The afterlife of a trademark: What really happens when you close shop

JULITA MUSHATI AND FUNGAI CHIMWAMUROMBE

When a business closes, owners often think only of clearing debts, selling equipment, or settling with employees.

Yet one of the most important assets the trademark is sometimes forgotten. A trademark does not disappear when the doors shut.

Instead, it remains part of the company’s estate and can continue to hold significant value if it is properly managed.

Trademarks are unique because they embody the goodwill and reputation of a business. When a business in Zimbabwe closes, whether through liquidation, voluntary winding up, deregistration, or even an informal decision to stop trading, its intellectual property still forms part of the assets to be dealt with.

Trademarks are no exception. They remain attached to the business’s estate and must be properly transferred, sold, or licensed to avoid being lost. Where a formal process such as liquidation is involved, a liquidator will often assess their value and arrange for their disposal, sometimes through sale or auction.

In other cases, the owners themselves may decide how to distribute or sell the rights, depending on the business structure and agreements in place.

If no one takes ownership, or it is abandoned the trademark may ultimately pass to the State as, “bona vacantia, engraved under section 53 of the Companies and Other Business Entities Act [24:31] which state that when a company or private business corporation is dissolved whether through winding up or being struck off the register as defunct any property that remains undistributed automatically becomes bona vacantia and vests in the State, unless otherwise provided.

This outcome is particularly likely where no application is made to the Registrar to record the assignment or transmission of the trade mark, as required under Section 29 of the Trade Marks Act [Chapter 26:04]. Once removed, the mark may be vulnerable to acquisition by third parties, potentially undermining the commercial goodwill and brand equity built by the original proprietor.

The fate of a trademark also depends on the structure of the business.

For sole proprietors, the mark usually follows the owner, who may continue to use it in another venture or sell it outright.

In a partnership, ownership depends on the terms of the partnership agreement, and without a clear agreement disputes can arise.

In the case of companies, trademarks belong to the corporate body and are distributed during dissolution in line with creditor claims and shareholder arrangements. Only once debts are settled will any remaining intellectual property be passed to shareholders or sold off.

One important legal risk is that trademarks cannot simply lie dormant forever. Under section 31 (b) of the Trademarks Act [Chapter 26:04], a registered trademark may be cancelled if it is not used for a continuous period of five years. That means a mark left idle after a company closes could lose its legal protection altogether. To prevent this, a new owner must not only renew the registration but also put the mark to genuine commercial use.

Consider a bakery that has operated under the name Golden Crust for many years. Customers have come to associate that brand with fresh bread and good quality.

If the bakery closes because of financial challenges, the ovens and premises may be sold off, but the trademark itself still carries value.

Through a trademark assignment usually recorded in writing and lodged with the Registrar, another business could lawfully acquire the Golden Crust name.

That new owner would then step into the shoes of the old bakery, using the mark on its own bread and continuing the brand’s legacy in the market.

Without such an assignment, however, the original owner’s goodwill could simply lapse or be acquired by competitors.

What these examples show is that closing a business does not automatically mean the end of a trademark. A mark can be sold to a third party, licensed for continued use, or transferred to shareholders for new ventures. At the same time, if neglected, it can be lost to cancellation or pass into the hands of others at little or no value.

With the right planning and legal expertise, it can help settle debts, reward investors, or create opportunities for the future. Without such planning, years of brand building may simply slip away.

Julita Mushati is a legal intern at Zenas Legal Practice (Pvt) Limited and can be contacted for feedback on julitazenaslegalpractice.com and whatsapp 0772306088

Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Chimwamurombe Legal Practice and can be contacted through email fungai@zenaslegalpractice.com.

—