

Zirtual Fired 400 Employees Right Before It Was Acquired. Now They’re Suing - grej
http://www.slate.com/blogs/business_insider/2015/08/14/zirtual_fired_400_employees_right_before_being_acquired_now_they_re_suing.html

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harryh
I feel like I remember reading that startups.co acquired Zirtual's assets and
not Zirtual the company. Possibly they did this so they wouldn't be liable for
anything like this?

As is, whatever is left of Zirtual presumably doesn't have any assets worth
suing over.

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rayiner
Yes, in general an asset purchaser is not liable for judgments against the
seller. But there is the potential for a buyer to have "successor liability"
under certain circumstances. Usually, it's when the sale is really a de facto
merger, with continuity in the identities of shareholders. If this was a cash
sale of assets, that would not apply here. In some states there are ways to
get successor liability when the buyer continues the business of the seller,
not in Delaware.

Of course the assets were sold for cash, so that's in the husk of the company.
If that money exists, it'll be hard for shareholders and insiders to get it
out of the remnant company without running into trouble in the inevitable
bankruptcy. But even if the employees win, they're judgment creditors and
behind a few people in the line for that money.

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bradleyjg
I thought back pay had a very high priority in bankruptcy. Are WARN act
payments considered ordinary judgments rather than back pay?

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rayiner
Good point. I think unpaid wage judgments are given the same priority as
unpaid wages. Either way they're behind secured creditors. If the company had
bank loans secured by collateral, the banks may have dibs on the proceeds.

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harryh
Venture debt would be unsecured though right? Probably all (or nearly all) of
their debt falls into that category.

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rayiner
Yeah if they have mostly venture debt it's probably not secured by collateral.

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sixQuarks
Wow. What a mess. I feel bad for the founder, even though she handled the
situation badly.

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subliminalzen
I feel bad for the hundreds of employees she essentially stole from and left
in the lurch.

