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Asset Purchase Agreement Environmental Liabilities

However, as in most areas of the act, there are exceptions to the general rule that asset purchase transactions can be used to avoid debt recovery. There are certain circumstances in which a buyer is liable for certain debts of the selling company, while he has structured the transaction as an asset purchase and has expressly excluded those debts from the transaction. This legal area is called “inheritance liability” since the buyer, as the seller`s successor, is legally liable for certain obligations of the seller with respect to the acquired assets. It is also sometimes referred to as “transfer responsibility.” One of the reasons (there are many others) that buyers prefer to buy the assets of the sale transaction rather than the shares or other holdings held by the owners is to prevent the acquisition of the company`s liabilities from selling. Most buyers prefer to pick up the company`s assets and leave the liabilities behind. A variant of the concept of survival, which is envisaged in some agreements, provides that representation is maintained until the expiry of the statute of limitations. This is a unique problem in the environmental context, as the statutes of limitations under certain environmental laws do not begin until the environmental issue is discovered. A period of survival related to the statute of limitations should create a situation in which this representation would survive indefinitely. If, for example.B.

an agreement indicates that there is no contamination in real estate purchased by the buyer and that this representation will persist until the expiry of the statute, the buyer could prove that there is no violation of the representation if, 20 years later, contamination attributable to the seller is found in the property. The product line exception provides for the purchaser of a business a successor liability actions as a result of the product against the acquired transaction, if the buyer buys 100% of the shares of a company, he assumes the same environmental responsibility as in the case of a sale of assets. Until the 1970s, the responsibility to succeed the players of M-A was not a major concern. The courts have almost always complied with the debt allocation in the asset purchase agreement. But since then, the courts have developed several new theories of estate liability in order to make a buyer liable for the debts and obligations of the sellers. 3. Should a seller disclose environmental information to the buyer in the event of a sale of assets or shares? However, when it comes to other debts, such as litigation, most buyers prefer not to assume them. In general, the structuring of an AM transaction as an asset purchase gives the buyer the flexibility to avoid unwanted liabilities. The reason is that the buyer chooses only the assets and liabilities he wishes to acquire. On the other hand, in the case of a share purchase, the buyer inserts himself into the sellers` shoes and takes over the business as it is. One of the main considerations of these agreements is whether environmental representatives will survive.

In the agreements in which the insurances are in place, the purchaser may be entitled to compensation (often subject to self-granters and subject amounts) if it turns out that a representation was not true and the buyer was harmed by the violation before the end of the survival period. Survival times for environmental representations vary, as with other representations: they can survive for a short period of time or, in rare cases, survive forever. 4. Is environmental diligence common in the case of asset/share sales? Depending on the outcome of the environmental diligence, the nature of the agreement and the negotiating force of the parties, certain transactional agreements may provide compensation to the purchaser in the event of a breach by the seller of an environmental guarantee or guarantee.