A Business's Domain That Goes Into Liquidation?

[Chris.C]

Ok so this is an unusual situation...

Basically a competitor of a major client of mine went into liquidation about 2 months ago (they spent the 6 months prior to that exhorting customers for $2.5M). The real shame is that this is the second time this guy has gone bankrupt in 5 years, taking people for millions.

Anyway, this competitor website is well designed and ranks well in Google to this day.



So we as a competitor naturally approached the liquidators to say we'd be willing to acquire some of this company's assets, particularly their domain and website, but it appears that the business owner very cunningly transferred the domain into a freshly registered business name that they have setup so they could restart their old scam.

What is the best way for the liquidator to reacquire this domain?

Obviously the website is worth nothing to us without that domain.

However the bankrupt company still holds a trademark for the business name which is the exact same name as the domain name...

So could the liquidator simply submit a dispute to AUDA to transfer ownership back to them? If so how long would that take?

Any advice is welcome.

 

[findtim]

this happened to me last week after 3 months of struggle to gain the rights to the domain for the client.

i was on the outer so i don't know the details but my client says it did cost them a lot of money to get it sorted, whats "a lot" of money? knowing these guys it was 50K +

based on what we went through in my example i would be pushing it all back to the liquidator, if an asset of a company is transfered i think that is illegal, as in our case the domain name asset was transfered to the guys girlfriend !!!!

NOTE: i wasn't involved in the legal stuff, i just got snippets of info and did the 301 redirects as i got ftp access, we are stilllllllllll yet to gain the registration admin of the domains, so its still going on.

push back to the liquidators i say.

tim

 

[snoopy]

I think the liquidator would typically take legal action against the directors. Sounds like a theft type issue perhaps as well. Unless of course the director has bought it, which is entirely possible.

 

[Chris.C]

Thanks for the feedback guys.

So does anyone know how long the dispute process takes?

 

[Ashman]

What is the best way for the liquidator to reacquire this domain?

I doubt the Liquidator would be able to recover the domain and if they did I would be extremely surprised.

My reasoning is that domains are typically regarded as an expense in terms of paying the licencing fee. They are not typically treated as an asset on the balance sheet and therefore would not be subject to recovery in my opinion.

 

[Shane]

I doubt the Liquidator would be able to recover the domain and if they did I would be extremely surprised.

My reasoning is that domains are typically regarded as an expense in terms of paying the licencing fee. They are not typically treated as an asset on the balance sheet and therefore would not be subject to recovery in my opinion.

The registration cost is classed an an expense, but the domain should still be an asset.

I had to pay CGT on the transfer of a domain portfolio last year, so either I have a sh*t accountant or domains are classed as assets.

 

[Ashman]

Did some research and this is what I came up with:

1. Domain names can be classed as intangible assets.

2. Intangible assets have been argued to be one possible contributor to the disparity between company value as per their accounting records, and company value as per their market capitalisation.

3. The Financial Accounting Standards Board defines an intangible asset as an asset, other than a financial asset, that lacks physical substance.

4. The International Accounting Standards Board offers some guidance as to how intangible assets should be accounted for in financial statements. In general, legal intangibles that are developed internally are not recognised and legal intangibles that are purchased from third-parties are recognised.

5. Domain names are examples of intangible assets with indefinite useful lives, however intangible assets are typically expensed according to their respective life expectancy. Intangible assets with indefinite useful lives are reassessed each year for impairment. If an impairment has occurred, then a loss must be recognised and vise versa.

 

[Ashman]

The registration cost is classed an an expense, but the domain should still be an asset.

I had to pay CGT on the transfer of a domain portfolio last year, so either I have a sh*t accountant or domains are classed as assets.

Since there is no accepted valuation method for domain names, I would say they are only recognised and capitalised onto the balance sheet at the point of sale when their market value is determined.

Even at that point they could not be an asset because they have been sold so their value would be capitalised as earnings. Just a theory ...

 

[m8e]

However the bankrupt company still holds a trademark for the business name which is the exact same name as the domain name...

So could the liquidator simply submit a dispute to AUDA to transfer ownership back to them? If so how long would that take?

I think this is definitely valid and worth pursuing, as the domain is worth money to the creditors of the bankrupt company.

Negotiate a deal with the liquidators whereby
- they grant you license to act on behalf of the bankrupt entity to reclaim its domain via AUDA
- you agree buy the name from liquidators for $X upon successful AUDA arbitration

 

[m8e]

I had to pay CGT on the transfer of a domain portfolio last year, so either I have a sh*t accountant or domains are classed as assets.

Interesting question. I've always just treated domains as expenses and incomes, not assets (no depreciation, etc).

My bank won't give me a loan based on my domains... so why would they be assets? However, is there any tax advantage to treating domains as assets?

Bit of searching found some interesting threads

http://domainshane.com/do-you-treat-your-domains-as-assets-or-an-expense-on-your-taxes/

http://www.dnforum.com/f77/domains-assets-expenses-thread-3937.html

http://www.ukbusinessforums.co.uk/forums/showthread.php?t=12517

 

[kiml]

I'd suggest that you clarify the date of transfer of administration of the domain vs the date of liquidation or the entity that it was previously registered to, as this will be key to disputing a COR with auDA.

If the COR happened before liquidators were appointed and it was within policy constraints, I doubt you would be able to recover the name via auDA (no policy provision that I know of that covers this).

If the COR happened after an external party was put in control, the liquidator should be able to request auDA reverse the COR as it would have been done in bad faith.

Good luck.