Most corporate acquisitions are structured as asset purchases
to the buyer from the liabilities of. to isolate
the seller. While this is generally an effective strategy, it does exist
are exceptions and nuances that will be explored in this article
in connection with the purchase of a business in the state
Ohio.2
value added tax
Ohio, like most states, has a sales tax with certain
Exceptions to retail sales in this state.3 Although these are the
Buyer of a sales taxable item used to pay the
Tax, it's the seller, assuming he has an Ohio connection with that
must collect sales tax and pay it to the state. 4
Ohio sales tax rate is 5.75%, and counties on behalf of
themselves, and other government organizations, may provide additional
so-called piggyback taxes, which increase the tax rate.5 Piggyback sales
For example, the Cuyahoga County tax rate is 2.75%. About
Sales tax rates in the various Ohio jurisdictions can be determined
under the following link: https://www.tax.ohio.gov/sales_and_use/rate_changes.aspx.
A buyer of a company's assets is liable for all of them
unpaid sales tax of the seller, as well as accrued interest and
associated penalties if they have the
Purchase price for such assets an amount sufficient to pay for them
Taxes, Interest and Penalties. The amount withheld
The purchase price may only be paid to the seller if he
Receives a receipt from the Ohio Tax Commissioner with all details
Taxes have been paid or a certificate stating that no taxes are due
because of 6
The seller must file a final VAT return within 15 days
after the sale date of the company and the seller should then
Submit a Form D5 to the Ohio Department of Taxation to: a
Clearance certificate. 7 The application is to be sent to
Ohio Department of Taxation P.O. P.O. Box 182382 Columbus, Ohio,
43218-2382. The seller should then close the seller's seller
License from the Ohio Department of Taxation. A form D5 must be
filed and a tax certificate received from a corporation
before it can dissolve, give permission from its seller,
consolidate, merge or convert to another company.8 If the seller
Liquor License, the Liquor License is non-transferable and can be
suspended or revoked if not all sales taxes of the seller
paid. 9
The sale of assets to a buyer can even be subject to the Ohio
Value added tax. Selling most assets should be tax free
because they are related to the manufacture of
Real estate for resale is sold and not wholesaled
Retail or because they are eligible for the causal sales exemption. 10
However, there is an exclusion from the occasional sale exemption for
Sales of motor vehicles and, accordingly, the buyer must
Pay sales tax to acquire ownership of such vehicles. 11
Business tax
Ohio does not collect franchise tax from companies that do
Companies in the state, but all trading companies with
Significant ties with the state are required to run a commercial
Activity Tax ("CAT") on their Gross Income.12 On
For gross revenues greater than $ 1 million, the CAT rate is 0.26% .13
The liability of all companies that form a consolidated or combined
Group under the applicable law is jointly and severally. 14
How the Ohio Sales Tax When Selling a Business in Ohio That
is defined as a sale of at least 75% of the assets of a
Transactions outside the normal course of business or a sale
leads to the termination of the seller's business,
The buyer may be liable for the seller's and unpaid CAT taxes
all applicable interest and penalties if not of
the purchase price an amount sufficient to pay such taxes, interest
and penalties. The retained amount may not be paid to the seller
until he has received a receipt from the tax inspector that shows
all taxes have been paid or a certificate stating that no taxes are due 15
Income tax withholding
Like any government agency that collects an income tax, Ohio is
requires a deduction from employers who have employees in the state,
Withhold taxes and pay them to the state of Ohio taxes
Compensation paid to its employees.16 When an Ohio employer has its
Store or inventory must receive a final return within the seller
15 days after the date of sale. 17 The buyer is responsible for the
seller's unpaid income tax, interest, and penalties
if the buyer does not withhold a sufficient amount of the purchase
Price to pay these taxes, interest and penalties prior to receipt
a receipt from the Ohio Tax Commissioner stating that the taxes have been paid
Has been paid, or a certificate stating that no taxes are due. 18 Interestingly
this law provides that the tax commissioner the
Liability of the seller or liability of the buyer,
for income tax deduction if necessary to ensure that the state
collects the maximum withholding tax revenue.19 Presumably this is
is to induce a buyer to buy a company from which the
the possible tax liability exceeds the purchase price. A similar
Provision is not included in the sales tax or CAT statutes.
