Closing a business
Assignment for the benefit of creditors vs dissolution: who sells the assets, and where a data sale fits
On this page
The short answer
Assignment for the benefit of creditors vs dissolution comes down to control. In a dissolution, the company's own board winds up, sells the assets and pays creditors before stockholders (source: Delaware Code Title 8, Section 278, Delaware Code Title 8, Section 281). In an assignment for the benefit of creditors (ABC), the company transfers everything to an independent assignee who owes a fiduciary duty to creditors and decides what to sell (source: 10 Del. C. 7304A, assignee and agreement, 10 Del. C. 7309A, duties of assignee, 10 Del. C. 7310A, powers of assignee).
Either way, company data can be sold or licensed during the wind-down. In a dissolution the company signs; in an ABC the assignee signs; in Chapter 7 a court-supervised trustee does. Export the records before the paid tools lapse, or there is nothing left to sell.
Assignment for the benefit of creditors vs dissolution: the core difference
Both paths end a company. They answer a different question first: can the company pay what it owes?
- Dissolution is the ordinary corporate exit. The board, which manages the business under Delaware law (source: Delaware Code Title 8, Section 141(a)), recommends dissolution, stockholders approve it, and the company winds itself up. It pays or provides for every claim, then distributes the rest to stockholders (source: Delaware Code Title 8, Section 275, Delaware Code Title 8, Section 281). It works best when the company is solvent or close to it.
- An assignment for the benefit of creditors is a state-law alternative to bankruptcy. California defines a general assignment as one that transfers all of the debtor's transferable, non-exempt assets, for the benefit of all creditors, without creating a preference among them (source: Cal. Code Civ. Proc. 493.010). The assignee, not the board, then liquidates the estate.
- Chapter 7 is federal liquidation. A case trustee is appointed to sell the company's non-exempt assets to maximize the return to unsecured creditors, and corporations do not receive a discharge (source: US Courts, Chapter 7 bankruptcy basics).
Delaware rewrote its ABC law in June 2026
Delaware repealed its old voluntary assignment sections, 10 Del. C. 7381 to 7387 (source: Delaware Code Title 10, former Sections 7381 to 7387 (repealed)), and adopted the Uniform Assignment for Benefit of Creditors Act with minor changes in Senate Bill 267, signed and effective June 10, 2026 (source: Delaware General Assembly, Senate Bill 267 (signed June 10, 2026)). The new chapter applies to organizations whose internal affairs are governed by Delaware law, so a Delaware corporation with offices in California or New York can use it (source: 10 Del. C. 7303A, scope). Older guides that describe Delaware inventory affidavits and appraiser bonds are out of date.
Delaware dissolution steps, in order
- Board resolution. A majority of the whole board adopts a resolution that dissolution is advisable and calls a stockholder meeting. Alternatively, every stockholder entitled to vote consents in writing (source: Delaware Code Title 8, Section 275).
- Stockholder approval. Holders of a majority of the outstanding voting stock approve (source: Delaware Code Title 8, Section 275). Your charter or investor agreements may require more, so read them before the meeting.
- Certificate of dissolution. File it with the Delaware Secretary of State. The company dissolves when the certificate becomes effective (source: Delaware Code Title 8, Section 275).
- Federal tax filings. File IRS Form 966 after adopting the resolution or plan to dissolve, a final return with the final return box checked, and final W-2s and 1099s (source: IRS, closing a business).
- Notice to claimants (optional but protective). Under Section 280, the company can require claims by a date at least 60 days after notice, published once a week for two consecutive weeks and mailed to known claimants. Unfiled claims are barred. The company has 90 days to reject a claim, and a rejected claimant has 120 days to sue (source: Delaware Code Title 8, Section 280).
- Pay or provide for claims, then distribute. Under Section 281(a), stockholders cannot be paid until 150 days after the last rejection notice. A company that skips the Section 280 process instead adopts a plan of distribution under Section 281(b) that reasonably provides for known, contingent and likely future claims (source: Delaware Code Title 8, Section 281).
Directors who follow Section 281(a) or (b) are not personally liable to claimants, and a stockholder's liability for a later claim is capped at the amount that stockholder received in the dissolution (source: Delaware Code Title 8, Section 281, Delaware Code Title 8, Section 282). Those protections are why the order matters.
