Question Details: My husband is owed over $25,000 by a company. We have recently heard that the owner of this company is trying to sell the business. Would the debts be wiped clean? Would the new owner have to pay the previous owner's debt? Or would the debt stay with the previous owner personally?
Filed under Consumer Law | 1964 View(s)
Liability for the debt depends on how the company is sold.
The debt, assuming it is well founded and less than 6 years old, will not be wiped clean. However, the question of who is liable to repay it will depend on the nature of the sale of the company concerned.
If it is a share sale (that means the owner is simply selling the shares in the company), then the company will continue to be liable for the debt because the company will continue to exist (just under different ownership).
If it is an asset sale (that means that the assets the company owns are being sold to another company or person), the liability will stay with the previous company. In the event of an asset sale, you will still be able to seek repayment as long the company continues to exist. However, given that the company will have sold all of its assets, the likelihood of you being able to recover your debt is much lower.
For more information on debt collection and recovery, please visit this website: www.communitylaw.org.nz.
Answered 10 Oct 2013. The IMPORTANT NOTICE below is part of this answer.
The answer provided above is intended for general informational purposes only and cannot be
considered a substitute for face-to-face legal advice. It should not be relied upon as the sole
basis for taking action in relation to a legal issue. Laws change frequently, and small
variations in the facts, or a fact not provided in the question, can often change a legal
outcome or a lawyer’s conclusion. No liability whatsoever is accepted by the authors or
publishers of the answer, for loss, damage or inconvenience arising in any way from the use of
this site. While each answer has been published by a lawyer with a practising certificate, that
person may not necessarily have experience in the particular area of law involved.