Q: Can litigation be used to drain a company of its capital and leave it vulnerable to a takeover by the plaintiff?

Hi everyone, I don't have any specific geographical location in mind, so if lawyers have examples of laws that they know of, regardless of region, it'd be interesting to hear them:

Is there anything in the law to prevent litigation used by one larger company (that can handle legal expenses) to bankrupt another (that can't) so that it can buy up all of its assets?

1 Lawyer Answer
Timothy Denison
Timothy Denison
  • Bankruptcy Lawyer
  • Louisville, KY

A: Generally not unless it involves the purchaser becoming so large as to violate the Sherman Anti-trust Act. The activity you describe is called corporate raiding but is usually legal when performed within the rules of a particular state.

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