Bankruptcy

In addition to escrow agreements, organizations should consider the need for other clauses in licensing agreements to protect against the risk of a vendor bankruptcy. For mission-critical software, organizations should consult with their legal counsel on how best to deal with Section 365(n) of the Bankruptcy Code, which gives a bankrupt vendor discretion to determine which of its executory contracts it will continue to perform and which it will reject. Proper structuring of the agreement can help an organization protect its interests if a vendor becomes insolvent.

 

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