Successor Corporation Liability Arizona
In Arizona, the general rule for successor liability is when a corporation sells or transfers its principal assets to a successor corporation, the successor corporation is not liable for the former corporation's debts and liabilities. A.R. Teeters & Assocs., Inc. v. Eastman Kodak Co., 172 Ariz. 324, 329, 836 P.2d 1034, 1039 (App. 1992).
Legal responsibility exists only if:
(1) the successor corporation expressly or impliedly agreed to assume the liabilities of the predecessor corporation;
(2) the alleged transactions between the two companies amounted to a consolidation or merger of the corporations;
(3) the successor corporation is a mere continuation or reincarnation of the predecessor corporation;
(4) clear and convincing evidence shows that the transfer of assets from the predecessor corporation to the successor corporation was for the fraudulent purpose of escaping debt liability. Id.
The mere continuation grounds for finding successor liability "reinforces the policy of protecting rights of a creditor by allowing a creditor to recover from the successor corporation whenever the successor is substantially the same as the predecessor." Gladstone v. Stuart Cinemas, Inc., 178 Vt. 104, 878 A.2d 214, 222, P19 (Vt. 2005) (citing William M. Fletcher, 15 Fletcher Cyclopedia Corp. 7124.10, at 298-301 (1999)).
The premise of this approach "is that, if a corporation goes through a mere change in form without a significant change in substance, it should not be allowed to escape liability." Id.
To find a corporation is a mere continuation of a predecessor corporation there must be "a substantial similarity in the ownership and control of the two corporations," and "insufficient consideration running from the new company to the old" for the assets passing to the new company. Teeters, 172 Ariz. at 330, 836 P.2d at 1040.