Ohio Enterprise Shopping for: Traps For The Careless – Corporate & Business Regulation

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


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


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


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


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.


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



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


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


4. RC


5. RC


6. RC



I would.

8. Ohio

Usage code 5703-1-05.

9. Ohio

Usage code 5703-1-07.


RC 5739.01 (E), 5739.01 (L), 5739.02 (B) (42) (g) and

5739.02 (B) (8).


RC 5739.02 (B) (8).


RC 5751.02 and 5751.033.


RC 5751.03.


RC 5751.014.


RC 5751.10.


RC 5747.06 and 5747.07.


RC 5747.07 (H).


I would.


I would.


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).


Ohio Dept. of Taxation v. B / G 98 Co., LLC, 141 Ohio App.3d

678, 753 N.E.2d 214 (1st Dist. 2001).


RC 1309.617.


See B / G 98 Co., LLC, see footnote 21.


State v Standard Oil Co., 39 Ohio St 2D 41, 313 N.E 2D

838 (1974).


RC 1336.04 (A) (1).


RC 1336.04 (A) (2); Lesick v MedGroup Management, Inc.,

1. Dist. Hamilton No. C-990097, 1999 WL 979136 (October 29



See 11 U.S.C. Section 548.


See RC 1336.07.


RC 1136.08 (A).


Baker & Sons Equip. Co. v GSO Equip. Leasing, Inc.,

87 Ohio App.3d 644, 622 N.E.2d 1113 (10th Dist. 1993).


RC 1336.08 (C) (1).

32. 11

USC § 548 (c).


RC 2735.04 (D) (1).


See 11 U.S.C. Section 363.


RC 319.54 (G) (3).


RC 319.202.


See ORC § 319.54 (G) (3) (h) and (m); Ohio op. Atty.

Gen. No. 81-016, 1981 WL 156166 (March 26, 1981).


Ohio H. B. 449.


RC 4123.32 (B); Ohio Adm. Code 4123-17-02 (B).


Ohio administrative code 4123-17-02.


Ohio Adm. Code 4123-17-02 (B) (1).


Ohio Adm. Code 4123-17-02 (B) (2).


Ohio Adm. Code 4123-17-02 (C) (1).


Ohio Adm. Code 4123-17-02 (B) (6).


Ohio Adm. Code 4123-17-02 (B) (7).


Ohio Adm. Code 4123-17-02 (B) (8).


Ohio Adm. Code 4123-17-02 (C).


I would.; Ohio Bur. the worker comp. v. Widenmeyer

Elektr. Co., 72 Ohio App.3d 100, 593 N.E.2d 468 (9th Dist.



Condition ex rel. RFFG, LLC v Ohio Bur. the employee

Comp., 141 Ohio St 3d 331, 2014-Ohio-5199, 23 N.E 3d 1172



Condition ex rel. K&D Group, Inc. v Bührer, 135 Ohio

St 3d 257, 2013-Ohio-734, 985 N.E.2d 1270 (2013).


Ohio Adm. Code 4123-17-02 (B) (3).


RC 4141.24 (F); Ohio Adm. Code 4141-17-03.


Ohio Adm. Code 4141-17-03 (A).


RC 4141.24 (F); Ohio Adm. Code 4141-17-02.


RC 4141.24 (G) (1); Ohio Adm. Code 4141-17-05.


RC 4141.24 (G) (2).


Flaugher v. Cone Automatic Machine Co., 30 Ohio St. 3d 60,

507 N. E. 2d 331 (1987).


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).


Pottschmidt v Thomas J. Klosterman, M.D., Inc., 169 Ohio.

App.3d 824, 2006-Ohio-6964, 865 N.E.2d 111 (9th Dist.



Welco Industries, Inc. v Applied Cos., 67 Ohio St 3d 344,

617 N.E.2d 1129 (1993).


Pottschmidt, supra note 60.


Welco Industries, Inc., supra



See Cytec Industries, Inc. v B. F. Goodrich Co.,

196 F.Supp.2d 644 (S.D. Ohio 2002).


Flaugher, supra note 57; Welcome industry,

Inc., see footnote 61; Pottschmidt,

above note 60.


Flaugher, supra note 57; Welco Industries, Inc.,

see above, note 61.


Ray v. Alad Corp., 560 P.2d 3, 136 Cal. Rptr. 574 (cal.



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.


Comprehensive response to the environment, compensation and liability

1980 Act, as amended, 42 U.S.C. § 9602 ff.



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).).


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.



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).


See e.g. B. City of Management Corp.,

see above, note 71.


See e.g. B. Cytec Industries, Inc., supra

Note 64.


Cobb v Contract Transp., Inc., 452 F.3d 543, 554 (6.

Circ. 2006).


I would. (citing EEOC v MacMillan Bloedel Containers,

Inc., 503 F.2d 1086, 1091 (6th Cir. 1974).


MacMillan Bloedel Containers, Inc., see footnote 76, at



Clark v Shop24 Global, LLC, 77 F.Supp.3d 660 (S.D. Ohio



RC Chapter 4111


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).


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.


RC 4141.28 (C).


Acordia of Ohio, L.L.C. v. Fishel, 133 Ohio St. 3d 356,

2012-Ohio-4648, 978 N.E.2d 823 (2012).

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