Debtor Assistance Procedure
Generally, when a seller hasn't paid their Ohio taxes, that is
because his business is in financial distress. This lifts the
Ask if an acquirer can avoid a company's assets
Liability for the taxes of the seller by purchasing as part of it
a debtor exemption procedure. Buyers have argued that since
the sale is carried out by a person other than the seller
Company that owed the taxes did not comply with the above statutes
apply. In two cases, Common Pleas Courts have ruled that a sale of
Assets through a bankruptcy trustee in a bankruptcy administrative proceeding or a sheriff at
a foreclosure sale, are not sales by the taxpayer who owes the state
Taxes, and the buyer therefore acquired the assets sold free of
lagging state tax debts.20 In a later appeals court
Decision on insolvency court proceedings under Chapter 11,
The Hamilton County Court of Appeals ruled that a sale by a
Could debtors owned with bankruptcy clearance
is subject to successor liability according to RC § 5739.14 and vice versa
a decision of the judicial process based on these opinions of the Common Pleas Court.
The appeals court argued that in a Chapter 11 case, the
The seller of the assets is not the bankruptcy court and therefore
Buyers could be subject to the obligation to withhold potential
State tax liability from the purchase price. The bankruptcy court
In the order for approval of the sale it was unclear whether the buyer
earned title free from claims of the Ohio Department of
Taxes and the appellate court have referred the case back to the main hearing
Court to make that decision.21 It certainly seems that a
Buyers in legal proceedings may acquire ownership of the assets of a. acquire
Companies exempt from liability for Ohio state taxes, but only if that
Court order authorizing the sale and advice for such
The buyer should make sure that the order is written correctly.
As set out below, specifically Section 363 of the Bankruptcy Act
authorizes a sale free and free from all claims and interests
including those of the state tax authorities.
Under Article 9 of Ohio's version of the Uniform Commercial
Code can sell assets that are collateral to a secured party
pledged by a debtor to a buyer, free from: (i) all of the
The debtor's rights to the collateral; (2) the security interest of
the secured party; and (3) any subordinated securities interests or
Lien on the assets to be sold.22 Thus, a secured party
To freely and freely transfer assets of a troubled company to a buyer
all government tax liabilities, provided the secured party has
priority security interest over that of the Ministry of Finance
in assets sold. 23 The Ohio Supreme Court has
that the acquisition of the debtor's property by a secured
In the context of a security agreement, there is no sale subject to the legal successor
Sales tax liability. 24
Fraudulent transmission
A buyer of a company's assets may be held liable for that
Creditors of the seller if the acquisition as
fraudulent transfer. Ohio has the Fraudulent uniform. accepted
Transfer Act, which is codified in Chapter 1336 of the Revised
Code. Ohio law distinguishes between actual fraud and legal fraud.
So when a seller sells his assets with "real intent",
To obstruct, delay, or defraud a creditor, "then the transfer will take place
is fraudulent.25 However, a believer does not have to prove
actual fraud. A transfer is fraudulent even if the transfer is
manufactured for "less than a reasonable equivalent value" and the
The seller was made insolvent. "26
The Federal Bankruptcy Act also includes a fraudulent transfer
Provision that enables a liquidator on behalf of creditors to
to avoid a transmission that is actually intended to hinder, delay or
Cheating creditors or with less than reasonable
Value that made the debtor insolvent.27 A buyer
should take precautions when purchasing a business from a seller
who is insolvent or because of the
Purchase.
Ohio offers a number of remedies when selling a business
found to be a fraudulent transfer. These remedies include one
preliminary injunction against further disposal of property, appointment
a bankruptcy trustee to take over the transferred assets, contestation
the transfer or attachment or attachment of the transferred
Ownership. 28 In practice, when the buyer of
if it is found that a troubled company has rendered inadequate consideration,
the buyer must pay the obligee more or
Creditors bringing a single fraudulent transfer lawsuit
Plot.
Ohio law recognizes certain objections to a fraudulent transfer
Action. For example, a transferee who acts and pays in good faith
has an appropriate equivalent value for the acquired assets a
complete defense against fraudulent transfer campaigns, even if the
Seller who was involved in an actual scam.29 Real fact is
that the buyer pays a reasonable equivalent value himself
Evidence that it was not a fraud but a good thing
Belief. 30 Even if a transmission is called
fraudulent because the buyer has not paid adequately
Value for the transferred assets if the buyer has acted
in good faith, the buyer has a right of lien on these assets
Amount of Value Paid 31
Although there are some technical differences, this is bankruptcy
Fraudulent transfer rules are similar to Uniforms
Fraudulent Transfers Act. Bankruptcy offers essentially the same thing
Immunity. 32
How can a buyer of a financially troubled company protect themselves?
against a fraudulent transfer act? First the buyer
obtain an appraisal or appraisal of the value of the assets
is bought. Provided that the consideration paid is reasonable
corresponds to the estimated or appraisal value, the buyer has
Evidence that it acted in good faith and is paid appropriately
equivalent value. An appraisal report or appraisal report can be used to
Defense against possible fraudulent transfer actions that are claimed
that the buyer has not paid adequate consideration.
