Successor Liability and Pandemic Business Fire Sales
Successor Liability in a Pandemic Climate
Marcadis Singer, PA, offers Creditors Rights Representation for those purchasing businesses, especially those taking advantage of the oversupply of Distressed Businesses.
A Fire Sale Primer as it relates to Successor Liability
Many transactions contain hidden risks, like Successor Liability, that can be costly for buyers if not addressed before closing. This is especially the case in a distressed transaction where the seller may not satisfy retained liabilities after the closing. Therefore, buyers must be aware of the risk of Successor Liability and take steps to mitigate it. Successor Liability mitigation steps include carefully considering potential sources of claims and post-closing business integration. Additional Mitigation steps include performing proper due diligence, carefully drafting purchase agreements. Negotiating an indemnification package that includes a source of funds, or other security, especially in a fire sale situation to satisfy indemnification claims, is appropriate,
Non-Liability General Rule
Buyers of businesses will frequently try to structure the transaction as an asset sale specifically to avoid inheriting liabilities as part of the purchase. However, the general rule is that a buyer of assets is not liable for a seller’s liabilities simply because the buyer owns the assets. The Supreme Court declared 130 years ago that this general rule of non-liability is “so well settled” that “any other can be supposed to exist.”
This article is not to be considered legal advice; it is purely informational. Every case is different. Do not rely on this article for professional advice.
If you believe you have a claim for Successor Liability related to M&A or purchase of a business, contact a Creditors Rights Attorney as soon as possible. Marcadis Singer, PA, are Creditors Rights Attorneys practicing in Florida.