Transfer of Business and Liability for Debts: Commentary on Ordinance No. 10902 of 2024

The recent Ordinance No. 10902 of April 23, 2024, from the Court of Cassation addressed a highly relevant issue in commercial law: liability for debts incurred following the transfer of a business. This ruling clarifies the rights and obligations of the buyer and seller, providing useful guidance for those operating in the sector and for lawyers assisting the parties in such transactions.

The Principle of Liability in Business Transfer

The ordinance in question clearly establishes that, in the case of a business transfer, the buyer is solely responsible for debts arising from ongoing or periodic performances executed after the transfer. This occurs due to their legal succession in existing contracts, as provided by Article 2560 of the Civil Code. The seller, on the other hand, is only liable for debts remaining from contracts in which the third contracting party has already fulfilled their obligation prior to the transfer.

Business - Transfer - Ongoing and periodic performance contracts - Debts subsequent to the contractual succession legally related to the transfer of business - Buyer’s liability - Basis - Case concerning supply. In the event of a business transfer, the debts for the payment of ongoing or periodic performances executed after the transfer are solely the responsibility of the buyer, due to their legal succession in existing contracts for reciprocal performances not yet fully executed by either party, while, pursuant to Article 2560 of the Civil Code, the seller is only liable for debts remaining from contracts in which the third contracting party has already fulfilled their obligation prior to the transfer. (In application of the stated principle, the Supreme Court rejected the appeal against the ruling accepting the opposition to an injunction order condemning the seller of the business to pay for the electricity supplied after the transfer).

Practical Implications of the Ruling

This ruling has significant consequences for businesses and professionals in the sector, as it clarifies the lines of liability in the event of a business transfer. It is essential for both parties involved to understand the legal implications of such operations.

  • For the buyer: it is crucial to evaluate existing contracts and associated debts before proceeding with the purchase.
  • For the seller: it is vital to ensure that contracts have been fulfilled and that there are no residual debts for which they may be held liable.

Conclusions

In conclusion, Ordinance No. 10902 of 2024 provides important clarification regarding the buyer's liability in the case of a business transfer. The parties involved in a transfer must pay particular attention to existing contracts and the resulting obligations to avoid legal disputes in the future. It is advisable to seek the advice of an experienced lawyer to navigate the complexities of these commercial operations.

Bianucci Law Firm