Does a company who bought out another company assume responsibility for the outstanding bills?
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Does a company who bought out another company assume responsibility for the outstanding bills?
I work for a Heating and A/C company. We have an outstanding bill to a manufacturing company who in the last 4 months was bought out by a larger company. Is it now the larger company’s responsibility to pay the outstanding bill that was in the name of the previous company? I called and talked to the same contact at the new company as I had at the old comp nay. He told me that the company only bought the assets so the debt remained with the first company.
Asked on August 4, 2011 Wisconsin
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
You contact, unfortunately, may be right. There are two ways to buy a company. The first is to buy the corporate (or LLC) entity--the "company," if you would. If that is what happens, then the new owner is responsible for the bills, since he, she, or it now owns the same legal person or entity which incurred the obligation.
The other way is to simply buy the assets of the old company--i.e. the customer files, the inventory, the equipment, etc. Buying assets does not obligate one to the bills of the old. In this case, unless you can prove some sort of wrongdoing (e.g. it was "sold" to the same person, specifically to defraud creditors), you can't collect from the buying company, though you may still be able to seek payment from the old company (if it still exists, even as a relatively inactive "shell" but one with assets you could reach) or potentially from the old owners (if the company had been a sole proprietorship or partnership, so owners were personally liable, and not an LLC or corporation).
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