Data asset sales in a Delaware Chapter 11

Delaware is one of the most frequent venues for large corporate bankruptcies. Companies incorporated in Delaware can file there even if they operate elsewhere, and many mid-size companies with Delaware parent entities do. If your company's case is in Delaware, the court will be familiar with asset sales of every kind. That's an advantage for a data sale, but it also means the bar for process and disclosure is high.

General information, not legal advice. Delaware local rules and chambers procedures change; your counsel should advise on your case.

Why companies end up in Delaware

Under 28 U.S.C. § 1408, a corporation may file in the district of its domicile, which for a Delaware corporation includes Delaware, or where an affiliate's case is pending. Many operating companies are Delaware corporations or have a Delaware holding company, so a case can be venued there even if every employee works in another state. Venue is chosen for the whole case, not for one asset sale, so treat it as a given and plan the data sale around the court's practice.

What Delaware practice means for a data sale

• Experienced judges and parties. The court routinely handles § 363 sales, often of intangible assets such as intellectual property, customer lists and software. A data license will be evaluated alongside that body of practice.
• Detailed sale procedures. Large Delaware cases often use bid procedures orders that set marketing periods, bid deadlines, auctions and sale hearings. A data license can be sold within a broader sale process or on a stand-alone motion if it's separable.
• Active committees. Official committees of unsecured creditors are common and well-advised. Expect detailed information requests about price, process and fees.
• The U.S. Trustee's office for the region closely reviews retention applications and sale motions, including privacy questions.

Stand-alone motion or part of the main sale?

If the company is selling substantially all of its assets, the buyer of the business may want the data too, and the data may be worth more as part of the business. But AI developers often want only a non-exclusive license of a de-identified copy, which doesn't conflict with a going-concern sale. Three common structures:

1. Carve-out license before the main sale. The debtor licenses a de-identified copy on a stand-alone motion; the going-concern buyer later acquires the business and the original data, subject to the existing non-exclusive license.
2. License as a separate lot. The bid procedures allow bids for the data license as a separate lot, so the estate can compare combined and separate bids.
3. License after the main sale. If the data isn't sold with the business, a liquidating trustee or plan administrator can license it later, as authorized in the plan.

Each needs coordination with the main buyer and the lender. The Section 363 sale guide covers the motion itself.

Privacy: federal and Delaware

The Bankruptcy Code's § 363(b)(1) limits sales of personally identifiable information that a privacy policy prohibits transferring. Delaware cases have long experience with consumer privacy ombudsman appointments in retail and consumer-facing cases. See the ombudsman guide.

Delaware's own Personal Data Privacy Act took effect January 1, 2025. Like other state comprehensive privacy laws, it gives consumers rights over their personal data and treats de-identified data differently when the controller takes reasonable measures, commits publicly not to re-identify, and binds recipients by contract. But note: a debtor incorporated in Delaware may have customers and employees almost anywhere, so the privacy laws of the states where those people live matter more than Delaware's. A careful privacy analysis looks at where the data subjects are, not where the company is incorporated.

Committee expectations in Delaware

Delaware committees typically ask for:

• The marketing process and a list of parties contacted (often under seal or on a professionals'-eyes-only basis).
• All bids received and the reasons for choosing the winning bid.
• The de-identification method and any expert or vendor involved.
• Fee terms for any broker or adviser, and whether retention under § 327 or § 328 is required.
• The effect of the license on the value of the remaining estate assets.

Give them the answers before the motion is filed. Our creditors' committee guide has a short briefing format.

Retention and fees

In Delaware, professionals who advise the estate are typically retained by application under § 327, with fees reviewed under § 330 or § 328. Whether a data broker needs to be retained, or can be paid as part of the transaction, depends on the role. Counsel should decide early. Either way, the fee must be disclosed. We don't pay or accept referral fees.

A Delaware timeline

1. Week 1: Confirm the structure relative to any main sale; NDA; inventory.
2. Weeks 1–3: De-identification test, outreach, bids; lender and committee briefings.
3. Week 3–4: File the motion (or include the license lot in bid procedures).
4. Weeks 6–8: Objection deadline, hearing, order; delivery.

If the data is part of a broader auction, it follows that auction's calendar.

Getting started

If your company has a Delaware case on file or is preparing one, ask for a confidential valuation or have your counsel contact us directly. The counsel brief summarizes the issues for a busy restructuring team.

Sealing and confidentiality

Bids and buyer identities in a data sale can be commercially sensitive. Delaware practice allows motions to file certain information under seal under § 107(b) when it's confidential commercial information, though courts favor public access and expect narrow requests. A typical approach: describe the buyer type and price in the public motion, and provide bid letters to the U.S. Trustee, committee and lender under a confidentiality protocol. Ask counsel whether sealing is needed at all; often, disclosing the buyer and price publicly is simpler and draws fewer questions. Whatever is filed publicly should describe the de-identification method in enough detail for parties to evaluate it, without revealing anything that would help someone reverse it.

Frequently asked questions

Can a company that operates in another state file in Delaware?

Often yes, if it's a Delaware entity or has an affiliate with a pending Delaware case. Venue is a decision for the whole case and should be made with counsel.

Does a data license conflict with a going-concern sale?

Not necessarily. A non-exclusive license of a de-identified copy leaves the original data with the business. The buyer of the business must accept the existing license, so coordinate early.

Which privacy law applies to a Delaware debtor?

The Bankruptcy Code's rules, plus the laws that protect the people in the data, which depend largely on where they live. Delaware's own act is one of several that may apply.

Will the committee object to a data sale?

Committees object when they doubt the price or process. Sharing bids and the marketing record usually resolves that.

Do we need a separate auction for the data?

Not usually. Most data licenses are marketed directly and approved on a stand-alone motion, unless they're part of a larger sale process.

This guide is general information, not legal, tax or financial advice, and reading it does not create an attorney-client relationship. Bankruptcy outcomes depend on the facts, the court and the parties; nothing here promises price, timing or court approval. Talk to your bankruptcy counsel about your case.