Shareholder Trade Mark Licence
Trade mark licence from a shareholder to a company, for the grant of a licence to the company to use trade marks owned by the shareholder for the company’s business.
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When do I use this document?
- for a licence of trade marks from a shareholder to a company
- for registered and/or unregistered trade marks
- for a licensee company which is a private limited company incorporated in England and Wales
What are the key features?
- 17 clauses and one schedule over 11 pages
- alternative wording depending on whether the licence is exclusive or non-exclusive
- optional provisions for either a royalty-free licence or for payment of a royalty based on the percentage of sales
- restrictions on the use of the trade marks by the company
- termination rights for the licensor, including the licensor ceasing to be a shareholder in the licensee
What else do I need to know?
One of the shareholders in a company may own a trade mark which the company requires for its business.
The shareholder may want to retain the ownership of the trade mark but to allow the company to use the trade mark in its business whilst the shareholder remains a shareholder in the company.
The licence of the trade mark could be:
- exclusive or non-exclusive: if exclusive, the shareholder will not be permitted to allow other third parties to use the trade mark whilst the licence is in force
- limited to a particular territory
- royalty free or subject to payment of a royalty, for example a royalty of a specified percentage of the sales made by the company
The licensing shareholder will want to retain control of the manner in which its trade mark is used by the company.
The licensing shareholder may also want the licence to come to an end should it cease to be a shareholder in the company.
When do I use this document?
- as an advance subscription agreement between the company and a single investor
- where the conversion price will be calculated as a percentage discount to the issue price for shares in the qualified investment round
- if agreed, where there is an agreed valuation cap on the company’s valuation
What are the key features?
- advance subscription terms and payment
- conversion on the occurrence of defined events, including a qualifying financing round, the sale of the company or on a longstop date
- conversion price on a qualified financing round to be at an agreed percentage discount to the qualified financing round share price
- if agreed, a cap on the valuation of the company for the purpose of calculating the conversion price
- warranties regarding the investor’s compliance with Financial Services and Markets Act 2000 regime regarding financial promotions
What else do I need to know?
For detailed discussion regarding the purpose of advance subscription agreements and their benefits and disadvantages for investors and the company, click here.
Negotiating points
Prior to entering into this ASA, the parties will need to consider and agree:
- discount rate: the discounted price per share (expressed as a percentage) at which the ASA investor will receive shares in the qualified financing round
- valuation cap: if agreed, the cap on the valuation of the company for the purpose of calculating the price at which the advance subscription will convert into shares on a qualified investment round
- default valuation: the default valuation of the company which will be used to calculate the conversion price of the advance subscription in circumstances where conversion occurs on the agreed longstop date or the company’s insolvency
- longstop date: the longstop date on which (and in the absence of a prior qualifying financing round) the ASA will automatically convert into shares
- qualified financing round: the minimum amount of funding which the company must raise before that funding round will count as the qualified financing round under the ASA which results in the conversion of the advance subscription into shares
- subscription amount: the amount of the investor’s advance subscription
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Updated by a lawyer on 21/07/2025
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