June 28, 2023
A potential problem in the sale or transfer of substantially all of a corporation’s assets is whether the purchaser has assumed the corporation’s liabilities. When transferring corporate assets you need to be aware that you may in fact assume the liabilities of the selling corporation depending on the way such assets are transferred.
In California, the general rule is that when a corporation sells or transfers its principal assets to a successor corporation, the successor corporation is not liable for the former corporation’s debts and liabilities. However, there are exceptions to this rule. Liability will transfer to a successor corporation under the following circumstances:
On the other hand, liability does not transfer from a former corporation to a successor corporation under the following circumstances.
In conclusion, if you are planning on acquiring the assets of another corporation, it is recommended that you have an attorney assist you through the process to avoid any potential unwanted liability.
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