Is there any issue, where the license is transferred directly from company A to company B and as a result I acquire a shareholding? Would the transaction require the shareholding to be the company's rather than mine personally? I.e. do I have to take ownership of the license at some point for me to acquire shares based on its value?

Peterdalkey

in my opinion yes, just buy it for a Euro!! Then it is your to trade/sell/echange!

amen

in my opinion yes, just buy it for a Euro!! Then it is your to trade/sell/echange

but is he then not breaching the terms if his software license?

I have enquired and mentioned that the company will be restructuring and they said there would be no problem transferring the license on a once-off basi

What you are proposing is transferring the license from Company A to the OP and then from the OP to Company B.

The software company would then have to do two transfers ?

Peterdalkey

But only one transfer of registration!! Company A to B, the interim transfer of title is invisible to the lecensor and the intermediate is not seeking to use the programme.

amen

But only one transfer of registration!! Company A to B, the interim transfer of title is invisible to the lecensor and the intermediate is not seeking to use the programme.

I agree with that but would revenue not require that the software be licensed to him to be a valid asset ?

Peterdalkey

The Revenue could not give a toss about the registration one way or the other, it is irrelevant. The cost sale/price are the asset values at any point in time. Lots of items registered in a persons name are not their property... everything leased for instance!.

CapedCrusader

Thanks folks... very helpful discussion