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Delewarellc

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.

Related terms