Successor liability
A doctrine where an acquirer assumes liabilities of an acquired entity in certain transactions.
Definition
Successor liability is the doctrine under which an entity acquiring assets of another entity may assume the seller liabilities. Default rule: asset purchases avoid successor liability; mergers and stock purchases assume liabilities.
Context
Relevant in M&A transactions involving Delaware LLCs.
Example
An LLC acquires another LLC customer list and IP via asset purchase. Successor liability typically does not apply, so seller liabilities do not transfer.
Common pitfalls
- De facto merger doctrine can override asset-purchase structure.
- Product liability often has special successor-liability rules.