Yesterday, John Jenkins wrote in DealLawyers.com about successor liability in asset purchase transactions. Many practitioners may be unfamiliar with potential successor liability under California's Unemployment Insurance Code.
Pursuant to Section 1731 of the California Unemployment Insurance Code, any person that acquires the organization, trade or business, or substantially all the assets of an employer is required to withhold in trust money or other property sufficient to cover the amount of any contributions, interest and penalties due or unpaid from seller until the seller produces a Certificate of Release of Buyer (Form DE 2220). If the employer does not produce a Certificate of Release, the buyer must pay the amount or the value of the property so withheld to the Department at the time of the purchase. For more information, see Requirements for Obtaining Certificate of Release of Buyer (DE 2220) When a Business Is Sold (DE 3409A).