Mergers & Acquisitions

Resources: Glossary

Don’t be confused or intimidated by any terms or abbreviations in the M&A world. You’ll find answers here.

Successor’s Liability

Definition

Liability that passes from the seller of a business to a buyer of a business by operation of law without an express contractual agreement for the buyer to assume the liabilities of the seller.

See Also

Tax clearance.

Example

An example of a successor’s liability includes sales tax. If the buyer of a business does not obtain a tax clearance certificate, the buyer may be liable for any unpaid sales taxes as of the day of closing.

Tips

The purchaser should obtain a tax clearance certificate to protect themselves from potential successor’s liabilities. Most successor’s liabilities are tax related, though a few forms of potential successor’s liabilities are not tax related, such as those related to environmental matters.