Assignment for the benefit of creditors: what happens to the company's data

Who holds title to data in an ABC?#

In an ABC, the assignee generally holds title to the company's data after the assignment, because the assignment agreement transfers substantially all of the company's assets to the assignee in trust for creditors. ABCs are governed by state law and the process differs: some states have detailed statutes, some rely mainly on common law, and some involve more court supervision.

Title to data is narrower than it sounds. The company held rights in records it created, such as support tickets, CRM histories, engineering issues, project files and internal documents. It may not have owned customer-provided data, and SaaS-hosted records exist only as long as the vendor keeps the account open. The assignee receives what the company had, with the same contractual limits.

Because the assignee is a fiduciary for creditors, the duty is to maximize recovery. When the company held years of operating records, a documented look at data assets is part of that duty rather than a side project.

Which data assets should an assignee list?#

An assignee's data schedule should list each record family, the system that holds it and the rights question attached to it. Data rarely appears on a balance sheet, so it is easy to leave out of the asset list that goes to prospective buyers.

Each row in the schedule becomes a decision later: offer, offer after preparation, or exclude. Recording the rights question now saves the buyer's counsel from discovering it during diligence.

Who can sign a data license in an ABC?#

The assignee generally signs any license of the company's data once the assignment is effective, because the former officers and board no longer control the assigned assets. Before that moment the company acts through its board; afterward, the board's authority over those assets ends.

Buyers and their counsel will want to see the chain of authority in writing. Expect requests for the documents below.

Lender consent is easy to overlook. Many credit agreements take a security interest in intellectual property and general intangibles, which can include data. The lender may consent, release its lien in exchange for the proceeds, or credit those proceeds against its claim.

• 1The executed assignment agreement and any schedule of assets.
• 2Evidence that the assignee accepted the assignment and, where state law calls for it, any filing or court record.
• 3Lien searches plus releases or consents from secured lenders whose collateral includes general intangibles.
• 4The customer contracts, privacy policies and employee agreements that define what the data may be used for.
• 5A description of how the records were preserved and who has had access since the assignment.

How do proceeds from a data license flow?#

Proceeds from a data license generally flow into the assignment estate and are distributed with the other proceeds under the state's priority rules, after the costs of administration and after secured creditors are paid from their collateral. Where a lender's lien covers the data, the lender usually has the first claim on what the data brings in.

Timing creates a practical problem. ABCs are designed to wrap up efficiently, while a license can pay in stages or carry continuing obligations such as deletion certificates at the end of the term. The structure has to fit the estate's timetable and the assignee's ability to monitor it.

Privacy promises and contracts travel with the data#

Privacy promises and customer contracts limit an assignee exactly as they limited the company. If the privacy policy said personal information would not be sold or shared, or customer agreements require return or deletion at termination, those terms shape what can be offered.

Removing personal and confidential details changes the analysis but does not erase it. A de-identified set of support tickets may fall outside a privacy promise about personal information, yet a customer contract may still treat the ticket contents as confidential. State privacy laws may apply as well, and they are assessed deal by deal with counsel.

When a record family cannot be cleared, leave it out of the offering rather than discounting it. A smaller package with clean rights is easier to license than a larger one that a buyer's counsel will reject.

Preserving data before systems go dark#

Data preservation in an ABC has to start as soon as the assignment is made, because SaaS vendors suspend service when invoices go unpaid and former staff take system knowledge with them. An assignee who values the data later may find little left to value.

Keep the cost visible. Paying a handful of subscriptions until exports are verified is often modest next to what could be lost, but the assignee should document the reason for each payment so creditors can see why estate funds were spent.

• 1Secure owner and admin credentials for every system and change shared passwords.
• 2Identify which subscriptions must stay paid until exports are verified.
• 3Suspend automated retention rules that would purge older records.
• 4Export each system and check record counts and date ranges against the live account.
• 5Retain a former engineer or operations lead on short consulting terms to explain the systems.
• 6Log who accessed the exports and when, for the eventual buyer.

Illustrative: an assignee inherits a scheduling software company#

Illustrative: a fictional scheduling software company for HVAC contractors, which employed more than fifty people before its decline, makes an assignment for the benefit of creditors after losing its main distribution partner. The assignee finds an AWS production account, Zendesk, HubSpot, GitHub and Jira, and a lender holding a lien on all assets.

Customer agreements treat contractor job data as customer confidential information, so the production database is offered only with the platform. Support tickets and engineering issues, which describe the company's own product work, are reviewed separately. The assignee sells the platform and customer contracts to a competitor, and the asset purchase agreement reserves the estate's right to license de-identified support and engineering history non-exclusively. The lender consents on the condition that license proceeds are applied to its claim.

How SourceX works with assignees#

SourceX works with assignees through the SourceX five-step transaction, starting with a metadata fit check that names systems, years of history and known restrictions without moving any files. The assignee approves each later step, including the final release.

For packages that proceed, the SourceX Evidence Packet records provenance, licensing rights, permitted use, the privacy record and release authorization, including the assignment instrument and any lender consent. That gives a buyer one record of who had authority to license and on what terms. SourceX does not take title to the data, and its rights in a deidentified dataset are set out in the signed supplier agreement.