If you have signed an NDA with a company and that company goes bankrupt and is later acquired, are you still bound by the NDA?

I'm guessing yes, but thought I'd ask anyhoo.

 

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I have no idea. I'd guess yes. It might depend on the terms of the NDA you signed but if there isn't anything in it I would expect it would continue to bind you even if the company no longer exists, although in that case there probably wouldn't be anyone who had standing to enforce it.


My understanding of bankruptcy is minimal but in a corporate bankruptcy the entity never ceases to exist so I don't see why you wouldn't still be bound by it no matter which way you look at it.


But I really don't know.

YES

[face_noideawhatimtalkinbout]

 

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That was the out I was considering. I wasn't sure if the acquiring company would be assuming that standing.

 

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If it bought the company? Sure, it would have standing. Usually called a successor-in-interest.

I haven't signed a NDA that I didn't break. But I'm fair and make no secret about it.

 

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No. Yes. Maybe. Definitely.


If the original entity dissolved and someone just bought all their assets or IP? You are not bound by any agreement you signed with that entity as it does not exist any more.


If however the original entity sold itself lock-stock-n-barrel to another company (regardless of them going bankrupt first) then technically that entity still exists, and you're bound by your agreement.

 

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Here is one example of a termination/continuity clause within a confidentiality agreement. It is from a mutual-NDA:

Termination for Insolvency. If either party is adjudged insolvent or bankrupt, or upon the institution of any proceedings by it seeking relief, reorganization or arrangement under any Laws relating to insolvency, or if an involuntary petition in bankruptcy is filed against a party and the petition is not discharged within sixty (60) days after filing, or upon any assignment for the benefit of a party's creditors, or upon the appointment of a receiver, liquidator or trustee of any of a party's assets, or upon the liquidation, dissolution or winding up of its business (each, an "Event of Bankruptcy", then the party affected by any Event of Bankruptcy must immediately give notice of the Event of Bankruptcy to the other party, and the other party may terminate this Agreement by notice to the affected party.

In some states, depending on the types of parties involved in the NDA/NCA and the particulars of liquidation or dissolution proceedings, the original NDA or NCA may be subject to court-mediated restructure. I have experience with a NCA with a broker/dealer. The CEO of the BD invested several millions of dollars of clients' money in a bogus tax-free bond fund. The SEC and Federal Marshals raided the BD, and the BD was acquired by another firm out of California. I guess you could say the NCA just...went up in smoke. The legal representatives of the acquiring firm just didn't have that much attention to detail. NDAs are, of course, a bit different than NCAs, but not THAT much. I think you'll find that you can void the NDA relatively easily.

 

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Yeah, but that's because it's between two entities with roughly equal bargaining power who can afford lawyers. I can't imagine why any company would ever put language in an employee contract letting the employee out of an NDA because they went bankrupt.

Yea I don't see an employee NDA containing an insolvency clause as something that'll be very common.


The trick is whether the entity that the agreement existed with... still exists. If their assets+liabilities were purchased in a company sale, then they still exist, as does all their agreements.


If however they no longer exist (in situation I pointed out earlier) then there is no longer anyone who can bring a cause of action against you for violating the terms of your NDA. It's not that the agreement is void, but that there is no longer anyone who can legally try and enforce its provisions upon you.

 

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