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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Commercial Law

Date & Time
  • event Date

    Wednesday, February 8, 2023

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00

This CLE course will discuss strategies for mitigating the risk of successor liability in distressed M&A transactions. The panel will outline the sources of potential claims and the role of due diligence, indemnification and other contract provisions, insurance, and entity structure can have in limiting the buyer's liability post-closing.

Faculty

George H. Singer
Partner
Holland & Hart

Mr. Singer practices in the areas of corporate and commercial law, including finance, financial restructuring, capital recovery, and bankruptcy. He negotiates senior and subordinated financing arrangements and has experience with structuring credit facilities, perfecting finance documentation, and closing secured and lease finance transactions. Mr. Singer regularly represents lenders, lessors, funds, committees, business debtors, guarantors, and creditors in financial workouts, restructurings, distressed-sale transactions, intercreditor disputes, lender liability claims, successor liability issues, and preferential and fraudulent transfer litigation. He has been practicing for over 20 years and regularly advises publicly and privately held companies on corporate governance, debt and equity financings, licensing issues, and risk management. Mr. Singer serves as corporate counsel on behalf of buyers and sellers and venture capitalists in complex merger, acquisition, divestiture, and joint-venture transactions.

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Michael Ott
Of Counsel
Ice Miller LLP

Mr. Ott is an attorney in Ice Miller’s Bankruptcy and Financial Restructuring Practice, where he counsels banks, financial institutions and other creditors in distressed situations. He is experienced in all aspects of the workout, restructuring and bankruptcy process, providing clients with thorough analysis and creative solutions.

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Description

Current market conditions present distressed investing opportunities, but distressed M&A transactions bring an increased risk for successor liability claims. Counsel must be aware of the risks associated with acquiring distressed debt or assets and the steps a buyer should take to mitigate that risk.

In an asset acquisition, the buyer is generally not responsible for the seller's liabilities, but there are exceptions to this general rule. The buyer may remain liable for the seller's obligations if the buyer assumes the liabilities; the transaction is deemed to constitute a merger; the buyer is, effectively, a mere continuation of the seller; or the transaction is deemed to be a fraudulent transfer. Courts have also found successor liability when the buyer continues the product line of the seller or public policy demands it.

Buyers can mitigate the risk of successor liability by placing the acquired assets in a single purpose entity. Due diligence is also critical and may include areas of concern such as product liability, environmental or employment claims, and tax liabilities. The purchase agreement should clearly delineate assumed and excluded liabilities and include indemnification and escrow provisions, if possible, to cover outstanding obligations. Finally, insurance must be continued or tailored to cover the seller for outstanding claims.

Listen as our authoritative panel discusses the successor liability risks associated with acquiring distressed debt or investing in distressed assets, as well as strategies counsel can adopt to minimize liability for the buyer.

Outline

  1. Special concerns with acquiring distressed assets
  2. General rule: liabilities do not transfer to the buyer in an asset sale
  3. Exceptions to the rule
    • Express or implied assumption of liability
    • Deemed merger
    • The buyer is a mere continuation of the seller
    • The transfer is a fraud on creditors
    • Other
  4. Mitigation strategies
    • Due diligence: environmental, employment claims, and tax liabilities
    • Form a new subsidiary to acquire assets
    • Purchase agreement: clearly delineate assets being acquired, liabilities being assumed
    • Indemnity provisions; escrow or other security if available
    • Insurance

Benefits

The panel will review these and other critical issues:

  • Why are distressed assets and companies of particular concern in M&A?
  • What conditions can give rise to successor liability?
  • How can transactions be structured to limit liability for the buyer?
  • What provisions should be included in the purchase agreement to mitigate successor liability?