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Successor Liability: Corporate & Business

The general rule in Missouri is that when one corporation/business sells or transfers all of its assets to another corporation/business the latter is not liable for the debts and liabilities of the former. This is because Missouri recognizes the distinction between (a) corporate mergers or the sale and purchase of outstanding stock of a corporation where preexisting corporate liabilities also pass to the surviving corporation or to the purchaser and (b) the sale and purchase of corporate assets which eliminates successor liability. Chem. Design, Inc. v. Am. Standard, Inc., 847 S.W.2d 488, 492-93 (Mo. Ct. App. 1993).

Like with all rules, there are exceptions to this general non-liability: (1) when the purchaser explicitly or implicitly agrees to assume the debts and liabilities, (2) when the transaction amounts to a consolidation or merger, (3) when the purchaser is a mere continuation of the seller, and (4) when the transaction is entered into fraudulently to escape liability for the debts and liabilities. Id. at 491.

It is worth noting that successor liability is post money judgment work. It will only come into play when you have obtained a Court judgment and you are trying to collect against a particular business entity. Thus, it is very similar to the piercing the corporate veil doctrine because it reflects the court’s power to allow a plaintiff or judgment creditor to collect against a defendant or close associate of the defendant.

Contact us with questions.