However, a better strategy is to invest the assets of a
Troubled business through a lawsuit involving an order
registered that authorizes the transfer of the property to the buyer
free from liens or claims. Ohio law allows an appointed court
Recipients for the sale of assets "deposit-free"
court approval. 33 In such a case, the sale
The party can be the bankruptcy administrator of the financially troubled company
whose assets are acquired by the buyer. By going through the
Legal proceedings will cut the rights of creditors as soon as the
Court will issue a final order approving the sale. In essence it is
forces creditors to object to the adequacy of the purchase
consider raising your objections before closing the sale.
The Federal Bankruptcy Act provides a similar procedure in which
an acquirer of assets can acquire them free of pledge,
Claims and encumbrances through a so-called "section"
363 "Sale. 34 Although the procedure in
Bankruptcy is a little different from a state judicial administration,
the goal is the same. After the sale is complete, there is no believer in the
Companies whose assets are being sold may find out about the adequacy of the
the price. Instead, the believer must precede the objection
Sale closes.
Although this procedure offers greater protection, it does
come with a certain risk. The main risk is that the proposed
Buyer could be outbid by someone else trying to purchase
the Fortune. But it is precisely this risk that the
Protection. By acquiring the assets of the ailing company
The successful bidder can prove that
it made the "highest and best" offer on the assets.
Real estate brokerage fee
The Ohio County auditors charge a fee for filing a charter for
the transfer of real estate in this state in the amount of 10 cents for
any $ 100 or a fraction of $ 100 of the value of the real
Ownership. 35 A buyer doesn't have to pay
this fee, but the deed for the property purchased by the buyer will be
will not be recorded if this fee is not paid. The buyer must a
Declaration with the district auditor (Form DTE 100) about the
Purchase price and thus the basis for the determination
the amount of the transport fee.36 Certain types of transport are excluded
from the carriage fee, including distributions from a company
Society to its owners and capital contributions to a company
Company in return for issuing a portion thereof. 37
Selling a stake in a company that owns real estate
Real estate is not subject to the property transfer fee. These
has led taxpayers to sell real estate to a
Business unit and then sell the unit to a buyer. That's not just
allowed the seller to evade the transportation fee, but also avoided it
an obligation of the buyer to indicate the selling price, which, if
it is higher than the value of the property tax, it will likely go up
the value of the property for property tax purposes. district
Auditors and school authorities have become aware of this technology
in recent years and regularly challenge the valuation of real estate
transferred this way – if they know of the transfer. If the
The purchase is financed with the property as security
A mortgage deposit can be made through the government agencies
Selling, causing them to question the valuation and possibly try to
charge a transport fee. A closure law has been proposed
this perceived gap by asking sellers to report to the sale
a company that only owns real estate and is selling it
on carriage charges.38 The proposed legislation did not
has been adopted, and at least in the short term there are none
significant prospect of such laws being passed; d. H
Taxpayers can still use this structure to
Transaction Costs When Selling Real Estate in Ohio.
