Module 1 · Chapter 1
What a Licence Is, and Why This Deal Needs One
When a group sells one factory, the factory often still needs the group's brand, technical knowledge and software. A licence lets the factory keep using them while it builds its own.
In this chapter
- What a licence moves, and what it never moves
- Why selling one factory out of a group needs a licence
- The deal in this workbook, and its two years at a glance
1.1IP licences in one paragraph
A licence is permission to use intellectual property (IP) that someone else owns and keeps. The owner who gives the permission is the licensor, and the business that gets it is the licensee. This workbook follows one licence, signed when a pump maker sells one of its factories. You are a trainee in the IP and technology team at Merriden Lowe LLP in Birmingham, and you act for the buyer.
Key point
A licence moves permission, never ownership. The licensor still owns its brand, know-how or software after signing. The licensee may use them only in the ways, places and times the licence allows.
1.2Why selling one factory needs a licence
When a group sells one business out of many, the sale is called a carve-out. Inside the group, a factory simply uses the group's brand, drawings and software. So every carve-out has to answer one question: who keeps which IP after the sale?
The usual answer depends on who still needs the IP:
- IP that only the business being sold uses usually goes with it as part of the sale.
- IP that the rest of the group keeps using stays with the group. The business sold gets a licence.
So a group rarely sells its brand with one factory, because its other factories still put that brand on their products. Shared drawings and group software stay with the group for the same reason.
The licence has to be in place at completion, the day the sale takes effect. A buyer of a company's shares gets the company, and only what that company itself owns. The brand, the drawings or the software may belong to another company in the group. Then, without a licence, the factory could not put the name on its products, build from the drawings or run the software.
1.3The deal in this workbook
Kelderwick is a group that makes industrial pumps, with factories in 15 countries and distributors in 50. The group's parent company is the seller. The group's brand, its know-how (the drawings and methods for making its pumps) and its software all belong to one group company, Kelderwick IP.
The group's only factory in the UK is in Sheffield. It makes the group's existing range of pumps for customers in the UK and Ireland. This workbook calls the company that runs it “the Sheffield company”.
The buyer is Tregarth, an engineering group in the UK that is buying its first pump factory. Tregarth buys all the shares in the Sheffield company from Kelderwick. The contract of sale is the share purchase agreement, called the SPA. It is signed on 1 April 2026, and the deal completes the same day.
The Sheffield company keeps its factory, its staff and its contracts, because only its owner changes. But the brand, the know-how and KelderPlan, the group's planning and quality software, belong to Kelderwick IP. Tregarth is not buying that company, so the SPA gives Tregarth none of them. Under a separate transitional services agreement, the group also keeps giving the factory IT support for a limited time.
So Kelderwick IP grants the Sheffield company a licence, which this workbook calls “the Licence”. Its terms were agreed in final form alongside the SPA, and both companies sign it at completion. This one document holds three licences:
- The brand, for two years, while the factory changes to a brand of its own.
- The know-how, for ever, to make, repair and sell the existing pumps.
- KelderPlan, for the same two years, while Tregarth installs new software for the factory.
The Licence opens with a short background that says why it exists:
Read in the Licence →(A) The Licensor owns the Licensed IP, which the Licensee has used at the Site as a member of the Licensor's Group.
(B) Under the Share Purchase Agreement, Tregarth Engineering Limited has today bought the whole issued share capital of the Licensee from Kelderwick Holdings Limited.
(C) The Licensor has agreed to grant the Licensee the licences in this Licence so that the Licensee can carry on its business while it moves to its own brand and its own software.
The Licence is called a transitional licence, and paragraph (C) says why. A new name cannot reach every sign and label overnight, and new software takes time to install. So the brand and software licences are a bridge of two years. The know-how licence never ends, and Chapter 2 explains why.
These are the companies and your own team:
| Who's who | What they do |
|---|---|
| Kelderwick Holdings Limited (“Kelderwick”) | The seller, the group's parent company. “Kelderwick” also means the group as a whole. |
| Kelderwick IP Limited (“Kelderwick IP”) | The licensor. It owns Kelderwick's brand, know-how and software. |
| Kelderwick Pumps (Sheffield) Limited (“the Sheffield company”) | The licensee. It runs the Sheffield factory, and Tregarth buys its shares. |
| Tregarth Engineering Limited (“Tregarth”) | The buyer. A UK engineering group buying its first pump factory. |
| Merriden Lowe LLP | Tregarth's solicitors, and your firm. From completion it also acts for the Sheffield company, which Tregarth then owns. |
| Kofi Mensah | The senior associate. He drafts Tregarth's changes to the Licence and supervises you. |
1.4The two years at a glance
The brand and software licences run for two years from completion, to 31 March 2028. The Licence counts time in months: month 1 begins at completion, and “by month 3” means by the end of the third month. A rebranding plan in the Licence moves the Sheffield company onto a brand of its own in steps, each with a deadline.
| When | What happens |
|---|---|
| Completion | The SPA and the Licence are signed. All three licences begin. |
| By month 3 | The Sheffield company changes its company name. |
| By month 6 | Stationery, the website and all new packaging carry its own brand. |
| By month 18 | Factory signs and vehicles carry its own brand. |
| By month 24 | The labels and nameplates of every pump made from then on carry its own brand. The brand licence ends. The KelderPlan licence ends too, unless the Sheffield company has extended it once, by up to three months, for a fee. |
| The next three months | The Sell-Off Period. The Sheffield company may still sell branded pumps made during the two years. |
| For ever | The know-how licence goes on. |
The cheapest and most visible step comes first, and the pumps themselves change last. Chapter 3 explains that order.
1.5Your job
Your first job is a deal sheet: one page that shows what the Licence lets the factory use, and until when. Then you test the Licence against the factory itself. Before completion, list what the factory will use on its first day under Tregarth, and match each item to one of the three licences in clause 2.
An item that no licence covers is a gap, because the factory may have no right to use it after completion. A gap is easiest to close while the Licence is still being agreed, so report it at once.
- Write a one-page deal sheet: the parties, the three licences and the day each one ends.
- Add the deadline month of each rebranding step.
- List what the factory uses on day one: names, logos, drawings, test methods and software.
- Next to each item, tick the licence in clause 2 that covers it.
- Send every unticked item to Kofi Mensah, with a note of who uses it and how.
Key takeaways
- A licence moves permission to use IP. The licensor still owns it.
- In a carve-out, IP the group keeps using stays with the group and is licensed.
- Buying the shares gives the buyer only what the company itself owns.
- The brand and software licences last two years. The know-how licence never ends.
- The Licence is agreed alongside the SPA and signed at completion.