How to use patents to invest in a company?
What Is Patent Investment?
- An investor may transfer the ownership of a patent to a company
- The company then issues shares as Non-cash Consideration
Steps to Invest Using a Patent
1. Patent Valuation：
- Appoint a Qualified Valuer
- To conduct an independent valuation of the patent
2. Board Approval：
- The Board of Directors must pass a resolution
- Confirming that the consideration is fair and reasonable
3. Sign the Transfer Agreement：
- The investor and the company must execute an
- Assignment of Patent Agreement
4. Register the Patent Transfer：
- Register the transfer with the Intellectual Property Corporation of Malaysia (MyIPO)
- So that the company becomes the legal owner of the patent
5. Update Company Records：
- Record the transaction in the company's accounting records
- Update the Register of Members (ROM) to reflect that the shares were issued in exchange for the patent
What Are the Risks?
- If the patent is overvalued
- Shareholders or creditors may challenge the transaction
- Directors may also be held responsible
Why Is an Independent Valuation Important?
- It provides evidence of the patent's fair market value
- Helps reduce valuation disputes
- Protects both the company and its directors from potential legal issues
Summary
- A patent may be used as Non-cash Consideration for shares
- The process includes valuation, board approval, signing the transfer agreement, registering the transfer with MyIPO, and updating the company's records
- An independent valuation report is essential to ensure a fair transaction and minimise legal risks