Workers compensation
Ohio is one of the relatively few states in the country where
most employers are required to buy workers compensation insurance
Insurance from the state; in most other states employers buy
Workers' compensation insurance from non-state insurance companies
Companies. In Ohio, larger employers who have the required
financial means are able to insure their employees themselves
Compensation for damages. When an employer in Ohio owns the assets of a
Deal to a buyer, the buyer's actuarial risk for
The employee's compensation claims are based on
Seller's experience. 39 If the buyer takes out insurance
To cover this risk are the premiums to be paid for it
determined based on the experience of the seller. When the buyer will be
after the sale at the Bureau of Workers & # 39; Compensation insured,
the seller's experience affects the buyer's premium
from an actuarial point of view, if the buyer as
Successor of the seller. 40 If the buyer is a new employer
with no experience in the state of ohio, then the seller's rate
determines that of the buyer.41 If both the buyer and the seller
Experience in the state of Ohio then buyer's premium
is determined by the combined experience of the buyer and
Seller. 42
A buyer is treated as a successor to a seller if the
Buyer takes over the operation of the acquired business. 43
Whether the handover of the predecessor to the successor is
voluntarily or through an intermediary, such as B. a bank or a
In bankruptcy administration, the buyer will be treated as successor in title if (i) he
expressly or tacitly agrees that the seller
Employee Compensation Obligations, (ii) the acquisition is
treated as a de facto consolidation or merger; (iii) the
Successor is a mere continuation of the Seller, or (iv) the
the acquisition was made for the purpose of escape
Obligations from the Employee Compensation Act 44
Notwithstanding the foregoing, a buyer will not be deemed a
Successor if all of the following statements are true: there is a material
Change of ownership of the company, change of management
Classification of the company and a change in the process, security
Risks or hazards related to the operation of the company 45
The Ohio Bureau of. treated
Worker's compensation as successor upon acquisition
more than six months after the seller ceased operations,
and there is no family or other connection between the
Buyers and Sellers. 46
An acquirer of a company who becomes the successor takes over the
Risks related to the seller's compensation for workers
Invoices and related rights and obligations. 47 The buyer is
also responsible for unpaid premiums, fees or reports owed
to the Bureau of Workers & # 39; Compensation by the seller, 48
and the cost of any claims of the acquired business related to the work
Post injuries not covered by employee compensation
Insurance.
The Ohio Supreme Court has ruled that a company is a buyer
treated as a successor even though it was purchased by the seller
only selected assets or locations and the right to use
certain customers of the seller. 49 A buyer must
however acquire at least part of the assets to be treated from the seller
as a successor. According to an earlier version of the succession plan
cited above, the Ohio Supreme Court ruled that a manager had one
Apartment complex was not a successor to a previous management company
if the administrator has not acquired any assets from the management company,
but only hired a part of his former employees and took over the management
of apartment leases. 50 A subsidiary of the administrator
bought the building from a third party who had signed a contract with
the previous management company. The Supreme Court ruled that since
Manager had not acquired any assets from previous management
Company, it couldn't be a successor. As the Colonel
The court's decision in the cited case was unanimous and the previous one
Version of the rule did not differ significantly from the existing one
Usually in relation to this question, it is likely to be engaging in
this case remains under the new version of the
applicable provision of the Ohio Administrative Code.
The above shows the importance of the buyer
familiarize yourself with the experiences, rights and obligations
assigned to the seller's workers' compensation account.
Accordingly, the buyer should contact the Bureau of
Worker Compensation Form AC-4 prior to an acquisition in
to get this information. If the buyer hasn't before
participated in the workers' compensation system, then it must
Submit an application on Form U-3 for Ohio Workers & # 39; Submit compensation
Insurance coverage that includes the disclosure of information about the
Acquisition of the company whose legal successor is the buyer. If
the buyer is already participating in workers' compensation insurance
System, then it must submit a Form U-118 in which the Bureau of
Employee compensation for acquisition. If the buyer
Acquisition of only part of the seller's business, the bureau
the employee remuneration is based on the following
Employers only experience that relates to that part of the former
Company of the employer who is taken over 51
If the seller at the Ohio Bureau of Workers & # 39;
Compensation Fund and the buyer not, then the buyer
have to pay (or cause the seller to pay) any actuarial amount
calculated by the Bureau, which are necessary for leaving the insurance fund.
Likewise, if the buyer participates in the temporary employment
Compensation Fund and after the purchase of the seller
would like to exit the fund, a corresponding actuarial
Payment to the Bureau of Workers & # 39; Compensation.
Unemployment benefit experience
When a salesman starts a business in Ohio his entire business is on
Buyer is the seller's successor for the buyer
Ohio unemployment benefits and the buyer will
assume the resources and liabilities of the seller's Ohio
Unemployment benefit insurance account and set the
Payment of all contributions or payment in lieu of contributions,
due in this regard.52 The buyer should obtain a GFS 20101
with the Ohio Department of Job and Family Services (the
"ODJFS"), which provides the information to
the transfer of the account.
