Who pays?

[Jamie]

Question: Who pays for the promises of the previous "regime"?

When a team gets new ownership, do they have any responsibility to pay the debts of the previous ownership?

Case#1: The Dayton Warbirds get booted out of the UIF. New owners take over, and run the team in the NIFL. People are owed money by the previous owner. But the new owners argue they are not responsible for the debts, contracts and promises made by the previous owner. Yet, they have the team name and its assets, such as they are (players, equipment, fans).

Case#2: The Warbirds owner folds his team, and a new franchise is started in Dayton with new owners. The Bulldogs. They emphasise that they are a new organization, with no connection to the previous regime, therefore are not responsible for any outstanding obligations left behind.

Case#3: Stuebenville Stampede get a new owner, and repudiate promises made to season ticket holders made by the previous GM and Coach. Yet the new owner took up all the assets, don't they have a responsibility to honor the liabilities?

This question is not about bashing. I recognize that in most cases, the new owners coming in are doing their best to revive a struggling team or market. But what is their obligation?

I don't pretend to be a business major. So, one of you tell me, what is customary when a business changes hands. Can the new owner say, "So sorry", go find the old owner to collect.

Please don't use this thread to bash the owners in question above, I just use them as an example. I'm more interested in the larger question of transfer of ownership and responsibility.

[exit322]

I'd say in the Bulldogs case, they're a brand new team. No obligation to pay (though I'd consider it good business to honor any ticket arrangements for 2006 from the Warbirds).

Steubenville's case...same franchise...probably need to do something to at least appease the people that feel they got screwed by previous management.

[Pounder]

In Portland, the AAA Beavers and USL Timbers are currently "held" by the Pacific Coast League. They're trying to sell the teams to Sacramento interests, but the main creditor of the previous ownership (who owned Portland Family Entertainment, the former name of the entity) keeps getting in the way of a deal, expecting return on their investment. Though ownership HAS actually transferred (kind of by takeover, mind you), the debts are the property of the ownership. In some cases, a deal is made to assign former owners the debt load, but that is EXTREMELY rare from my observation.

Legally, most often, the debt remains with the "entity," not the owners.

Did the entity stay intact in Case # 1? Probably. They were probably up to their teeth in it, which is how Case # 2 came about. In case # 2, the owners are correct.

Do "promises" made in # 3 have a written contract backing them? They may not. It's up to the STHs to punish the team for that, however, and that is what usually happens.

[AIFLFan]

Question: Who pays for the promises of the previous "regime"?

When a team gets new ownership, do they have any responsibility to pay the debts of the previous ownership?

Case#1: The Dayton Warbirds get booted out of the UIF. New owners take over, and run the team in the NIFL. People are owed money by the previous owner. But the new owners argue they are not responsible for the debts, contracts and promises made by the previous owner. Yet, they have the team name and its assets, such as they are (players, equipment, fans).

Case#2: The Warbirds owner folds his team, and a new franchise is started in Dayton with new owners. The Bulldogs. They emphasise that they are a new organization, with no connection to the previous regime, therefore are not responsible for any outstanding obligations left behind.

Case#3: Stuebenville Stampede get a new owner, and repudiate promises made to season ticket holders made by the previous GM and Coach. Yet the new owner took up all the assets, don't they have a responsibility to honor the liabilities?

This question is not about bashing. I recognize that in most cases, the new owners coming in are doing their best to revive a struggling team or market. But what is their obligation?

I don't pretend to be a business major. So, one of you tell me, what is customary when a business changes hands. Can the new owner say, "So sorry", go find the old owner to collect.

Please don't use this thread to bash the owners in question above, I just use them as an example. I'm more interested in the larger question of transfer of ownership and responsibility.

This is actually an easy answer. If the new owner, buys out the company and keeps the corporation formed as is, then the new owner becomes responsbile for the team.

If the new owner, creates a new company for the sole purpose of purchasing the team, then the new owner is not liable to pay the old debts. Often times the new owner, may pay the old debt, just for the purpose of PR, even though they are not liable.

[nksports]

It often depends on how the deal is structured. The sale contract often determines that. Sometimes, purchase price goes directly to the creditors. Sometimes the new owner assumes the debts of the franchise.
If the sale was done by a federal bankruptcy court, the old owner only gets something after all the bills are paid, including lawyers and court costs. Often the creditors have to settle for pennies on the dollar in those cases, leaving the owner with nothing (usually the reason the franchise goes into bankruptcy in the first place).
When a team folds and a new one takes its place, the answer is trickier. If the move is done simply to get out of old debts, the creditor can often sue, claiming fraud (especially if the new owners turn out to be a front for the old owners).