A popular acquisition structure for purchasers of ongoing business operations is through an asset purchase agreement. While an asset purchase is generally a preferred structure for minimizing the risk of environmental successor liability of the target business, an asset purchase structure does not automatically protect an asset purchaser from successor liability. This article discusses steps that an asset purchaser can take to minimize their risk of unwittingly succeeding to the environmental liabilities of the selling entity.

Carefully Draft Critical Provisions in the Asset Purchase Agreement

The general rule is that a purchaser of assets is not responsible for a seller’s liabilities simply because of the ownership of the assets. However, purchasers can be held responsible for the liabilities of the seller in certain circumstances. Purchasers should identify what creates risks of successor liability exposure and draft the asset purchase agreement to avoid them.