The acquirer of a company is also treated as a legal successor
Ohio unemployment insurance purposes when it acquires
Essentially all of the deal from one seller and submitter
Application to the director of the ODJFS on form no. JFS 201118. To
Acquisition is treated as essentially the entire company
if the buyer acquires 75% or more of the seller's assets
based in the US state of Ohio and immediately after the acquisition
the buyer employs 75% or more of those under the
Ohio Unemployment Compensation Act Immediately Before Selling 53
Even if the buyer is less than essentially all of them
Seller's business in Ohio, may still transfer to a
Part of the seller's Ohio Unemployment Compensation
Insurance account if it is a clearly definable and
recognizable part of the acquirer's business, and after
the buyer employs essentially the same people
is insured under the Ohio Unemployment Compensation Act, the
were employed by the seller immediately before the handover
this part of the business and an application is made by the
Seller and buyer using form JFS 201119.54
Transfer of a part of the company by a seller to a buyer and both
Parties are under common ownership and / or control, then
Experience of unemployment and outstanding debt due to the
The transferred part of the company must be approved by the. be transmitted
Seller to Buyer 55
Notwithstanding the foregoing, if a buyer who does not have a
The Ohio employer, who is subject to unemployment insurance, is making a purchase
Business if the acquisition is exclusively or predominantly for the
In order to receive a lower premium rate, the buyer will
a new employer tariff according to ORC § 4141.25 (A) (1) .56. be assigned to
General successor liability
The courts of most states, including Ohio, have evolved together
Legal doctrines for holding the buyer of the assets of a
(or presumably any other business unit such as
Limited Liability Company) is liable for the obligations of the
Seller. These legal teachings are identified and discussed and
below. Most courts, including Ohio, have recognized four situations
when it is appropriate for the seller's creditors,
Claims against a buyer of his property. These situations are like
follows: (i) an assumption of liability, (i) a factual one
Consolidation or Merger, (iii) the buyer is a mere continuation of
the seller; or (iv) the sale was made fraudulently for the
to evade liability to the seller's creditors. 57
a) assumption of liabilities
Of course, a buyer who takes on the obligations of a seller will
be responsible for it. The point here seems to be that dishes may
Find an implied agreement to assume one or more liabilities
unless there is an express assumption. In Cintas
Corporation v Great Lakes Best One Tire & Service, LLC,
An Ohio appeals court found that the purchaser of the assets of a
Business implicitly assumed a uniform rental agreement
by the seller if the sales contract provided that the buyer
assumed all liabilities to suppliers for materials and services
appointed in the ordinary course of business in line with the past
Practices including, but not limited to, those referred to in a
Time schedule. The contract with the Cintas Corporation was not listed on
the schedule, but the court found that it was taken over by the buyer
than a contract concluded in the ordinary course of business
consistent with previous practice.58 The existence of such cases has
prompted the drafters of most sales contracts, not just a
Provision that precisely defines which liabilities are assumed
in the event of an acquisition, but also a provision with the designation a
non-exclusive list of liabilities that are expressly not
accepted. 59
b) De facto consolidation
or merger
A de facto consolidation or merger is a takeover of
the assets of a corporation or other business entity that
substantial equivalent of a consolidation or merger after the Ohio
Revised Code, with the exception of the procedural requirements of the
Applicable Laws. 60 The Essential Facts That
Evidence of de facto consolidation or amalgamation is that
the following:
I. Continuation of business
Activity of the seller with the same staff;
ii. Ownership Continuity
resulting from the issuance of equity to the buyer in return
the acquisition of the seller's assets;
iii. the immediate or the fast
Dissolution of the seller after the sale; and
iv. the takeover by the buyer of
all liabilities and obligations that are normally required for going concern
the seller's business. 61
A dissolution of the seller is expressly called
Part of a de facto consolidation or amalgamation, courts
been willing to disregard this requirement, at least if the
The selling company does not retain enough assets to maintain its
Creditors.62 The scope of the de
de facto consolidation or merger doctrine is relatively narrow
and does not apply if the buyer has no common ownership with
of the seller and cannot be applied if the buyer has no equity. issues
of the seller. 63 It is likely that some issue of
Buyer's equity in return for the acquisition of assets
would not be required if the buyer's owners are the same as
the seller, since the share issue would have no point
economic impact. 64
c) The buyer is a mere continuation of
the seller
Some courts, including the one in Ohio, have arrested a buyer
responsible for a seller's liabilities when the buyer is
a mere continuation of the seller. The factors that must be present
for the application of this doctrine are similar to those showing that a
De-factor consolidation or merger, with the exception of the issue
of equity for assets. The factors are identified below:
I. the presence of significant
Common features that buyers and sellers have in common, e.g.
