Successor Liability

A state law doctrine that allows a creditor to seek recovery from the purchaser of assets for liabilities that were not assumed as part of an acquisition. Products liability, environmental clean-up and employment law are areas where the doctrine of successor liability is more commonly applied. As a general rule, the buyer of assets in an asset acquisition does not automatically assume the liabilities of the seller. However, in certain circumstances, the buyer can be held responsible for liabilities of the seller if a court determines that the factors of one of the following exceptions are met:

  • The buyer expressly or impliedly assumes the liabilities.

  • The transaction is deemed a de facto merger under state law.

  • The transfer was fraudulent or intended to defraud creditors.

  • The buyer is a mere continuation of the seller.

  • The buyer continues essentially the same operations or product line of the seller.

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