Can a dissolved company sell its assets?
Yes. Delaware says a dissolved corporation continues for three years, or longer if the Court of Chancery directs, to settle its affairs and “to dispose of and convey their property”, but not for the purpose of continuing the business (source: Delaware Code Title 8, Section 278). Selling a codebase, licensing a de-identified copy of the company's Slack and ticket history, or selling domain names are all ways of disposing of property.
Three points shape how that sale happens:
- Before dissolution, big sales need stockholders. A sale of all or substantially all of the company's assets needs board action and a resolution of a majority of the outstanding voting stock (source: Delaware Code Title 8, Section 271).
- The board can get help. On application by a creditor, stockholder or director, the Court of Chancery can appoint directors as trustees or other people as receivers to take charge of the property (source: Delaware Code Title 8, Section 279). That is rare, but it is the dissolution version of an outside seller.
- The money goes to creditors first. Proceeds from a data sale join every other asset and are applied to claims before anything reaches stockholders (source: Delaware Code Title 8, Section 281).
How an ABC startup wind down works
In an ABC, the company signs an assignment agreement with an assignee it chooses, and the assignee takes over. Under Delaware's new act:
- The assignee is independent. It cannot be a creditor, affiliate or insider of the company, cannot have a claim against the estate beyond its fees, and cannot hold equity in the company (source: 10 Del. C. 7304A, assignee and agreement).
- The agreement transfers everything. It must be signed by both parties, transfer all of the company's assets, describe them, provide for distribution, and state the assignee's fees, with the company representing under penalty of perjury that it is assigning all its assets (source: 10 Del. C. 7304A, assignee and agreement).
- The assignee works for creditors. It has a fiduciary duty to the assignment estate for the benefit of creditors, including loyalty, good faith and reasonable care to maximize distributions (source: 10 Del. C. 7309A, duties of assignee).
- The assignee can sell or license. Unless the agreement says otherwise, it can run the business, and sell, lease, license or otherwise dispose of assets, even assets subject to a lien (source: 10 Del. C. 7310A, powers of assignee). A good-faith buyer for value takes free of the assignee's lien and subordinate liens (source: 10 Del. C. 7314A, effect of disposition).
- Court involvement is light. The assignee must file a petition with the Court of Chancery within 14 days, and may ask the court for orders on sales or sale procedures, but approval is not required for each sale (source: 10 Del. C. 7321A, Court of Chancery petition).
California's rules sit in several code sections. They define the general assignment (source: Cal. Code Civ. Proc. 493.010), require the assignee to notify creditors within 30 days after accepting the assignment and to set a claims deadline 150 to 180 days after notice (source: Cal. Code Civ. Proc. 1802), and let the assignee recover preferential payments made in the 90 days before the assignment, or up to one year for insiders, by suing within one year (source: Cal. Code Civ. Proc. 1800).
Chapter 7: when a trustee sells the assets
Chapter 7 puts a neutral case trustee, chosen by the US trustee, in charge of selling the company's non-exempt assets. Between 21 and 40 days after filing, the trustee holds a meeting of creditors. Filing stops most collection actions through the automatic stay, and the court charges a $245 filing fee, a $75 administrative fee and a $15 trustee surcharge (source: US Courts, Chapter 7 bankruptcy basics).
Sales outside the ordinary course need notice and a hearing. Data has one extra rule: if the company told individuals, in offering its product, that it would not transfer their personal information to unaffiliated parties, the trustee may sell that information only consistent with the policy, or after a consumer privacy ombudsman is appointed and the court approves (source: 11 U.S.C. 363 (Cornell LII)).
Large data sales already happen this way. MIT Technology Review reported that a bankrupt airline's decades of records, including 100 million emails and 500 million Teams messages, sold for $10 million after its bankruptcy (source: MIT Technology Review, data from shut-down startups (Oct 13, 2026)).