Employees, a common name or the same management;
ii. the seller is dissolved or
liquidated soon after the sale;
iii. insufficient consideration is
be paid to the seller; and
iv. Ownership identity between
the seller and buyer. 65
Courts in other states do not have everyone present
these factors, with the exception of the continuation of business operations,
for applying this teaching, but that is not the case in
Ohio. 66 For example the California
The Supreme Court ruled that succession liability for
Buyer who continues to manufacture an earlier line of products
Manufactured by the Seller (referred to as the "Product Line")
Teaching "). 67
Although a buyer of an Ohio business is not liable
just because it continues to make and sell products
which are manufactured by the seller, the products can be sold in the states
like California, who have adopted the product line doctrine and
which can expose a buyer to liability under local laws
Status. In addition, a plaintiff was filed by one of a. injured product sold
The seller can be held liable to a buyer of the company who
Manufactured this product because it was not warned of an error
in this. The courts in Ohio have generally denied such claims, but when,
the facts were such that the buyer became aware of a defect
Product line can injure a person by the product
liability of the buyer for failure to warn
defective. 68
Environmental liability
Another potential succession liability for a buyer of the assets
a company refers to an environmental pollution caused by the
Seller, especially under CERCLA. (69) Though some
Courts have used federal customary law to determine whether a
Buyer is subject to succession liability under CERCLA, (70)
at the federal district courts under the supervision of
Sixth District Court of Appeal (including Ohio), applicable
State law will determine this question. (71) For example:
such courts have ruled that a general liability
and presumably also an assumption of the environment
Liabilities. (72) On the other hand, if a
Contract expressly takes over the environment
The courts have the limitations thereof in liabilities
such contracts. (73) Courts also have the
de facto merger doctrine to impose succession liability under
CERCLA. (74)
Employment Law
In Ohio, an asset purchaser may be held liable for: a
Violations by the seller of labor laws or to remedy
such a breach if the buyer is the successor in title of
Shops of the seller. The sixth district appeals court has
recognized succession liability in the employment context and stated
"The appropriateness of the successor liability depends on whether
the imposition of such liability would be fair. "75
The federal courts in the sixth district compensate for the following:
Determine successor liability: “1) the interests of
the defendant employer, 2) the interests of the complaining employee and
3) the goals of federal policy taking into account the particular facts of the
Case and the respective legal obligation involved. "76
The courts have identified the following factors to consider:
when dealing with the question of succession liability in the context of
Work entitlements: (1) whether the new employer has the
Encumbrance or claim prior to acquiring the company; (2) the
Ability of predecessor to provide relief; (3) whether the new
Employer uses the same facility; (4) whether it is
substantial business continuity; (5) whether the new
Employers employ the same or essentially the same workforce; (6) whether
the new employer uses the same or essentially the same regulator
Staff; (7) whether the same jobs are essentially among the
equal working conditions; (8) whether the new employer is using the same
Machines, equipment and production processes; and (9) whether the
new employer produces or offers essentially the same product or
Services. 77
Though the sixth district appeals court is not direct
determined whether the successor liability applies to Fair Labor
Standard Act ("FLSA") claims the federal doctrine of
It was determined that the above-mentioned successor liability applies to FLSA
Claims. 78 For claims from the
Ohio Minimum Wage Standards Act79
("OMWSA"), the federal standard for succession liability
was inapplicable and the Ohio Successor Liability Act applied. So, a
Successor company can for violations according to the
OMWSA if: "(1) the buyer expressly or tacitly agrees,
assume such liability; (2) the transaction corresponds to a factual one
Consolidation or merger; (3) The buying company is only a
Continuation of the seller company; or (4) is the transaction
fraudulently received for the purpose of escape
Liability. "80
Federal law regulates succession liability in connection with unfair
Labor Practices under the National Labor Relations Act. 81
A buyer of a company's assets should be the
Applicability of the federal employee adjustment and retraining
Notification Act ("WARN") 82 relating to the transaction. Ohio does
do not have a "mini-WARN" law. However, with a note
Provisions of the Ohio Unemployment Compensation Act must employ employer
inform the ODJFS of the dismissal or separation of 50 or more employees
due to lack of work within a period of seven days. 83
The notice of termination must be received by ODJFS at least three working days
before the first day of separation or discharge. The foregoing
The ODJFS Notice Provision does not address penalties for failing to
give the hint.
Non-compete obligations between a seller and his employees can
an asset that a buyer wants to acquire. In Ohio that is
The language of the agreement with the seller's employees is wants
controlling. The Ohio Supreme Court ruled that because
Non-compete obligations between employees and their employer are not
indicate that they could or will be transferred to a successor,
said parties intended to enter into the agreements only between
themselves – the employees and the respective employer 84
Correspondingly, if "successor and abandoner" is the language
Without the non-compete clause, the seller is not in a position
assign the contract to the buyer.
