Controlling Successor Liability in Asset AcquisitionsJuly 1, 2021 – Articles
Dinsmore partner Mark Boos was recently published in NPCA Marketer with his article "Controlling Successor Liability in Asset Acquisitions (Part 1)," an excerpt of which is below.
The so-called "rule of liability"(the Rule) is straightforward: The buyer of the assets of a business is not responsible for the debts and liabilities of the sellers.
This principle has long been one of the reasons buyers elect to purchase the assets of a seller rather than acquiring the seller itself in a merger for example.
The protection afforded by the Rule is far from absolute, however. There are an increasing number of exceptions, any of which can result in a buyer inheriting some or all of the seller's liabilities, even in an asset deal. In short, just because you elect to purchase the real estate and inventory of an e-store operator or the supply contracts of a distributor, rather than the stock or membership interests of that operator or distributor itself, does not necessarily mean you'll take them free and clear of seller liabilities.