This page is general information, not legal, tax or financial advice. Talk to a qualified professional about your situation.
A closing company still has to keep the promises in its privacy policy about customer data. In practice that leaves three options: delete what you no longer need, keep what law or contracts require, and transfer data only in ways your policy allows. The FTC’s long-standing position, set out in the RadioShack and Toysmart bankruptcies, is that a buyer of customer data should be in the same line of business and bound by the policy the customers agreed to.
Your options for customer data
| Option | When it fits | Watch out for |
|---|---|---|
| Delete | You no longer need it and no retention rule applies | Dispose of it properly; FTC guidance is to keep only what you need |
| Keep | Tax, warranty, legal hold or contract duties | Name who keeps it and secure it |
| Return | B2B customers whose contracts require it | Contract deadlines and formats |
| Transfer with the business | A buyer takes over the line of business | Privacy policy terms; California’s merger and acquisition rule |
| License de-identified copies | Operational records, with counsel’s approval | Policy promises, contracts and how de-identification is done |
What regulators have said
- FTC, RadioShack (2015): RadioShack had promised not to sell customer information. The FTC asked the bankruptcy court to make sure any sale kept the data bundled with other assets, went to a buyer in substantially the same line of business, bound the buyer to the original privacy policies, and required affirmative consent for materially different uses.
- Bankruptcy Code: if a privacy policy in effect at filing prohibits transferring personal information to unaffiliated parties, a trustee may not sell it unless the sale is consistent with the policy or the court approves it after a hearing, with a consumer privacy ombudsman (11 U.S.C. § 363(b)(1)). See the consumer privacy ombudsman.
- California (CCPA): transferring personal information as an asset in a merger, acquisition, bankruptcy or similar transaction where the third party takes control of the business is not a “sale”, but if the acquirer materially changes how it uses the data, it must give consumers prior notice (Cal. Civ. Code 1798.140(ad)(2)(C)).
A short plan
- Find the privacy policy that was in force when you collected the data, and any earlier versions.
- List where customer data lives: CRM, support desk, billing, email, backups.
- Decide per system: delete, keep, return, transfer or license, and write the decision down.
- Have counsel review any transfer or licence before it happens.
Questions people ask
Can we sell our customer list when we close?
Only in line with what your privacy policy promised. In the RadioShack bankruptcy the FTC asked that customer data not be sold on its own, only to a buyer in substantially the same line of business, and that the buyer be bound by the original privacy policy.
Does licensing de-identified records count as selling customer data?
It depends on whether the data is truly de-identified and on your privacy policy and contracts. Buyers such as micro1 and Mercor de-identify data themselves, but whether you may share it in the first place is a question for your lawyer.
Sources
Related guides
The consumer privacy ombudsman: selling customer data in bankruptcy
When a bankrupt company can sell customer data, when the court appoints a consumer privacy ombudsman under 11 U.S.C. 332, and what the ombudsman reports.
Transferring customer data when you sell your business
When giving customer data to a buyer is not a "sale" under California law, what the buyer owes customers, and what the FTC expects.
What happens to company assets, including data, in bankruptcy
How a bankruptcy estate, trustee and court handle company assets, the special rule for customer personal data, and what owners should do with records.
Part of Shutting down a company.