Legal Question in Business Law in California

Re: Resposibility for debts after purchase of corporation

Wait a minute......you're saying Corp. #1 owed you money; then they bought Corp. #2, and because Corp. #1 now owns Corp. #2 that Corp. #1 is relieved of its liabilities? That makes no sense at all....if that were possible, large companies with lots of debt would make it vanish by buying smaller companies. You are still owed the money.

Possibly what you meant is that Corp. #1 which owed you money was bought by Corp. #2, and Corp. #2 is saying it won't honor #1's debts after six months. Equally, you are still owed the money. Even if Corp. #1 is merged out of existence after being acquired, Corp. #2 is liable for all its debts.

There is a third possibility. If Corp. #1 owes you money, but before paying you it sells most of its assets to Corp. #2 (but remains independent), you have both a remaining claim against Corp. #1 and possibly a claim against Corp. #2 under the Bulk Sale Act, a law designed to protect creditors from their debtors' selling off so many assets that they can't pay their bills. Your rights against Corp. #2, the buyer, if they ever come into being, are good for only one year, see Calif. Commercial Code section 6110.

You may also have a statute of limitations problem for your ordinary claim against Corp. #1, the seller/original creditor. For these reasons, you should have the facts reviewed at least briefly in an initial conference with an attorney to see whether fast action is necessary and against which of the firms involved you should proceed.

I do not know of any law with a six-month drop-dead date for making claims for ordinary trade payables. Perhaps you could ask that A/P person what law he/she is relying on.