Successor Law and Legal Definition

A successor is a person or entity who takes over and continues the role or position of another. For example, in trust law, many grantors and their respective spouses act as the initial trustees of a revocable living trust. In this situation, they remain in control until they are incapacitated or die. Then pre-selected successor trustees are appointed in under the terms of the declaration of trust. Usually a spouse, family member or trusted friend are selected as successor trustees. A second successor is a person nominated to take over responsibilities of the first successor in the case of death or disability of the first successor.

A corporate successor is a corporation that takes on the burdens of a previous corporation through merger, acquisition, or other means of succession. Successor liability is an important issue in areas such as product liability, environmental concerns, and labor and employment law.

Successor liability is a state law doctrine that allows a creditor to seek recovery from the purchaser of assets even when the purchaser did not expressly assume such liabilities as part of the purchase. This situation arises, for example, in nonbankruptcy sales such as bulk transfers, receivership and foreclosure/ UCC Article 9 sales. In in context of a claim that a defective product has caused personal injury, successor liability is more aptly treated as a matter of tort law than contract law. For example, environmental cleanup litigation often involves issues of successor liability.

In corporate successor liability law, the traditional corporate law rule does not impose the liabilities of the selling predecessor upon the buying successor company unless

  1. the successor expressly or impliedly assumes obligations of the predecessor,
  2. the transaction is a de facto merger,
  3. the successor is a mere continuation of the predecessor, or
  4. the transaction is a ruse to defraud the creditors and avoid liabilities of the predecessor.