Who is Owner: Bankruptcy

As different countries have different bankruptcy laws, naturally they will also have different regulations regarding ownership in bankruptcy situations.  

United States

In the United States, the regulations that deal with bankruptcy issues involving intellectual property is the Intellectual Property Act of 1988 which was incorporated into the Bankruptcy Code at Section 365.  Normally, commercial enterprises will claim Chapter 11 bankruptcy in which the enterprise can attempt to simultaneously continue business operations and repay creditors through a court-approved plan of reorganization.  The point at which ownership concerns enter the scenario is when the court must decide whether the company exists separate from the stockholders.  For a corporation, Chapter 11 does not put the personal assets of the stockholders, aka owners of the corporation, at risk but only the stockholders’ investments in the corporation’s stock.  A sole proprietorship, on the other hand, considers the owner to be the debtor, so the personal assets and the business assets of the debtor are put at risk.  Lastly, if a partnership claims Chapter 11, it is the partnership who is considered owner, as an entity apart from the owners.  Usually, partnerships are treated the same way as corporations and the partners’ personal assets are normally not put in risk, but in some cases, the personal assets of the partners can be used to pay creditors.  Depending on who is considered owner, the business assets, including intangible assets, may or may not be at risk of being sold off in order to raise revenue for the company.

Europe

Whereas the goal of U.S. federal bankruptcy laws is to give debtors a financial “fresh start” from their overpowering debts, the European bankruptcy laws are less lenient towards bankrupt companies.  European countries in recent years have tried to change their systems and regulations in ways that would help companies survive, but their systems are still relatively harsh in how they deal with insolvent firms, as most still end up in liquidation.  One of the changes to the European systems came in the form of France’s procédure de sauvegarde, inspired by Chapter 11 of America’s bankruptcy code as it prevents the seizure of assets.  Although, this French process is still one in which the court makes the major decisions and the process has been wrought with companies abusing the “out” from having to pay on their debts, when they may be capable of doing so.  So, in the European system, the ownership lies almost exclusively with the company and as such, it is more common to see a liquidation of tangible assets and selling off of the intangible assets that hold value when separated from the company.