Dissolution vs ABC vs Chapter 7 at a glance
| Dissolution (Delaware) | ABC (Delaware act) | Chapter 7 | |
|---|---|---|---|
| Best fit | Company can pay or provide for its debts | Company cannot pay everyone and wants an independent seller without a bankruptcy case | Company cannot pay everyone, or creditors need court supervision |
| Who controls the sale | The board, during a 3-year wind-up period (see: Delaware Code Title 8, Section 141(a), Delaware Code Title 8, Section 278) | An independent assignee with a fiduciary duty to creditors (see: 10 Del. C. 7304A, assignee and agreement, 10 Del. C. 7309A, duties of assignee) | A case trustee appointed by the US trustee (see: US Courts, Chapter 7 bankruptcy basics) |
| Who signs a data license | An officer authorized by the board | The assignee | The trustee, after notice and a hearing |
| Court role | None unless someone petitions the Court of Chancery (see: Delaware Code Title 8, Section 279, Delaware Code Title 8, Section 280) | Petition within 14 days; orders on request (see: 10 Del. C. 7321A, Court of Chancery petition) | Bankruptcy court oversees the case (see: US Courts, Chapter 7 bankruptcy basics, 11 U.S.C. 363 (Cornell LII)) |
| Key deadlines | Claim date at least 60 days after notice; no stockholder distribution until 150 days after the last rejection (see: Delaware Code Title 8, Section 280, Delaware Code Title 8, Section 281) | Creditor notice within 30 days; claims deadline at least 90 days after the assignment (see: 10 Del. C. 7307A, notice to creditors, 10 Del. C. 7309A, duties of assignee) | Meeting of creditors 21 to 40 days after filing (see: US Courts, Chapter 7 bankruptcy basics) |
| Personal data rule | Ordinary privacy law and contracts | Ordinary privacy law; assets restricted from assignment stay out unless consent is given | Privacy-policy limit and possible consumer privacy ombudsman (see: 11 U.S.C. 363 (Cornell LII)) |
| Payment order | Claims first, then stockholders (see: Delaware Code Title 8, Section 281) | Secured, admin costs, federal, wages, other priority, general unsecured (see: 10 Del. C. 7315A, distributions) | Six tiers starting with Section 507 priority claims (see: 11 U.S.C. 726 (Cornell LII)) |
Where a data license or data asset sale fits in each path
AI companies buy or license the working records of companies that have closed: code with its history, tickets, docs and team chat. Our guide to who buys data from closed companies compares the programs that take them. What changes from path to path is who sells and what has to be true first.
In a dissolution
The company is the seller. The board authorizes the license, an officer signs it during the wind-up period, and the proceeds go into the pool that pays claims (source: Delaware Code Title 8, Section 278, Delaware Code Title 8, Section 281). Because the company still controls its systems, this is the easiest path to run a competitive process and to set the scope yourself: what is in, what is out, and how personal information is removed.
In an ABC
The assignee is the seller, and the data is just another asset of the estate it can license (source: 10 Del. C. 7310A, powers of assignee). Two details matter for records:
- Restricted property may not transfer. Delaware's act excludes from “asset” property restricted from assignment where that restriction is effective under other law, unless the required consent is given (source: 10 Del. C. 7302A, definitions). Customer data you hold under contracts is the obvious example, and it stays out of an AI data license anyway.
- Founders still have work to do. The company has a duty to take all reasonable actions needed for the assignee to administer the assets (source: 10 Del. C. 7308A, duties of assignor). In practice that means the people who know the systems run the exports and explain what is in them.
Buyers have adapted to this. Buyer program P, for example, says whoever holds signing authority for the entity at the time, a director, a liquidator or an administrator, can sign, asks for proof of that authority up front, and pays the entity rather than individuals (source: program terms, Regulr buyer directory). In an ABC, that signer is the assignee.
In Chapter 7
The trustee sells, with notice to creditors and a hearing, and the privacy-policy rule in Section 363(b)(1) can add a consumer privacy ombudsman to any sale of personal information (source: 11 U.S.C. 363 (Cornell LII)). A de-identified operating record is a better fit for that process than a raw export full of names.
The records disappear on their own schedule
None of these statutes keep Slack, Jira or GitHub from deleting data after you stop paying. Whichever path you choose, export first. Our guide to shutting down a startup and selling its code and records lists each vendor's deletion window.
