Selling company data in an assignment for the benefit of creditors
An assignment for the benefit of creditors, or ABC, is a way to close a US company under state law instead of in bankruptcy. The company signs its assets over to an assignee, who sells them and pays the creditors. Venture-backed startups use it often, and their Slack, code, tickets and CRM history can be among the assets the assignee licenses or sells to AI companies.
How an ABC works
The board, and usually the shareholders, approve a written assignment of all the company’s assets to an assignee, often a firm that does this work full time. From that day the assignee owns the assets in trust for the creditors, decides what to sell and to whom, and pays out the proceeds.
The rules come from each state. Some states run the process under a statute with a court watching, such as Chapter 727 of the Florida Statutes. Others, California among them, rely mostly on common law with little court involvement. A short summary of the idea is in Cornell’s legal encyclopedia.
Who signs, and how fast it can move
| Question | In an ABC |
|---|---|
| Who signs a data license | The assignee, as owner of the assets for the creditors. |
| Is a court hearing needed | Only where the state statute requires court oversight of sales. Elsewhere the assignee decides. |
| Secured lenders | Their liens stay attached to the assets, so the assignee works with them on any sale. |
| Speed | Usually quicker than a bankruptcy sale, because there is no section 363 motion and no ombudsman step. |
Privacy is still the company’s promise
There is no consumer privacy ombudsman in an ABC. The privacy policy the company published and the contracts it signed with customers still bind what can be done with personal information, and state privacy laws still apply to the people in the records.
For a startup this matters most in product data and support history, where customers wrote freely. Names, emails and account details are removed before any sample leaves, and the license says how. The assignee’s counsel checks the old policy against the plan.
What the assignee should secure on day one
- Admin access to the workspace, code host, ticket system and CRM, before seats are cancelled by default.
- Exports of chat and email while the paid plan still allows them; free tiers often hide or drop history.
- The privacy policy and terms of service in each version.
- The headcount at its peak and the years each system was in use.
Read next
- Closing or bankrupt companies. Who signs in each kind of closing.
- What company data is worth. Ranges by data type and company size.
- De-identification. How names and personal details come out first.
Questions about selling company data in an assignment for the benefit of creditors
Is an ABC cheaper than bankruptcy?
It is often simpler and quicker, which keeps costs down, but the assignee’s fee and the state rules decide the real cost. Counsel compares the two for each company.
Can the founders still license the data after an ABC?
No. Once the assignment is signed the assets, records included, belong to the assignee for the creditors.
Does every state allow an ABC?
Most do in some form, under a statute or under common law. Which one applies depends on where the company is organized and where its assets are.
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