What is “Successor Liability” and what are some of the steps you should consider to protect against successor liability in an asset purchase or stock purchase? What is the key to structuring an asset purchase contract or stock purchase agreement to protect against successor liability in San Diego Southern California?
What is Successor Liability?
What is successor liability and how can this risk be avoided during an asset purchase or stock purchase? Successor liability involves the transfer of debts and liabilities associated with a business or asset. While this concept usually applies to a stock purchase transaction or the merger of two companies, you must be sure to properly structure an asset purchase agreement to ensure protections against successor liability while providing clear title to the assets you intend to acquire.
There are cases where the buyer agrees to assume liabilities or existing financing associated with an asset in these transactions. In many cases the buyer is exchanging cash or some other asset in exchange for assets in many forms, including but not limited to:
- Real Estate
- Inventory
- Customers
- Facilities
- Equipment
- Vehicles
- Goodwill
- Trade Names, Logos and Other Intellectual Property
Asset Purchases are Much More Common
Asset purchases are much more common than a stock purchase transaction. While these may seem to be more straight forward an asset purchase still carries the risk of successor liability.
Asset purchase transactions help to position your company to attack new markets, geographies, vertical opportunities or expand existing operations. A well structured asset purchase transaction provides your company with new assets while potentially increasing the tax advantages associated with the acquisition. The restructuring of the “basis” associated with the asset allows the buyer to achieve a better Return On Investment or ROI in less time.
Ensure Protections Against Successor Liability in Your Business Transactions
The experienced mergers and acquisition attorneys at the Watkins Firm have decades of experience in these transactions. We work to protect our client’s interests while respecting the nuances associated with the art of a successful business transaction. We conduct a thorough due diligence to ensure our clients understand the exact quality, nature and unique identification associated with each asset within the purchase agreement, and that the transaction provides clear title without exposing our clients to unnecessary risk or liability.
The structuring of an asset purchase contract or stock purchase agreement to provide necessary protections against successor liability while ensuring a successful transaction requires experience as well as legal skill. Are you considering an asset purchase or stock purchase in San Diego? We invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
