Owner Managed Business update – February 2020
Welcome to our February edition of Owner Managed Business update.
Protecting a company's digital assets
In the information age our products and services are increasingly marketed through, and delivered via, digital platforms. A company's value is as much based on its intangible, digital assets as its physical assets. Businesses insure, record, track and secure physical assets, but how well protected are our digital assets?
First things first, what actually is a digital asset? Currently, there is no legal definition of digital assets in the UK. Generally, it is taken to mean any information that exists in a digital form. Yes, this is vague but to give you an idea, it is taken to cover email addresses, domain names, intellectual property, online shopping accounts mailing lists and client lists (containing sensitive data). It also includes the information necessary to access the digital assets, such as usernames and passwords to accounts. Digital assets can add great value to your business. If one day you choose to sell your business or bring an investor on-board, the chances are that they will want to understand the digital assets that your company holds. The amount that a buyer or investor might offer you for your business may be impacted by the value of your digital assets.
As these assets are so important, you need to make sure that they're safe. Below is a (non-exhaustive) list of actions you may wish to take to protect your digital assets:
- Itemise them – A good place to start would be to make a list of the assets that you use in your business. We have provided some ideas above but really think about your business's online presence and what assets your business uses that could be considered to be valuable. Remember to keep this list updated and make sure you keep it safe and secure so as to protect against any potential breaches to data protection laws.
- Value them – Think about how much value is attributed to the assets that you have included in your list. It may be difficult to pinpoint, for example, if your list if customers is (hopefully) ever growing. An accountant can guide you with this as digital assets can be included on your company's balance sheet.
- Protect them – If you rely on contacts built up through your employees’ social media accounts, make sure you have up to date restrictive covenants in their contracts of employment. Look to make sure you’re protected from a disgruntled ex-employee wanting to set up in competition using contacts and ideas they’ve gleaned from your business. In addition, establish whether there is any registrable intellectual property in your business that you might want to protect. Your designs and logos may be trade-marked. Also, if you have any processes that are unique to your business, you may want to think about whether these can be protected by a patent. Trowers & Hamlins' intellectual property team would be more than happy to assist if any of these examples apply to your business.
- Save them – Make sure that your assets are backed up to reduce the list of them being lost in case something unexpected happens. As mentioned above, security is paramount so always ensure you keep your security systems up to date to avoid hackers getting hold of any important information. You might also want to think about obtaining cyber insurance to protect against these risks.
Any prudent business owner knows that it is important to keep a list of physical assets that are owned or used by that business. This is just as important for digital assets and is sometimes overlooked.
Not only does keeping on top of your digital assets help to keep your business safe, it also makes life a lot easier if and when you choose to sell all or any part of your business and ownership of the assets need to change. Always make sure you keep a record of all contracts and terms and conditions you have with digital asset providers. This will be of particular importance if the assets need to be transferred. It is often not as simple as changing the name on the contract and sometimes there are restrictions as to what you can and cannot transfer without permission. Our commercial contracts team would more than happy to assist you if you have any queries about the provisions of any of your contracts.