DEBT COLLECTION SERIES: Successor Liability

Are you having trouble collecting a business debt? To make matters worse, is the business you are trying to collect against dissolving right before your eyes? You might have been told when the company is gone and out of business, that so are your chances of collecting on your debt, but that may not be correct. In Florida, creditors, including judgment creditors, have a variety of collection tools at their disposal to help fight the elusive type of duck-and-cover tactics employed by some business debtors. This article will introduce to you some examples of Florida’s solutions to the voluntarily dissolution of debtor-businesses that essentially continue to operate under a different name, in the same physical location, with same or similar executives, and/or using the assets of its predecessor.

Under Florida law, courts will impute the liabilities of a business onto its successor where it is evident that a de facto merger has occurred or where the successor business is a mere continuation of its predecessor. “A de facto merger occurs where one corporation is absorbed by another, but without compliance with the statutory requirements for a merger.” Amjad Munim, M.D., P.A. v. Azar, 648 So. 2d 145, 153 (Fla. 4th DCA 1994); see also Lab. Corp. of America v. Prof’l Recovery Network, 813 So.2d 266, 269 (Fla. 5th DCA 2002). Certain indicia of a de facto merger include: the same management, personnel, or assets; the successor operating out of the same physical location; a continuity of stockholders; and the dissolution of the predecessor business.

The concept of continuation of business arises where the successor corporation is merely a continuation or reincarnation of the predecessor corporation under a different name.” Id. Similar to de facto mergers, the court’s primary is whether the change from predecessor to successor business is one of form, but not substance. In these instances, creditors may file an action against the successor business for the debt owed by its predecessor. The procedure and strategy associated with this sort of legal action will be the subject of a future article in this Debt Collection Series.

Should you find yourself chasing a debtor-business attempting to escape its liabilities by continuing its operation under a new name, remember that the stresses associated with debt collection can be eased by retaining experienced collection attorneys that understand the variety of remedies and strategies available under Florida law. For questions regarding debt(s) owed to you, the collection attorneys at Pollack, Pollack & Kogan LLC may assist you in obtaining a meaningful resolution. This article is for informational purposes only and not intended as legal advice.

Author: Anthony Lopez, Esq. – Florida licensed attorney at Pollack, Pollack & Kogan, LLC, a law firm focused on commercial debt collection, business litigation, and probate litigation.