Successor Liability

Successor liability operates through several legal theories that determine how and when a buyer might be held responsible for a seller's past liabilities. These include product line theory, continuation theory, de facto merger theory, and express or implied assumption of liabilities.

The complexity of successor liability varies dramatically by state law, transaction structure, and industry. Some liabilities, like environmental claims, can follow assets regardless of how a transaction is structured, making careful due diligence crucial.

In practice, successor liability can surface years after a sale, potentially exposing buyers to significant financial risks from lawsuits, regulatory violations, or historical business practices that were not apparent during the initial transaction.