QUESTION
Does the stock sale of an s-corp cause a breach of the non-assignment clause in contracts the selling company has with clients
Asked on Nov 27th, 2019 on General Practice - New York
More details to this question:
A company structured as an S-Corp is selling one of its DBAs to the employees in a stock-sale. In essence, the owner is stepping down and the President is taking over ownership of the company. In service contracts with our clients we have a non-assignment clause. Does this transaction constitute an assignment?
1 ANSWER
In a vacuum, a stock sale changing ownership of a corporation is not an assignment of the corporation’s assets or liabilities the same entity is still obligated and getting the benefits. However many contracts define “assignment” to include a change in the corporation’s control. You need to look at the underlying contract to see how assignment is defined.
Answered on Nov 28th, 2019 at 9:55 AM