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