Transferring a business that is heavily reliant on social media is fraught with danger

The “Ice Bucket Challenge” for Lou Gehrig’s disease has gone viral.  The challenge has raised an estimated $100 million for the non-profit Association ALS.  Not only is this a financial success story but it has raised the disease from near obscurity: most people had not heard of Lou Gehrig’s disease until the challenge.

The “Ice Bucket Challenge” for Lou Gehrig’s disease has gone viral.  The challenge has raised an estimated $100 million for the non-profit Association ALS.  Not only is this a financial success story but it has raised the disease from near obscurity: most people had not heard of Lou Gehrig’s disease until the challenge.

The challenge is the latest in a number of successful campaigns that highlight the power of social media.

Some businesses, from start-ups to large and well established businesses have become reliant on social media as a source of business. So buying a business with important or even critical social media assets requires careful planning.

The Social Media Providers hold almost all of the cards, and any attempt to purchase those “assets” by way of a simple asset purchase agreement will often be ineffective. While there are ways to (at least temporarily[1]) transfer control of social media accounts between entities, the legal and practical problems which arise cannot be ignored. Accordingly, great care needs to be taken when structuring transactions which include the transfer of ownership or control of social media accounts. For example, Facebook’s terms of service may present problems for your business. Those terms state:

  • “You will not transfer your account (including any Page or application you administer) to anyone without first getting our written permission.”
  • “You will not share your password (or in the case of developers, your secret key), let anyone else access your account, or do anything else that might jeopardize the security of your account.”
  • “You will not transfer any of your rights or obligations under this Statement to anyone else without our consent.”

Some social media providers (such as Youtube) simply don’t allow you to transfer the social media asset at all. Even if the social media provider agrees to transfer the account it can be on ridiculous terms.

This means, if the seller simply transfers the passwords to the buyer of a business with social media assets, the seller will be in breach of the conditions and the social media account could be shut down.  This might happen in particular if the relationship between the seller and the buyer sours and the seller informs the social media provider of the unauthorised transfer.

There are various other alternatives but each are as unattractive as the other.[2]  Put simply, in many cases it is simply not currently legally possible to transfer the social media asset.   The only alternative might be a long term joint campaign by the seller and the buyer but few parties will be interested in such a lengthy campaign unless the seller carefully creates a succession plan.

[1] The seller can simply provide the buyer will access codes.

[2] Option 1 – purchase the shares in the seller company, rather than its assets

Option 2 – Require the seller to provide permanent and exclusive access to all social media accounts

Option 3 – Appoint the seller as agent to operate the social media accounts in perpetuity

Option 4 – Require the seller to deactivate its social media accounts and agree not to open any new account under certain names, then establish new accounts with the same names

What happens to your digital life when you die?

It is estimated that we each have up to 25 online accounts: email accounts, social media, online banking and ecommerce sites such as PayPal.  Each account has a different value to us and our family.  Some have an obvious financial value and other have sentimental value. So, what happens to those accounts when you die?

The answer depends on the terms of use for each online account, what the digital content is, the jurisdiction of the provider and what (if any) laws may apply.

Terms and conditions

The terms of each individual account is important. For example, Yahoo! US says your family has no rights to the e-mail accounts after you die. Yahoo! UK is not so strict.  AOL and Hotmail allow the transfer of e-mail accounts to next of kin. Twitter will deactivate an account on death.

Facebook has two options. Either turn the site into a memorial where the account is locked, but other users can post comments, photos, or, remove the account.

Google allows us to decide the fate of our accounts when we die. If we don’t make a selection, Google warns us our family may only access our email account ‘in rare cases.’


Typically, the law lags behind the reality. Some US states have now legislated to allow our families access to our digital accounts after we die. But no such specific legislation currently exists in Australia.

Existing Australian laws might be regarded as conflicting.  Privacy laws may prevent our families from gaining access but our estate may have copyright in the content of our on-lines lives. These laws must be set against the terms of the use that we agreed to. But perhaps more importantly, those terms may say Australian laws do not apply. What then?

What to do?

Clearly we can’t have a separate arrangements for each account.  Most of us can barely keep an up-to-date Will let alone make arrangements for some 25 or more accounts, each with different laws,  requirements and arrangements.

If your digital assets are important to you, there are some simple things you can do:

  • Include an appropriate clause in your Will.   That is the first and most important step.
  • Select the most important accounts and single them out for special attention, where necessary.
  • Leave a list of your account and passwords with someone you trust – even though most online terms state that you must not give your password to another person.

This area is fraught with difficulty.  However, if you value your online assets it is better to do something rather than nothing.

Remember, making a Will is made easy with the right help and should be the first step.

For more information call Matthew Yates. 07 5479 2457

Disclaimer: This is not legal advice and cannot be relied upon as legal advice.