Assignment for the benefit of creditors for startups: what happens to code and data

How does an ABC differ from bankruptcy or a simple dissolution?#

An ABC differs from bankruptcy mainly in who runs the process: a private assignee chosen by the company and acting under state law, rather than a trustee supervised by a federal bankruptcy court. Venture-backed startups often consider an ABC because it can be faster, quieter and more flexible than a bankruptcy case, although procedures and court involvement vary by state.

Which route fits depends on the company's debts, its secured lender, its investors and the state involved. Founders choose with insolvency counsel; the comparison below only frames that conversation.

Who controls the code and data at each stage?#

Control of code and data moves from the founders to the assignee at the moment the assignment agreement is signed. Before that, the board decides; afterward, founders act only as the assignee asks, often under a short consulting arrangement.

The handover is where value is most often lost. An assignee cannot sell a GitHub organization it cannot log into or a support archive whose subscription lapsed the week before signing.

What counts as a code or data asset in an ABC?#

Code and data assets in an ABC include anything the company owns that a buyer or licensee could use, including assets that never appeared on a balance sheet. Assignees often find that operating records deserve more attention than founders expected.

Every asset comes with obligations attached. The assignee takes the assets as the company held them, including the promises the company made about them.

Trained models deserve a separate note. A model trained on customer data may carry the same restrictions as that data, so the assignee will ask what went into each model, and under which terms, before offering it to anyone.

• 1Source code repositories, including history, branches and code reviews.
• 2Issue trackers, product specs, design files and architecture documents.
• 3Support ticket archives, CRM histories and internal chat and email, subject to privacy limits.
• 4Trained models, evaluation sets and labeled data the company created.
• 5Cloud accounts, domains, app store listings and trademarks.
• 6Customer databases, which carry the strongest privacy and contract limits.

What limits what the assignee can sell or license?#

The company's own promises are the main limit on what an assignee can sell or license. A privacy policy that said personal data would never be sold, a customer contract requiring deletion at termination, or a data processing agreement naming the company as a processor all travel with the assets.

Other limits come from outside parties. A secured lender may hold a lien on intellectual property, investors may hold consent rights, open-source licenses govern parts of the codebase, and data licensed in from third parties usually cannot be passed on. Gaps in contractor IP assignments can leave some code outside the estate altogether.

These limits are reviewed asset by asset. Privacy and consumer protection laws may apply differently to customer personal data than to the company's own engineering and operating records, which is why de-identified internal records are often the cleanest asset to license.

Preserve records before the subscriptions lapse#

Preservation is the step founders control and most often miss. When cash runs out, cloud hosting, help desks, CRMs and Git hosts stop being paid, and history disappears on each vendor's schedule rather than the company's.

A complete inventory also makes the assignee's work faster and more valuable to creditors, which is the purpose of the process.

• 1List every system that holds records, with its owner, plan and renewal date.
• 2Export repositories as mirror clones and back up issue trackers, wikis and support archives.
• 3Keep at least one documented admin account per system active for handover.
• 4Record known restrictions: privacy promises, customer deletion duties, lender liens and open-source licenses.
• 5Place legal holds on records tied to disputes, and keep payroll and tax records under your retention schedule.
• 6Store exports encrypted, in storage the assignee will control after signing.

Illustrative: a venture-backed analytics company enters an ABC#

Illustrative: a fictional venture-backed B2B analytics company, seven years old and about 70 people at its peak, runs out of runway. Its board approves an ABC, and before signing, the CTO exports the GitHub organization, the Linear workspace, the Intercom archive and the Notion wiki to encrypted storage and documents admin access.

The assignee's review finds that customer event data cannot be sold, because the company's agreements made it a processor and required deletion, so the assignee deletes that data and certifies it to customers. The engineering history and de-identified support conversations remain. The assignee grants a non-exclusive license to those records for AI training, then sells the codebase and brand subject to that license, each step reviewed by counsel.

The founders' early exports made both transactions possible. Without them, the Intercom subscription would have lapsed during the assignment and the support history would have been lost.

How SourceX works with founders and assignees#

SourceX works with founders before an assignment and with assignees after one, using the SourceX five-step transaction: Supply, Rights, Preparation, Approval and Delivery. In an ABC the assignee is usually the supplier, and its authorized signer approves each step.

The initial fit check uses metadata only, such as systems, years of history and record families, so nothing leaves the estate during assessment. If a package proceeds, its SourceX Evidence Packet documents provenance, licensing rights, permitted use, the privacy record and release authorization, which helps an assignee show creditors how each decision was made.