Who gets paid first: creditor priority basics
Every path pays creditors before owners. The order inside each one differs.
| Order | Delaware ABC | Chapter 7 |
|---|---|---|
| 1 | Protected secured creditors, from their collateral | Priority claims under Section 507, such as administrative expenses (2nd) and wages (4th) |
| 2 | Costs of administering the estate, including the assignee's fees | Timely general unsecured claims |
| 3 | Federal priority claims | Late-filed unsecured claims |
| 4 | Wages, salaries and commissions earned within 180 days, subject to limits | Fines, penalties and punitive damages |
| 5 | Other priority unsecured claims, then general unsecured claims | Post-petition interest |
| 6 | Late claims, then as the agreement provides | The debtor (for a company, its owners) |
Two practical points follow. If a venture lender holds a perfected security interest in your IP, it is a secured creditor and is paid from that collateral first in an ABC (source: 10 Del. C. 7315A, distributions), so expect it to have a view on any code or data sale. And employees have a real but capped priority: in bankruptcy, wages earned within 180 days before filing or before the business stopped rank fourth, up to $17,150 per person after the April 1, 2025 adjustment (source: 11 U.S.C. 507 (Cornell LII)).
MIT Technology Review noted that proceeds from selling a closed startup's data usually go to senior creditors and investors rather than employees (source: MIT Technology Review, data from shut-down startups (Oct 13, 2026)). That follows from these rules.
How to wind down a venture-backed startup without losing the data's value
- Pick the path on the numbers. If cash and expected sale proceeds cover every claim, a dissolution keeps the board in control. If they do not, compare an ABC and Chapter 7.
- Freeze deletion and export. Turn off retention limits and export repos, chat, tickets and docs while paid plans are active. Under an ABC the assignee needs these copies to sell anything.
- List what you own. Confirm contractor code assignments, open-source licenses in the codebase, and which records you hold under customer contracts. Those decide what can be licensed.
- Line up buyers before you sign. Whether the company or an assignee runs the sale, competing offers set the price. Check what your company data might be worth and which programs in our buyer directory take closed companies.
- Decide who signs, then sign. In a dissolution, the board authorizes an officer. In an ABC, the assignee signs after the assignment. In Chapter 7, the trustee does.
- Finish the filings. Certificate of dissolution, Form 966 and final returns, or the ABC petition and creditor notices (source: Delaware Code Title 8, Section 275, IRS, closing a business, 10 Del. C. 7321A, Court of Chancery petition).
For the full picture of what a closing company can still license, start at our guide to closing a business.
How Regulr is paid, and how we write these pages
Regulr is a sell-side advisor. When a business we introduce signs a license, we may be paid a fee by the buyer or through a program's referral terms. We list every program we can verify whether or not it pays us, order is never set by fees, and every figure is the company's own advertised term with a link to where it says so. Regulr has not closed a data deal yet, so nothing here describes our results.
Frequently asked questions
What is the difference between an assignment for the benefit of creditors and a dissolution?
In a dissolution the company stays in charge: its board winds up the business, sells the assets, pays or provides for creditors and distributes what is left to stockholders. In an assignment for the benefit of creditors (ABC), the company transfers all of its assets to an independent assignee, who sells them and pays creditors in a set order. Dissolution suits a company that can pay its debts. An ABC is built for one that cannot, without filing a bankruptcy case.
Can a dissolved company sell its assets?
Yes. Delaware continues every dissolved corporation for three years, or longer if the Court of Chancery directs, so it can wind up, including to dispose of and convey its property. It cannot use that period to keep running the business. A dissolved company can therefore sell or license its code, records and other property during the wind-down, as long as someone with authority signs for it.
What is an ABC startup wind down?
It is a shutdown where the startup assigns all of its assets to an assignee instead of dissolving on its own. Under Delaware's new Uniform Assignment for the Benefit of Creditors Act, the assignee cannot be a creditor or insider, owes a fiduciary duty to the estate for the benefit of creditors, may sell or license the assets, and must file a petition with the Court of Chancery within 14 days. Delaware corporations can use it even if their offices are elsewhere.
How do you wind down a venture-backed startup?
First decide whether the company can pay everyone it owes. If it can, the board approves dissolution, stockholders vote, and the company files a certificate of dissolution, gives notice to claimants, sells its assets and distributes the rest. If it cannot, the usual choices are an ABC or Chapter 7. In every path, export the code and workspace data before you cancel paid tools, because the records are often the most valuable thing left to sell.
What are the Delaware dissolution steps?
