Few doctrines at common law evoke more trepidation for the
buyers in an asset purchase agreement than the doctrine of
corporate successor liability.
An American principle, successor liability establishes that, in
an asset acquisition, the purchaser corporation may be held
responsible for the liabilities of the seller. This can occur even
if those liabilities were not expressly assumed by the buyer.
The concept of successor liability is not entirely foreign to
Canadians. Most liabilities on successor corporations are
statutorily imposed in both the U.S. and Canada. For example, these
statutes require that the successor company pay out wages or
conduct environmental remediation as a result of the
predecessor’s conduct. None of this is particularly new or
controversial in Canada.