Conclusion
A buyer of the assets of an Ohio company is exposed
on certain obligations of the seller. A lawyer who a. represents
The buyer of such a company should inform their customers about the
Means of quantifying and minimizing these risks. this article
should be helpful in allowing attorneys to do this
Responsibility.
Footnotes
1st Lord
Malone was assisted in the preparation of this article by the
The following members of Buckingham, Doolittle & Burroughs, LLC:
Richard Fry, Susan Rogers, Patrick Keating, Dale Nowak and Marcus
Robertson.
2. One more
general discussion on the matter appears in a memorandum deal
with successor liability for asset acquisition transactions from
January 12, 2019 by the Judicial Interpretations Working
Group of the ABA M&A Committee of the Commercial Law Section
which can be found in the M&A lawyer library
from the M&A Jurisprudence Subcommittee.
3. RC
5739.02.
4. RC
5739.03.
5. RC
5739.026.
6. RC
5739.14.
7th
I would.
8. Ohio
Usage code 5703-1-05.
9. Ohio
Usage code 5703-1-07.
10.
RC 5739.01 (E), 5739.01 (L), 5739.02 (B) (42) (g) and
5739.02 (B) (8).
11.
RC 5739.02 (B) (8).
12th
RC 5751.02 and 5751.033.
13th
RC 5751.03.
14th
RC 5751.014.
fifteen.
RC 5751.10.
16.
RC 5747.06 and 5747.07.
17th
RC 5747.07 (H).
18th
I would.
19th
I would.
20th
104, Inc. v Liquor Control Commission, 13 Ohio Misc. 75
233 N.E.2d 622 (C.P. 1967); Ohio Dept. of Taxation against Toledo
Sports Enterprises, Inc., 62 Ohio Misc.2d 172, 594 N.E.2d 180
(C.P. 1991).
21.
Ohio Dept. of Taxation v. B / G 98 Co., LLC, 141 Ohio App.3d
678, 753 N.E.2d 214 (1st Dist. 2001).
22nd
RC 1309.617.
23
See B / G 98 Co., LLC, see footnote 21.
24.
State v Standard Oil Co., 39 Ohio St 2D 41, 313 N.E 2D
838 (1974).
25th
RC 1336.04 (A) (1).
26th
RC 1336.04 (A) (2); Lesick v MedGroup Management, Inc.,
1. Dist. Hamilton No. C-990097, 1999 WL 979136 (October 29
1999).
27
See 11 U.S.C. Section 548.
28.
See RC 1336.07.
29
RC 1136.08 (A).
30th
Baker & Sons Equip. Co. v GSO Equip. Leasing, Inc.,
87 Ohio App.3d 644, 622 N.E.2d 1113 (10th Dist. 1993).
31.
RC 1336.08 (C) (1).
32. 11
USC § 548 (c).
33.
RC 2735.04 (D) (1).
34.
See 11 U.S.C. Section 363.
35.
RC 319.54 (G) (3).
36.
RC 319.202.
37.
See ORC § 319.54 (G) (3) (h) and (m); Ohio op. Atty.
Gen. No. 81-016, 1981 WL 156166 (March 26, 1981).
38.
Ohio H. B. 449.
39.
RC 4123.32 (B); Ohio Adm. Code 4123-17-02 (B).
40.
Ohio administrative code 4123-17-02.
41.
Ohio Adm. Code 4123-17-02 (B) (1).
42.
Ohio Adm. Code 4123-17-02 (B) (2).
43.
Ohio Adm. Code 4123-17-02 (C) (1).
44.
Ohio Adm. Code 4123-17-02 (B) (6).
45.
Ohio Adm. Code 4123-17-02 (B) (7).
46.
Ohio Adm. Code 4123-17-02 (B) (8).
47.
Ohio Adm. Code 4123-17-02 (C).
48.
I would.; Ohio Bur. the worker comp. v. Widenmeyer
Elektr. Co., 72 Ohio App.3d 100, 593 N.E.2d 468 (9th Dist.
1992).
49.
Condition ex rel. RFFG, LLC v Ohio Bur. the employee
Comp., 141 Ohio St 3d 331, 2014-Ohio-5199, 23 N.E 3d 1172
(2014).
50.
Condition ex rel. K&D Group, Inc. v Bührer, 135 Ohio
St 3d 257, 2013-Ohio-734, 985 N.E.2d 1270 (2013).
51.
Ohio Adm. Code 4123-17-02 (B) (3).