A majority of the whole board adopts a resolution and calls a stockholder meeting, or every voting stockholder consents in writing. Holders of a majority of the voting stock approve, and the company files a certificate of dissolution with the Secretary of State. It then winds up: it can send notice to claimants with a claim deadline at least 60 days out under Section 280, pay or provide for claims under Section 281, and distribute what remains to stockholders. It also files IRS Form 966 and a final return.
Who decides what gets sold in an ABC?
The assignee. Once the assignment is signed, the assets belong to the assignment estate and the assignee has power to sell, lease or license them, even assets subject to a lien. Court approval is optional in Delaware: the assignee can ask the Court of Chancery for an order approving a sale or sale procedures. The founders' job is to help, because the assignor has a duty to take reasonable actions needed for the assignee to administer the assets.
Can an assignee or a bankruptcy trustee license company data to an AI company?
An assignee can: Delaware's act lets an assignee sell, lease or license estate assets. A Chapter 7 trustee can sell estate property after notice and a hearing, with one limit worth knowing. If the company promised individuals a privacy policy that bars transferring their personal information, the trustee may sell that information only consistent with the policy or after a consumer privacy ombudsman is appointed and the court approves.
Who gets paid first when a closed company sells its data?
Creditors before stockholders, in every path. In a Delaware ABC the order is secured creditors from their collateral, then administration costs, federal priority claims, recent wages, other priority claims, and general unsecured creditors. Chapter 7 uses the Bankruptcy Code's six tiers, starting with priority claims such as administrative expenses and wages earned in the 180 days before filing. In a solvent dissolution, stockholders receive what is left after claims are paid or provided for.
Is an ABC faster than dissolution?
Not always. A Delaware ABC requires creditor notice within 30 days and a claims deadline at least 90 days after the assignment. California sets the claims deadline 150 to 180 days after notice. A Delaware dissolution using the Section 280 notice process cannot distribute to stockholders until 150 days after the last rejection notice. The real difference is who does the work and who is protected, not the calendar.
Sources
Delaware Code Title 8 and Title 10 chapter 73A, the Delaware General Assembly bill page, California Code of Civil Procedure sections, the US Code, the US Courts Chapter 7 guide, the IRS and MIT Technology Review read on their own sites on November 8, 2026. Program terms re-checked November 8, 2026; our buyer directory lists the programs and links to their published terms.
- Delaware Code Title 8, Section 141(a)
- Delaware Code Title 8, Section 271
- Delaware Code Title 8, Section 275
- Delaware Code Title 8, Section 278
- Delaware Code Title 8, Section 279
- Delaware Code Title 8, Section 280
- Delaware Code Title 8, Section 281
- Delaware Code Title 8, Section 282
- Delaware General Assembly, Senate Bill 267 (signed June 10, 2026)
- Delaware Code Title 10, former Sections 7381 to 7387 (repealed)
- 10 Del. C. 7302A, definitions
- 10 Del. C. 7303A, scope
- 10 Del. C. 7304A, assignee and agreement
- 10 Del. C. 7307A, notice to creditors
- 10 Del. C. 7308A, duties of assignor
- 10 Del. C. 7309A, duties of assignee
- 10 Del. C. 7310A, powers of assignee
- 10 Del. C. 7314A, effect of disposition
- 10 Del. C. 7315A, distributions
- 10 Del. C. 7321A, Court of Chancery petition
- Cal. Code Civ. Proc. 493.010
- Cal. Code Civ. Proc. 1800
- Cal. Code Civ. Proc. 1802
- US Courts, Chapter 7 bankruptcy basics
- 11 U.S.C. 363 (Cornell LII)
- 11 U.S.C. 507 (Cornell LII)
- 11 U.S.C. 726 (Cornell LII)
- IRS, closing a business
- MIT Technology Review, data from shut-down startups (Oct 13, 2026)
- program terms, Regulr buyer directory
Brian Boesen · Founder, Regulr AI
Brian runs Regulr AI, which works for established businesses that want to license de-identified records to AI companies. He checks each program's published terms against its own pages and updates these guides when they change. Last updated November 8, 2026.
This page is general information, not legal advice, and Regulr is not a law firm. Rules vary by state, by profession and by contract, and they apply to your facts, not to a category. You approve exactly what is in scope before anything is shared.
Keep reading