Liability when Acquiring a Business in Spite of Name Change

As a rule, persons acquiring an existing business assume responsibility for existing claims and debts. But is this also true when the owner’s but not the business’ name is changed when transferring the business? OLG Brandenburg gave a clear opinion on June 24, 2020 (re 7 U 44/19).

What happens to liability after company sold and name changed?

Background

The defendant's husband had signed a tax consultancy contract with the plaintiff for the business "Hotel Stutenhaus". Originally, the hotel owner had his personal name tied to the business. Later the ownership of the hotel changed from the defendant's husband to the defendant herself. When changing ownership, the defendant changed the owner’s name, i.e. the first name changed.

The plaintiff sued for payment against the defendant on the basis of the tax consultancy contract.

No Liability when Owner’s Name Changes

According to OLG Brandenburg, the defendant is not liable for the payment obligations under the tax consultancy contract concluded by her husband with the plaintiff. This is because the defendant did not continue a company within the meaning of §25 para. 1 cl. 1 HGB.

The public does not recognize designations, especially in the case of hotels / restaurants (here "Hotel Stutenhaus"), as legal entities, because reference is not made to the owner of the business, but only to the business itself.

In addition, the continuity of the business is also in question in that the defendant exchanged the first name and added her own name to the business name. For a continuation of the company, it is a prerequisite that the formative part of the old name is retained in the new company. This would ensure that the new company could still be identified with the old company in legal transactions. However, a business name does not have such an overwhelming weight that the name of the proprietor is completely obscured from a third person’s understanding.

Remark

The judgement clarifies that due to the clear regulation of §25 para. 1 cl. 1 HGB a distinction must be made between company name and other business name and the continuing liability only applies to businesses which are commercial.

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