QUESTION:
I am suing a company but it has been sold to another. Will I still be able to recover anything? How?
ANSWER:
There is a satisfaction of judgment dilemma when the suit is against a corporation that has been dissolved or sold. Under various circumstances, a corporation’s (or other business entity’s) liabilities may be imposed on its successors after the corporation has dissolved.
Generally, the purchaser of a corporation’s business or assets does not become liable for the transferor’s obligations simply by reason of the purchase. But the rule is otherwise if the purchaser assumes the corporation’s liabilities as part of the purchase price. Claimants are entitled to enforce the purchaser’s assumptions as third-party beneficiaries thereof; and such assumptions are interpreted broadly so as to give effect to the parties’ probable intent [Fisher v. Allis–Chalmers Corp. Product Liability Trust (2002); SCM Corp. v. Berkel, Inc. (1977). Whether it is fair to impose successor liability involves broad equitable considerations and hence is for the court (not the jury) to decide. [Rosales v. Thermex–Thermatron, Inc. (1998)].
Ordinarily, shareholders are not personally responsible for corporate liabilities. However, if a corporation has been operated as the “alter ego” of its shareholders, the corporation’s creditors—including tort claimants—may be permitted to “pierce the corporate veil“ and enforce their claims directly against the shareholders. Shareholders receiving assets of a dissolved corporation may be liable for corporate obligations, whether arising before or after dissolution. However, the shareholders’ liability is limited to the amount of the assets distributed to them or their pro rata share of the claim, whichever is less. In no event may a shareholder’s total postdissolution liability exceed the total amount of assets distributed to the shareholder, regardless of the number of claims. [Corps.C. § 2011(a)(1)].
Working with a lawyer who is an expert in civil law and personal injury would help in getting better informed about successor or alter ego liability, and would ensure more competent representation if needed.
