The impact of insolvency on licensors and licensees in the life sciences sector

At a time when well-known names are disappearing from the high street as a result of retailers going into administration, the spectre of corporate insolvencies has never loomed larger. The life sciences sector is feeling the pressure for a number of well-documented reasons — a difficult funding environment, a challenging regulatory landscape and dwindling pipelines — and these all, sadly, mean that insolvencies in the sector are happening and will continue to happen. So it is prudent for any life sciences company to consider the potential impact of the insolvency of its counterparty in each agreement that it enters into. This article considers in particular the impact on intellectual property (IP) licences.

What is insolvency? In the UK, a company can become ‘cash flow insolvent’, meaning it is unable to pay its debts as they fall due, or ‘balance sheet insolvent’, where its liabilities exceed its assets.

What are the main insolvency procedures? The Insolvency Act 1986, as amended, along with the Companies Act 2006, provides a comprehensive toolbox of different procedures that creditors and debtors may take advantage of…

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