Skip Navigation

6310 Hillside Court
Suite 160
Columbia, MD 21046

P. 410-290-0707

111 South Calvert Street

Suite 2700

Baltimore, MD 21202

P. 410-962-1199

Successor liability: Mere continuation revisited

In Martin v. TWP Enterprises Inc., the Maryland Court of Special Appeals re-applied the long-standing principle that “a corporation which acquires the assets of another corporation is not liable for the debts and liabilities of the predecessor corporation.” Baltimore Luggage Co. v. Holtzman, 80 Md. App. 282, 290 (1989) (also applied in Ramlall v. MobilePro Corp., 202 Md. App. 20, 34-35 (2011); Smith v. Navistar Intern. Transp. Corp., 737 F. Supp. 1446, 1448 (D. Md. 1988).

Exceptions to the general rule exist where:

  1. there is an expressed or implied assumption of liability

    (Maryland Code, Corporations and Associations § 3-115(c)(1); Isle of Thye Land Co. v. Whisman, 262 Md. 682, 706-07 (1971));

  2. the transaction amounts to a consolidation or merger

    (Maryland Code, Corporations and Associations § 3-114(f)(1); Ramlall v. MobilePro Corp., 202 Md. App. 20, 34-37 (2011));

  3. the purchasing corporation is a mere continuation of the selling corporation

    (Nissen Corporation v. Miller, 323 Md. 613 (1991); Academy of IRM v. LVI Environmental Services, Inc., 344 Md. 434 (1997)); or

  4. the transaction is entered into fraudulently to escape liability for debts

    (Maryland, Commercial Law, §§ 15-201 et seq.; Colandrea v. Colandrea, 42 Md. App. 421 (1979).


Baltimore Luggage, 80 Md. App. at 290 (references added)

The Court in Martin examined the third exception, “mere continuation”, in the context of a business transaction determined not to satisfy the exception at trial.  Compiling from limited Maryland case law on the issue, the Court enumerated five factors to consider as ‘indicia of continuation’:

(1) any change in ownership and management, (2) the continued existence of the selling corporation, (3) the adequacy of consideration, (4) the transfer of any “instrumental” employees from the predecessor to the successor, and (5) the purpose of the asset sale.

Martin at p. 28.  Applying those factors, the Court declined to overturn the trial court’s decision that the buyer was not a mere continuation, and therefore had no successor liability.

BTLG Attorneys At Law

Talk to a lawyer

Bold labels are required.

News from BTLG:

Voting Leave
Maryland employers have an obligation to provide paid leave for employees to vote under certain circumstances
Maryland’s #MeToo Bill – New Reporting Requirements
In the wake of the nation’s #MeToo movement, Maryland now joins the ranks of other states, such as Illinois and New York, that have adopted stricter sexual harassment policies.
Maryland Minimum Wage Increase 2018
Beginning on July 1, 2018, Maryland’s minimum wage will increase from $9.25 to $10.10 an hour.
General Data Protection Regulation
On May 25, 2018, the EU's General Data Protection Regulation went in to effect, regulating any business that collects or processes the personal data of EU residents
More BTLG News