Selling Code When the Company Is Dissolved, Insolvent or in Liquidation

When a company is dissolved, insolvent or in liquidation, its code usually still exists and still has value. What changes is who can sell it. The code belonged to the company, not to the people who wrote or ran it, so the right seller depends on the company’s state: the directors while it exists, a liquidator, administrator or trustee once an insolvency process starts, and in the UK the Crown once the company has been dissolved. Getting this right before you talk to a buyer saves months.

This page is general information, not legal advice. Insolvency and company law vary by country and by case. Before you sign anything, ask a qualified lawyer or insolvency practitioner to confirm who can sell in your situation.

Who owns the code when a company stops trading?

The company does, for as long as it exists. Code written by employees as part of their job belongs to the employer in the US, the UK and the EU, and code from contractors belongs to the company if it was assigned in writing. Our guide on who owns the code covers those rules.

That has a consequence many founders miss: a founder cannot sell company code in their own name, even if they wrote most of it and the company is closed. The person who signs must be someone with authority over the company’s property at that moment.

One warning for directors of a company that is insolvent but not yet in a formal process: the law generally expects you to act with creditors’ interests in mind, and an asset sold for too little, or to someone connected to you, can later be challenged. Talk to an insolvency practitioner before selling anything at that stage.

What happens to code when a UK company is dissolved?

Under section 1012 of the Companies Act 2006, when a company is dissolved, all property and rights it holds are deemed bona vacantia, ownerless property, and belong to the Crown (or the Duchy of Lancaster or the Duke of Cornwall). Copyright in code is property, so it goes too. The Government Legal Department’s Bona Vacantia division handles these assets.

There are two ways back:

1. Restore the company. Former directors or members can generally apply for administrative restoration up to 6 years after dissolution, and court restoration is generally available within 6 years too. A restored company is treated as if it had never been dissolved, so its code is its own again and its directors can sell it.
2. Buy the rights from the Crown. The Bona Vacantia team may sell intellectual property that belonged to a dissolved company, for a fee plus VAT and its costs. It warns there is no guarantee you will be offered the chance to buy, it gives no title guarantee, and if the company is later restored, the rights revert to the company.

Outside the UK the rules differ. In many US states, for example, a dissolved corporation continues to exist for a period to wind up its affairs, which can include selling remaining assets; a lawyer in the state of incorporation can confirm what applies.

For most founders, restoration is the cleaner route, because it puts the company back in a position to sign a normal written agreement. The best route of all is to decide about the code before dissolution, which our guide to shutting down a software company covers.

How do liquidators, administrators and trustees sell code?

Once an insolvency process starts, control of the company’s property passes to the office holder. In the UK, the Insolvency Act 1986 gives a liquidator the power to sell any of the company’s property by public auction or private contract. In a US Chapter 7 case, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets to pay creditors.

Code is often an awkward asset for an office holder. It may have no revenue, no running service and no obvious buyer, and the marketplaces that sell software businesses usually price them on revenue or profit. A liquidator holding a dead product’s codebase may find few routes to cash.

That is one reason a sale for research use can fit. Odys AI Labs, the research and development arm of Odys, buys the source code of software that is no longer used, for AI training and R&D. It buys code only, not the business: no customers, no running service, and never databases, user records or customer data. Secrets, keys and personal data are removed before transfer, and we help; we never use the old brand or relaunch the product. We may also work on the code with research partners, and the agreement sets out exactly what rights transfer. Terms are cash only, one agreed price, paid on transfer, after review and with no obligation. That typically gives an office holder a single, documented realization of an asset that might otherwise be written off.

Founders still matter in an insolvency. The office holder often knows little about the product, so a founder who, with the office holder’s agreement, can describe the codebase, point to the repositories and help remove secrets makes the asset easier to sell.

Do co-founders and investors need to sign off?

While the company exists, usually someone must approve, and the documents decide who. Check three places:

• The articles of association or bylaws, for who can bind the company and whether a sale of a major asset needs shareholder approval.
• The shareholder or investor agreement, which often gives investors consent rights over selling substantially all assets or the core intellectual property.
• Board minutes, so the decision is recorded and the signatory’s authority is clear.

The signed transfer itself must be in writing. In the US, a transfer of copyright is not valid unless it is in writing and signed by the owner or its authorized agent; in the UK, an assignment is not effective unless it is in writing signed by or on behalf of the assignor. A short written agreement, an asset purchase agreement limited to the code, is the normal tool. Our guide to what is in a source code purchase agreement explains the usual clauses.

What about heirs and personally owned code?

Copyright can be inherited. In the US, it may be bequeathed by will or pass by intestate succession like other personal property, and UK law similarly lets copyright pass by testamentary disposition. If the person who died owned the code personally, for example from a side business that was never incorporated, the estate or the heir can usually sell it. If a company owned it, the rules above apply instead. An executor or heir should confirm with a lawyer which case applies.

What does a buyer need to see in these cases?

A fair buyer will want evidence of authority, not your code. Expect to show:

1. Who you are acting for (the company, the estate, the insolvency estate) and your appointment or role.
2. That the company or person owned the code: employment and contractor assignments, or an acquisition agreement.
3. Any required approvals: board resolution, investor consent or court permission where the process requires it.

No code should change hands before a signed written agreement, and nobody should ask you to install or run anything to “check” the code. Our guide to red flags when someone offers to buy your code explains what a fair process looks like.

What to do next

• Find out the company’s exact status and date, from the company register or your insolvency practitioner.
• Identify who can sign today, and gather the approvals and ownership documents they will need.
• When authority is clear, send us a few details for a free code valuation, and take advice from a qualified lawyer before signing. This page is not legal advice.