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Can you explain what you mean by “assume all their liabilities” in practical terms?

by abm53 4y ago

deleted 4y ago
[deleted]
anonu 4y ago
Practically: CS may owe money, CS may get sued, CS still needs to pay suppliers and people...
curiousllama 4y ago
They owe folks money. If you buy them, then you owe those folks that money. So you'll have to pay the purchase price, and then pay the company's debts.
- dndn1 4y ago
  How is this the case whenever apparently Credit Suisse investors are not made to pay Credit Suisse debts? E.g. Saudi National Bank, who announced no more cash to CS
  - hn_throwaway_99 4y ago
    That's the whole point of corporations - that the only thing available for debts is the assets and equity of the company, not the assets of individual shareholders, execs or directors (unless there are some very specific circumstances, which is called "piercing the corporate veil).
Arrath 4y ago
You want to buy Bob's Delicatessen, a business which makes a tidy profit with their storefront schlepping sandwiches to the local cube farm dwellers. Bob's Deli has a number of on-going costs, like the lease for their storefront, contracts with suppliers to deliver goods, maybe a business loan from a local bank that got them going in the first place. These are all liabilities that you, the new buyer, must take on. You can't just rule from on high and say these business deals were with the old Bob's Deli and go away with the purchase. An example of a purchaser (apparently/allegedly) trying to say that former liabilities no longer apply: Disney buying up Fox, or Lucasfilm, and saying they no longer have to pay royalties out to authors who wrote novelizations of films, or expanded universe properties[1] [1]https://www.theverge.com/2020/11/19/21578621/disney-alan-dean-foster-royalties-copyright-law https://www.theverge.com/2020/11/19/21578621/disney-alan-dea...
- lastofthemojito 4y ago
  Or, more recently, Elon Musk deciding that liabilities that Twitter took on before he purchased it no longer apply to Twitter under his ownership: https://arstechnica.com/tech-policy/2023/01/twitters-landlord-sues-for-millions-in-unpaid-rent-at-firms-us-headquarters/ https://arstechnica.com/tech-policy/2023/01/twitters-landlor... https://www.nytimes.com/2023/02/03/technology/twitter-elon-musk-adviser-lawsuit.html https://www.nytimes.com/2023/02/03/technology/twitter-elon-m...
- loeg 4y ago
  Those are liabilities of the business; not you personally, the controlling shareholder. If the business's liabilities exceed its assets, you take the business through bankruptcy; you are not personally liable (generally, with limited exceptions).
  - Arrath 4y ago
    Sure, I could have been clearer but in my example "you" meant the entity acquiring ownership of the business. Not the reader or a specific person.
    - loeg 4y ago
      I don’t think the acquiring entity takes on the liabilities of the business unless it’s a merger rather than a subsidiary.
bombcar 4y ago
A company exists, and it has a loan on a building that it uses. It does nothing else, the building is worth $100m and the loan amount is $95m. So the company is worth $5m (the difference) and you could buy it for about that much (ignore whatever the company might DO with the building). But now the real estate market crashed, the building could only be sold for $80m, but the loan is still $95m. Now the company is worth -$15m. So you could buy it for a dollar, but you still have a building worth less than the loan on it.
- ta1243 4y ago
  If real estate goes back up then you're quids-in, if it doesn't, worst case scenario you just walk away having lost $1. You personally may have $20m in assets, but those are separate from the company you just bought.

Can you explain what you mean by “assume all their liabilities” in practical terms?

by abm53 4y ago

Can you explain what you mean by “assume all their liabilities” in practical terms?

deleted 4y ago

[deleted]

anonu 4y ago

Practically: CS may owe money, CS may get sued, CS still needs to pay suppliers and people...

curiousllama 4y ago

They owe folks money. If you buy them, then you owe those folks that money. So you'll have to pay the purchase price, and then pay the company's debts.

dndn1 4y ago
How is this the case whenever apparently Credit Suisse investors are not made to pay Credit Suisse debts? E.g. Saudi National Bank, who announced no more cash to CS
- hn_throwaway_99 4y ago
  That's the whole point of corporations - that the only thing available for debts is the assets and equity of the company, not the assets of individual shareholders, execs or directors (unless there are some very specific circumstances, which is called "piercing the corporate veil).

Arrath 4y ago

You want to buy Bob's Delicatessen, a business which makes a tidy profit with their storefront schlepping sandwiches to the local cube farm dwellers. Bob's Deli has a number of on-going costs, like the lease for their storefront, contracts with suppliers to deliver goods, maybe a business loan from a local bank that got them going in the first place. These are all liabilities that you, the new buyer, must take on. You can't just rule from on high and say these business deals were with the old Bob's Deli and go away with the purchase. An example of a purchaser (apparently/allegedly) trying to say that former liabilities no longer apply: Disney buying up Fox, or Lucasfilm, and saying they no longer have to pay royalties out to authors who wrote novelizations of films, or expanded universe properties[1] [1]https://www.theverge.com/2020/11/19/21578621/disney-alan-dean-foster-royalties-copyright-law https://www.theverge.com/2020/11/19/21578621/disney-alan-dea...

lastofthemojito 4y ago
Or, more recently, Elon Musk deciding that liabilities that Twitter took on before he purchased it no longer apply to Twitter under his ownership: https://arstechnica.com/tech-policy/2023/01/twitters-landlord-sues-for-millions-in-unpaid-rent-at-firms-us-headquarters/ https://arstechnica.com/tech-policy/2023/01/twitters-landlor... https://www.nytimes.com/2023/02/03/technology/twitter-elon-musk-adviser-lawsuit.html https://www.nytimes.com/2023/02/03/technology/twitter-elon-m...
loeg 4y ago
Those are liabilities of the business; not you personally, the controlling shareholder. If the business's liabilities exceed its assets, you take the business through bankruptcy; you are not personally liable (generally, with limited exceptions).
- Arrath 4y ago
  Sure, I could have been clearer but in my example "you" meant the entity acquiring ownership of the business. Not the reader or a specific person.
  - loeg 4y ago
    I don’t think the acquiring entity takes on the liabilities of the business unless it’s a merger rather than a subsidiary.

bombcar 4y ago

A company exists, and it has a loan on a building that it uses. It does nothing else, the building is worth $100m and the loan amount is $95m. So the company is worth $5m (the difference) and you could buy it for about that much (ignore whatever the company might DO with the building). But now the real estate market crashed, the building could only be sold for $80m, but the loan is still $95m. Now the company is worth -$15m. So you could buy it for a dollar, but you still have a building worth less than the loan on it.

ta1243 4y ago
If real estate goes back up then you're quids-in, if it doesn't, worst case scenario you just walk away having lost $1. You personally may have $20m in assets, but those are separate from the company you just bought.