Data Privacy Obligations Don’t End with a Business Sale or Closure
Whether you’re selling your Northern Virginia tech startup, merging operations with a D.C.-based competitor, or winding down entirely, one fact remains: your business has legal obligations to protect the privacy of your customers’ data.
Companies undergoing ownership changes—such as asset sales, mergers, acquisitions, or bankruptcy—must carefully navigate state and federal privacy laws. Mishandling customer data during these transitions can expose businesses to regulatory scrutiny, litigation, and reputational damage.
Privacy Obligations During Business Sales and Mergers
Business sales often involve the transfer of assets, including customer data. However, transferring personal information is not as simple as selling equipment or IP.
Here’s what businesses in Virginia and D.C. need to know:
- Consent and transparency are critical. Many privacy laws, including the Virginia Consumer Data Protection Act (VCDPA) and California Consumer Privacy Act (CCPA), restrict the transfer or sale of personal data without proper notice or consumer consent.
- Privacy policies must reflect your intentions. If your privacy policy states you “do not share data with third parties,” transferring that data in a sale may violate consumer trust—and potentially the law.
- Due diligence must address privacy compliance. Buyers and sellers alike should assess what personal data is involved in the transaction and whether any restrictions apply.
- If the sale includes sensitive information—like health, biometric, or financial data—you may face heightened legal obligations.
What If the Business Is Closing or Going Bankrupt?
In business wind-downs and bankruptcies, data obligations remain equally important:
- Personal data cannot be abandoned or forgotten.
- Courts may restrict the sale or transfer of customer information, especially if it conflicts with your company’s public privacy promises.
In bankruptcy cases governed by Section 363 of the U.S. Bankruptcy Code, the court may:
- Appoint a privacy ombudsman
- Require notice to affected consumers
- Block the transfer of data if it contradicts your stated privacy policies
Case in Point: The 2023 fallout from 23andMe raised alarms about what happens to sensitive data when a tech company struggles or considers a sale. Despite business distress, data privacy obligations remain—and failure to uphold them can damage customer trust and invite legal action. Read more at IAPP.
Privacy Obligations That Persist Through Any Business Transition
Whether your business is selling, merging, dissolving, or restructuring, the following obligations apply:
1. Secure Data Disposal
- Follow NIST SP 800-88 or industry-specific standards
- Delete data from all cloud systems, local servers, and devices
- Document data destruction efforts for potential audits
2. Transparent and Lawful Data Transfers
- Align data transfers with your published privacy policy
- Obtain consumer consent where required
- Clearly disclose how personal data will be handled post-transaction
3. Contractual and Legal Due Diligence
- Review contracts to determine whether data sharing is permitted
- Evaluate applicable laws in Virginia, Washington D.C., and any other affected jurisdictions
4. Maintain Consumer Rights and Protections
- Honor existing consumer opt-out preferences
- Maintain mechanisms for data access, correction, and deletion—even after a sale or closure.
Best Practices for Business Owners and Buyers
If you’re buying or selling a business—or winding one down—consider these steps:
- Conduct a privacy audit to identify all collected data and storage practices
- Update your privacy policy to reflect the change in control or ownership
- Notify users of the transition and give them a chance to opt out or delete data
- Work with legal counsel to create a compliant data transition or destruction plan
More guidance is available from the IAPP Resources.
Trusted Privacy Law Advisors in Virginia and Washington, D.C.
At Moore, Christoff & Siddiqui, we help businesses of all sizes navigate the complex intersection of data privacy, business law, and regulatory compliance—especially during high-stakes transitions like:
- Mergers and acquisitions
- Business sales or asset transfers
- Company wind-downs and bankruptcies
Our attorneys serve clients across Northern Virginia, Washington, D.C., and surrounding regions, providing clarity and confidence at every step.
Contact us to schedule a consultation or learn more about our business privacy services.
