A group of friends and I are discussing founding a startup where the products would be commercial software. One the most important aspects that in our opinion we should put in any legal agreement is to determine what would be the fate of products in the case of the startup fails; that is, if it reaches the bankrupt. We are considering as a condition in the legal agreement that says that if the startup fails, then all its products should be released under more liberal licenses such MIT or GNU.

So, I would like to know if anyone knows about an explicit precedent of this kind of juridical figure. If so, is it possible to know more about?

  • Free Software (Open Source) is commercial. You are asking about proprietary. Also I think the title is wrong: you are not asking if it is ok to convert proprietary software to Free Software. You are asking about writing something into the company's to make this inevitable if and when the company ends. Mar 14, 2018 at 0:31

2 Answers 2


I'm in no way a lawyer, and this is something that you should consult a lawyer for, in terms of actual wording in your agreements/contracts...

The ability to license a work belongs to whoever owns the copyright of that work. Where the startup is the owner of that work, it has the ability to offer it to other's under a license (in the same way that I can license software that I write to others).

Such a clause would probably write like this (again, this is probably not legally strong):

Dissolution of Company - Distribution of Assets

In the event that the Company is dissolved and its activities are terminated, all software owned by the Company shall be released and made available under the terms and conditions of the MIT license.

There are two issues that I see:

  1. Copyright Enforcement

    A party would likely have to be designated to be allowed to enforce copyright infringements by other parties. This probably won't be an issue for something like the MIT license, but it may be an issue for others if you license it under something like the GPL license, which has strong copyleft provisions. If this is something that you don't care about enforcing (aka, you don't have the resources, or you want anybody to use it almost as they wish), I would say just release it under MIT and be done with it. GPL would confuse things here.

  2. Re-ownership of Software

    This isn't so much an issue as it is a weird thing. If your startup decides to restart, then you have two options depending on choice of license. More "liberal" licenses such as MIT would be easy to deal with: you just take the software and no issues. With something like the GPL, you'd most likely have to follow those terms, but then there wouldn't be anyone to legally enforce it, so the issue kind of becomes moot.

I'm not aware of any judicial precedent for this, and I don't really see reason for one. Cases would only be going to court if the issue was severe, and if the failed startup was interested in enforcing license of provisions, which I imagine would be rare. Any other issues I imagine would be issues with the license involved, and not with this publication scheme.

All this said, be sure to ask a lawyer. They are the only ones able to give you proper legal advice.

  • 2
    What exactly counts as "fails" for this agreement? If the company is sold, does that count? In addition to getting a lawyer to look over this, this term should probably be clarified.
    – Brandin
    Feb 28, 2018 at 12:40
  • @Brandin Better term is probably dissolution or when the organization is dissolved. Fail is a... Pretty horrible term
    – Zizouz212
    Feb 28, 2018 at 16:43

Yes you can convert proprietary software to Free Software. It has been done many times.

If you want to pre-arrange this to happen on closure of the company. Then you would probably have to add it to articles of association (called articles of incorporation in some jurisdictions) or memorandum of association. See the appropriate lawyer about how to do this.

You may also want to explore bcorporation. It was started in US, but has spread else where http://bcorporation.uk/

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