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EtherPad source code is free, now what?
Posted Jan 3, 2010 18:44 UTC (Sun) by giraffedata (subscriber, #1954)
Isn't the company in question being bought, not bankrupt? That would mean that the buyer, ie google takes over contracts and responsibilities and thus can be sued.
The buyer doesn't normally do that.
A "company" isn't really something you can buy. Buying a company is an informal description of various kinds of transactions, but the most common one is that the buyer buys the assets of the company. E.g. Google buys the copyrights, patents, trademarks, real estate, machinery, customer lists, etc. You don't take over someone's liabilities just because you buy something (or lots of things) from him.
The seller is now a corporation whose only asset is cash. It dissolves itself and distributes that asset to its shareholders.
Another way is to buy all the stock of the corporation. If the buyer does that, the corporation still has all its liabilities, and by extension the buyer does. But these liabilities are why people don't like to buy businesses that way. And they're also a principle reason that the business was set up as a corporation in the first place.
Posted Jan 7, 2010 4:17 UTC (Thu) by jjs (guest, #10315)
Posted Jan 7, 2010 17:03 UTC (Thu) by giraffedata (subscriber, #1954)
Normally when a company buys another company they get the whole shebang - including the liabilities.
I'm saying there is no legal concept of buying a company. You buy individual pieces of property, and a "company" isn't one. There are lots of kinds of transactions that we informally call "buying the company," and the most common is where you buy all of the assets of the company and leave the liabilities alone. That seems to me to be the natural structure for the Google-Etherpad deal.
Otherwise it becomes a quick way to void contracts
One of the reasons corporations exist is to give people a way to void contracts. People who contract with corporations know this, of course (it's one reason corporations are required to have words such as "corporation" in their name) and usually require a natural person to guarantee performance of a contract with a corporation (I have personally given such guarantees many times). (Google-size corporations can negotiate on their own credit, but they are the minority).
Also, companies are bought on a routine basis by buying all the shares - it's one of the common ways of doing a buyout.
Yes, as the post you're responding to says. It also says this is an uncommon way to buy a company, because of the liability issue. (People aren't really worried about the outstanding contracts as in the Etherpad issue -- the liabilities no one knows about yet are the important ones).
You bid x per share,
That doesn't mean you're offering to purchase the shares. It's also the best way to state the purchase price of a publicly traded company's assets, because that's how much cash the shareholders get when their stock is ultimately cancelled.
I guess I should acknowledge now that there are special areas where the law does recognize the concept of buying the whole shebang -- they go under the terms "bulk sale" and "successor liability." But they're details that aren't worth discussing here. Also, directors of a corporation are responsible for operating it in a way that it can be expected to pay its debts, so in the case of a flat-out distribute-the-assets-and-screw-the-creditor transaction, the directors have to pay those creditors and a creditor can even get the money back from the shareholders. But that's nothing like making the guy who bought the company's assets pay those debts.
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