Mergers and Takeovers

The general rule in the United States as to mergers and takeovers is that a company which acquires the outstanding stock of another corporation generally assumes the obligations and liabilities of the acquired firm. See 15 Fletcher Cyclopedia of the Law of Private Corporations § 7117 (1990); see also Model Bus. Corp. Act § 11.06(3) (1979) (“the surviving corporation has all liabilities of each corporation party to the merger”). In other words, the surviving firm in a merger or takeover of a safe harbor organization by this method would be bound by the latter’s safe harbor commitments.

Moreover, even if the merger or takeover were effectuated through the acquisition of assets, the liabilities of the acquired enterprise could nevertheless bind the acquiring firm in certain circumstances. 15 Fletcher, § 7122. Even where liabilities did not survive the merger, however, it is worth noting that they also would not survive a merger where the data were transferred from Switzerland pursuant to a contract - the only viable alternative to the safe harbor for data transfers to the United States. In addition, the safe harbor documents as revised now require any safe harbor organization to notify the Department of Commerce of any takeover and permit data to continue to be transferred to the successor organization only if the successor organization joins the safe harbor. See FAQ 6. Indeed, the United States has now revised the safe harbor framework to require U.S. organizations in this situation to delete information they have received under the safe harbor framework if their safe harbor commitments will not continue or other suitable safeguards are not put in place.