52.
RC 4141.24 (F); Ohio Adm. Code 4141-17-03.
53.
Ohio Adm. Code 4141-17-03 (A).
54.
RC 4141.24 (F); Ohio Adm. Code 4141-17-02.
55.
RC 4141.24 (G) (1); Ohio Adm. Code 4141-17-05.
56.
RC 4141.24 (G) (2).
57.
Flaugher v. Cone Automatic Machine Co., 30 Ohio St. 3d 60,
507 N. E. 2d 331 (1987).
58.
Cintas Corp. v. Great Lakes Best One Tire & Service,
LLC, 11th Dist. Trumbull No. 2017-T-0080, 2018 WL3117477
(June 25, 2018).
59th American Bar Association, Committee on
Negotiated acquisitions, sample purchase agreement with
Commentary, Section 2.4 (b), pp. 48-49 (2001).
60
Pottschmidt v Thomas J. Klosterman, M.D., Inc., 169 Ohio.
App.3d 824, 2006-Ohio-6964, 865 N.E.2d 111 (9th Dist.
2011).
61.
Welco Industries, Inc. v Applied Cos., 67 Ohio St 3d 344,
617 N.E.2d 1129 (1993).
62.
Pottschmidt, supra note 60.
63.
Welco Industries, Inc., supra
61.
64.
See Cytec Industries, Inc. v B. F. Goodrich Co.,
196 F.Supp.2d 644 (S.D. Ohio 2002).
65.
Flaugher, supra note 57; Welcome industry,
Inc., see footnote 61; Pottschmidt,
above note 60.
66.
Flaugher, supra note 57; Welco Industries, Inc.,
see above, note 61.
67.
Ray v. Alad Corp., 560 P.2d 3, 136 Cal. Rptr. 574 (cal.
1977).
68.
Knitz v. Minster Machine Co., 69 Ohio St. 2D 460, 432
N. E. 2d 814 (1982); Zimmermann v. Shape Form, Inc., Dec.
Dist. Madison No. CA89-07-010, 1990 WL 2336 (January 16, 1990);
Flaugher, supra note 57.
69.
Comprehensive response to the environment, compensation and liability
1980 Act, as amended, 42 U.S.C. § 9602 ff.
(1988).
70.
See e.g. B. North Shore Gas Co. v Salomon
Inc., 152 F.3d 642 (7th Cir. 1998) (overruled on separate
Founding of Envision Healthcare, Inc. v. PreferredOne Ins.
Co., 604 F.3d 983 (7th Cir. App. 2010).).
71.
See Anspec Co., Inc. v Johnson Controls, Inc.,
922 F.2d 1240 (6th Cir. 1991); City Management Corp. against USA
Chemical Company, Inc., 43 F.3d 244 (6th Cir.
1994).
72.
See Olin Corp. against Yeargin Inc., 146 F.3d
398, 407 (6th Cir. 1998); White console. Industries, Inc. v.
Westinghouse Elektr. Corp., 179 F.3d 403 (6th Cir. 1999);
Hobart Corp. v Dayton Power & Light Co., 407
F.Supp.3d 732 (S.D. Ohio 2019).
73.
See e.g. B. City of Management Corp.,
see above, note 71.
74.
See e.g. B. Cytec Industries, Inc., supra
Note 64.
75.
Cobb v Contract Transp., Inc., 452 F.3d 543, 554 (6.
Circ. 2006).
76.
I would. (citing EEOC v MacMillan Bloedel Containers,
Inc., 503 F.2d 1086, 1091 (6th Cir. 1974).
77.
MacMillan Bloedel Containers, Inc., see footnote 76, at
1094.
78.
Clark v Shop24 Global, LLC, 77 F.Supp.3d 660 (S.D. Ohio
2015).
79.
RC Chapter 4111
80.
Clark, see footnote 78, p. 694 (quoted by Welco
Indus., Inc. v Applied Cos., 67 Ohio St. 3d 344, 347, 617
N. E. 2d 1129, 1132 (1993).
81.
See e.g. B. Golden State Bottling Co., Inc., v.
N. L. R. B., 414 U.S. p. 168 (1973).
82. 29
US Code Chapter 23.
83.
RC 4141.28 (C).
84.
Acordia of Ohio, L.L.C. v. Fishel, 133 Ohio St. 3d 356,
2012-Ohio-4648, 978 N.E.2d 823 (2012).
The content of this article is intended to be general
Instructions on the subject. Expert advice should be sought
about your particular circumstances.