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Successor Liability

Fairfax Injury Lawyer Brien Roche Addresses Successor Liability

Brien Roche

Successor liability claims are based upon a successor having assumed liability either expressly or through conduct.  An express assumption of liability is just that. A party says it is assuming liability.  An implied assumption of liability is in most cases by means of conduct.

General Rule Is No Liability

Under Virginia law, a company that purchases or receives the assets of another company is not liable for the debts and liabilities of the seller.  There are exceptions to that.  Those exceptions arise as stated above.  Also successor liability may arise where there has been a de facto merger.  It may also arise where the buyer is simply a continuation of the seller. That is the buyer is stepping into the shoes of the seller. In addition it may arise where the transaction itself is fraudulent. This fraud would be looked at in relation to the persons to whom the seller owes something.

Exceptions

These exceptions do not apply only in regards to sales of the business. The case of Harris v. T.I., Inc., 413 S.E.2d 605, 609 (1992) dealt with a sale.  However the court in Harris did not say that successor liability is limited to a sale of a business.

These exceptions to successor liability as referenced above are seen in the case of Kaiser Foundation Health Plan of the Mid-Atlantic States v. Clary and Moore, P.C., 123 F.3d 201, 204 (4th Cir. 1997).  The mere continuation exception was applied in that case.  The court looked at several factors in deciding if the successor was liable for the debts of the prior company.  One of them was an identity of ownership. This is the most important factor. 

Also the court looked at the nature and scope of the two businesses.  In addition, was there an asset transfer for less than fair consideration?  Also were there two separate entities after the transfer?  Did the new company continue in the same trappings as the old one? In other words did they keep the same space, phone numbers, etc.?  Finally how do the assets of the two companies compare? That is is the seller just a shell?

These are all issues that need to be looked at in determining whether or not the new company is in fact a successor for purposes of liability to the prior company.

Other Claims

As part of these types of cases there may also be other claims asserted. These may be fraud, conspiracy, breach of fiduciary duty. Also aiding and abetting breach of fiduciary duty and imposition of an equitable lien or trust in favor of creditors.

Call, or contact us for a free consult. Also for more info on successor liability see the Wikipedia pages. Also see the post on this site dealing with contract issues.

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Successor Liability

Fairfax Injury Lawyer Brien Roche Addresses Successor Liability

Brien Roche

Successor liability claims are based upon a successor having assumed liability either expressly or through conduct.  An express assumption of liability is just that. A party says it is assuming liability.  An implied assumption of liability is in most cases by means of conduct.

General Rule Is No Liability

Under Virginia law, a company that purchases or receives the assets of another company is not liable for the debts and liabilities of the seller.  There are exceptions to that.  Those exceptions arise as stated above.  Also successor liability may arise where there has been a de facto merger.  It may also arise where the buyer is simply a continuation of the seller. That is the buyer is stepping into the shoes of the seller. In addition it may arise where the transaction itself is fraudulent. This fraud would be looked at in relation to the persons to whom the seller owes something.

Exceptions

These exceptions do not apply only in regards to sales of the business. The case of Harris v. T.I., Inc., 413 S.E.2d 605, 609 (1992) dealt with a sale.  However the court in Harris did not say that successor liability is limited to a sale of a business.

These exceptions to successor liability as referenced above are seen in the case of Kaiser Foundation Health Plan of the Mid-Atlantic States v. Clary and Moore, P.C., 123 F.3d 201, 204 (4th Cir. 1997).  The mere continuation exception was applied in that case.  The court looked at several factors in deciding if the successor was liable for the debts of the prior company.  One of them was an identity of ownership. This is the most important factor. 

Also the court looked at the nature and scope of the two businesses.  In addition, was there an asset transfer for less than fair consideration?  Also were there two separate entities after the transfer?  Did the new company continue in the same trappings as the old one? In other words did they keep the same space, phone numbers, etc.?  Finally how do the assets of the two companies compare? That is is the seller just a shell?

These are all issues that need to be looked at in determining whether or not the new company is in fact a successor for purposes of liability to the prior company.

Other Claims

As part of these types of cases there may also be other claims asserted. These may be fraud, conspiracy, breach of fiduciary duty. Also aiding and abetting breach of fiduciary duty and imposition of an equitable lien or trust in favor of creditors.

Call, or contact us for a free consult. Also for more info on successor liability see the Wikipedia pages. Also see the post on this site dealing with contract issues.

Contact Us For A Free Consultation

Contact Us For A Free Consultation