1. If foreign Operating Company
is sued or becomes insolvent, what assets may a creditor attach and
sell?
a. Answer: Only the assets belonging to Operating
within the foreign country. The intangibles are owned by a separate
legal entity.
1) The license agreement provides
for cancellation upon 30 days notice, so Royalty Company may cancel
the license if Operating Company is seized by a creditor or files
for bankruptcy.
2) By the way, such a cancellation
is a prudent business move by Royalty Company, since the licensor
has changed ownership.
2. May an owner form a new operating
company and go into business the next day?
a. Answer: Yes, the contractual
relationships between old Operating and the magic black box companies
are severed, the intellectual property belongs to a separate entity,
and a new license agreement is entered into with the new entity. The
same holds true for any of the other black box companies created under
this concept.
b. This is the essence of asset
protection - creating multiple entities to separate "dangerous"
or potential creditor claims from "safe assets."
1) Limits: No fraudulent transfers
- One cannot defeat the claims of known creditors by transferring
assets.
2) Personal guarantees: These
structures do not help if the bank or vendor requires a personal
guarantee; however, personal asset protection may assist with these
issues.
