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Numerous companies in India and across the world have raised millions of dollars pledging their IP assets to secure an injection of funds. M S Bharath dissects the pros and cons of putting your rights up as part of a loan agreement.
The Indian economy, like those of many other developing nations, is increasingly driven by intangibles, with many companies listing intellectual property as their key asset. The financial sector has innovated over the years by advancing loans with IP as their sole or partial security. The lender and the borrower have to go through many pre- and post-transactional exercises, including due diligence, recording of security agreements, maintenance of IP and the measures to be taken should there be a default on the money advanced.
It is vital for comprehensive due diligence to be conducted to ascertain exact ownership, validity, conflicting rights and valuation of the IP, and the nature of the loan to be created.
due diligence, IP rights, security, SPV