Journal of
Corporate
Renewal
July/Aug
2017
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A third issue arises from the state in
which investors, receivers, trustees,
CROs, and/or foreclosing lenders
may find a debtor or newly acquired
company. When taking over a failing
or failed firm (or any firm, for that
matter), one may come into control of
PII. One of the first steps that should be
taken (if it was not already done during
the due diligence process before the
acquisition) is to assess what PII exists,
what systems are in place to protect and
manage it, and whether those systems
are legally and technically sufficient.
It is possible that during a company’s
march toward bankruptcy and/
or sale, privacy and cybersecurity
controls were reduced to save cash.
New management would be well-advised to remedy this to avoid any
liability on its part and/or diminution
in the value of the data (to the extent
the data serves as collateral or an
integral part of the new owner’s
business plan moving forward).
Prepare for the Worst
While the primary liabilities that have
driven a company to bankruptcy,
out-of-court restructuring, or
acquisition are often staring retained
professionals in the face, less
apparent privacy and cybersecurity
concerns can present hurdles to
the completion and/or success of
that acquisition or reorganization.
Therefore, professionals advising
debtors, creditors, and potential suitors
should plan ahead of a crisis to identify,
assess, and manage liabilities that
may be attached to the sensitive data
received, maintained, and transmitted
by the debtor or target organization.
In addition, and unfortunately, the
question of a data breach is not
one of if, but of when. Therefore, in
addition to preparing to deal with
privacy and cybersecurity issues at
debtors or targets, private equity and
restructuring professionals must
ensure that their own organizations
build, implement, and maintain an
overall privacy and cybersecurity
program. While that task may seem
overwhelming, it starts with an
assessment of what type of information
the organization has and what
obligations attach to that information.
Next, the organization should consider
obtaining or expanding its cyber
insurance coverage and investigate
retaining outside cyber incident
response professionals (technical,
Erik B. Weinick is certified as a Privacy and
Cybersecurity Professional (CIPP-US) by the
International Association of Privacy Professionals
(IAPP) and co-founded the Privacy & Cybersecurity
practice group at Otterbourg P.C., which counsels
firm clients on privacy and cybersecurity matters. In
addition, Weinick is a member of the firm’s Litigation
practice group and regularly represents a diverse
group of clients before state and federal courts,
including Bankruptcy Courts; regulatory authorities;
and alternative dispute resolution tribunals.
legal, and public relations) in advance
of an incident. Conducted under the
direction of outside counsel, a pre-
incident evaluation may even be
protected by attorney-client privilege
from discovery during subsequent
litigation initiated as a result of a
breach. Even for organizations with
in-house expertise in privacy and
cybersecurity, tapping the outside
perspective and experience of a
dedicated privacy and cybersecurity
professional may be beneficial.
Finally, the organization should
maintain vigilance and prepare for
the inevitable breach by, among
other things, conducting regular
training, education, and exercises,
and working collaboratively with
vendors, customers, clients, and
other business partners. J
