Section 19 Sale of Assets

• Library: Bus Trans 2005

Generally, the acquiring corporation assumes only those obligations and liabilities of the acquired corporation expressly or impliedly assumed in the asset sale agreement. There are five exceptions to this rule; one is statutorily imposed under Missouri’s version of the Uniform Fraudulent Transfer Act, §§ 428.005 et seq., RSMo 2000, and four have been judicially imposed under Brockmann v. O’Neill, 565 S.W.2d 796 (Mo. App. E.D. 1978).

A sixth exception, Article 6 of the Missouri Commercial Code governing bulk transfers, was repealed effective September 25, 2004. Article 6 was designed to overcome the hurdles of personal jurisdiction and judgment satisfaction that often plagued creditors around the turn of the century. Article 6 obligated buyers in bulk to incur costs to protect the interests of the seller’s creditors and even gave creditors a remedy against a potential good-faith purchaser. The Missouri General Assembly repealed Article 6 to prevent a buyer from incurring significant transaction costs when buying in bulk and because creditors may have a remedy under § 428.024, RSMo 2000, of Missouri’s version of the Uniform Fraudulent Transfer Act, which provides remedies in the case of a fraudulent bulk transfer.

Even though the repeal of Article 6 lowers transaction costs for buyers, buyers should continue to protect their interest in the bulk transfer of assets. A buyer who wishes to be protected from a seller’s creditors may seek to add a clause to the purchase agreement for the assets requiring that the seller retain an appropriate percentage of the purchase price in escrow for a period of 6 to 12 months. A buyer may prefer this option to an indemnification clause in the purchase agreement because a seller being pursued by creditors is unlikely to have...