Assignment of goodwill (deed)
Written with our partners at:
What's an assignment of goodwill (deed), and when do you need it?
This may be used on its own but it is designed to accompany our template transfer agreement converting a sole trader business to a limited company formed by that sole trader, where goodwill is transferred to the buyer company as part of the agreement. It is also relevant to our transfer agreement of a general partnership to a limited company, again, because substantial value in that business is being transferred s part of the conversion.
Goodwill basically includes the intangible items that add to a company’s value, but which cannot be easily identified or valued. These intangible items could include trademarks, and the reputation of the company. They may also take into account factors such as brand identity, customer relations, customer loyalty, and staff satisfaction, to ensure purchases are made at a fair price. However, it won’t cover identifiable assets such as contracts or legal rights, or assets that can be separated, divided, transferred, or sold.
Goodwill is one of the hardest-to-value assets of a business. And yet, it can be one of the most valuable – especially when it comes to selling that business, or valuing it for investment purposes. In many cases, their ultimate value will come down to how keen a potential buyer is to acquire the business in question, or an investor to invest in it – and the competition they may face.
Why is it done by deed? Deeds are contracts, but they have more exacting signature provisions, incorporating witnesses of signatures, which means they tend to be used in certain circumstances where a straightforward contract would be considered insufficient. The point of including the witnesses is to make clear, unequivocally, that both the signing parties fully understood what they were signing and that they intended to agree to the terms set out in the deed.
Powers of attorney, transfers of property and other valuable items will usually be done by way of a deed. An assignment of goodwill in business is also a situation where a deed is considered most appropriate to evidence that such a valuable transfer of property from the seller to the buyer was indeed fully intended.