Successors and Assigns: Ensure Contracts Survive M&A

TL;DR: The successors and assigns clause is the contractual equivalent of a will - it determines whether your deal survives a merger, acquisition, death, or restructuring. Most lawyers treat it as pure boilerplate and copy it reflexively from the last agreement they drafted. That is a mistake. A poorly drafted successors and assigns provision can inadvertently allow a competitor to step into your counterparty's shoes after an acquisition, or conversely, render your contract unenforceable against a successor entity following a statutory merger. The clause interacts in subtle and critical ways with assignment restrictions, change-of-control provisions, and anti-assignment statutes. In an era of constant M&A activity, this "standard" clause deserves far more attention than it typically receives.

What Is a Successors and Assigns Clause?

A successors and assigns clause provides that the rights and obligations under the agreement shall be binding upon, and inure to the benefit of, the parties and their respective successors and permitted assigns. In practical terms, it ensures that if a party to the contract undergoes a change in legal identity - whether through merger, consolidation, reorganization, death (for individuals), or permitted assignment - the contract continues in force and is enforceable by and against the entity or person that steps into the original party's position.

"Successors" generally refers to entities that acquire the rights and obligations of a party by operation of law - most commonly through merger or consolidation (where the surviving entity succeeds to the merged entity's contracts by statute) or through inheritance and estate administration. "Assigns" refers to third parties to whom a party has transferred its contractual rights or delegated its duties through a voluntary act of assignment.

The clause serves a dual function: it extends the contract's reach to future parties (binding successors), and it limits that reach to only those transfers that are authorized ("permitted" assigns). Without it, questions arise about whether a contract automatically transfers in a merger, whether an assignee can enforce the agreement, and whether the original party remains liable after assignment. The clause resolves these questions - or at least, it should, if properly drafted.

Why It Matters

M&A Continuity: When a party is acquired through a statutory merger, the surviving entity generally succeeds to all contracts by operation of law. The successors and assigns clause confirms this result contractually and eliminates arguments that the contract was "personal" and therefore did not transfer.
Assignment Clause Interaction: The successors and assigns clause works hand-in-glove with the assignment restriction clause. If the contract prohibits assignment without consent but binds "permitted assigns," only assignments made in compliance with the assignment clause carry the contract forward.
Change of Control Gaps: A contract that binds "successors" may survive a merger (which creates a successor by operation of law) but provide no protection against a change in the party's ownership via stock purchase (which does not change the legal entity). This gap is why change-of-control provisions are often needed alongside the successors clause.
Personal Services Carve-Outs: In contracts where the identity of the performing party is material - consulting agreements, creative services, key-person arrangements - the clause may need to exclude assignment entirely or condition it on consent, regardless of the successors language.
Third-Party Beneficiary Risk: Overly broad successors and assigns language can inadvertently create third-party beneficiary rights. If the contract states it benefits "successors, assigns, and their affiliates," an affiliate may argue it has independent enforcement rights.
Bankruptcy and Insolvency: In bankruptcy, executory contracts can be assumed and assigned under Section 365 of the U.S. Bankruptcy Code, potentially overriding contractual anti-assignment provisions. The successors and assigns clause frames the parties' intent, but bankruptcy law may supersede it.

Key Elements of a Well-Drafted Successors and Assigns Clause

Binding and Benefit Language: State clearly that the agreement "shall be binding upon and shall inure to the benefit of" the parties. This establishes both the obligation side (binding upon) and the rights side (inure to the benefit of).
Definition of Successors: Specify what constitutes a "successor" - at minimum, successors by merger, consolidation, or reorganization. Consider whether successors by asset purchase should be included or excluded.
Permitted Assigns Qualifier: Reference "permitted assigns" rather than "assigns" to ensure the clause does not inadvertently authorize assignments that the assignment restriction clause prohibits.
Cross-Reference to Assignment Clause: Explicitly state that the successors and assigns clause is "subject to" or "without limiting" the assignment restrictions elsewhere in the agreement, to prevent any argument that the successors clause implicitly permits assignment.
Personal Nature Carve-Out: If applicable, identify specific obligations that are personal to the named party and do not transfer to successors or assigns (e.g., key-person obligations, non-competition covenants, personal guarantees).
Heirs and Personal Representatives: For agreements with individual parties (employment, consulting, partnership), include "heirs, executors, administrators, and personal representatives" to cover succession upon death or incapacity.
No Third-Party Beneficiary Disclaimer: Include a statement that the clause does not create any third-party beneficiary rights unless expressly stated, to prevent successors and assigns language from being bootstrapped into a broader third-party beneficiary argument.
Survival Through Structural Changes: Consider expressly addressing whether the contract survives specific structural changes - conversion from LLC to corporation, domestication to a different state, reincorporation, or similar transactions that may or may not create a "successor" under applicable law.

Market Position & Benchmarks

Where Does Your Clause Fall?

Broad (Pro-Transferor): Binds successors and assigns without limitation, does not require the "permitted" qualifier, may extend to affiliates, does not cross-reference assignment restrictions, and operates independently as a grant of transferability.
Standard (Balanced): Binds successors and "permitted" assigns, cross-references the assignment clause, includes standard heirs and representatives language for individual parties, and contains a no-third-party-beneficiary carve-out.
Restrictive (Pro-Counterparty): Binds successors only by merger or consolidation (not asset purchase), limits assigns to those with prior written consent, identifies specific "personal" obligations that do not transfer, and may require the successor to meet specified financial or operational criteria.

Market Data

The successors and assigns clause appears in over 95% of commercial agreements, making it one of the most ubiquitous boilerplate provisions.
Despite its prevalence, fewer than 30% of agreements carefully coordinate the successors clause with the assignment restriction and change-of-control provisions, creating interpretive gaps.
In technology licensing, approximately 40% of agreements include carve-outs that make certain license grants "personal" to the named licensee, preventing transfer to successors who may be competitors.
Delaware courts have consistently held that a statutory merger transfers contracts to the surviving entity by operation of law, and that anti-assignment clauses do not prevent transfer by merger unless they specifically and expressly address mergers.
The rise of SPAC transactions and de-SPAC mergers has increased attention to successors provisions, as target companies' contracts must survive complex multi-step merger transactions.

Sample Language by Position

Broad (Pro-Transferor): "This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, and legal representatives. Nothing in this Section shall limit or restrict the right of either party to assign this Agreement in accordance with its terms."

Standard (Balanced): "This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. No assignment or transfer of this Agreement or any rights or obligations hereunder shall be effective except in compliance with Section [X] (Assignment). This Agreement is not intended to, and shall not, create any third-party beneficiary rights."

Restrictive (Pro-Counterparty): "This Agreement shall be binding upon and inure to the benefit of the parties and their successors by merger or consolidation only, and such assigns as are expressly permitted under Section [X]. Notwithstanding the foregoing, the obligations of [Party] under Sections [Y] and [Z] are personal to [Party] and shall not be transferable to any successor or assign without the prior written consent of [Counterparty], which consent may be withheld in [Counterparty's] sole discretion."

Example Clause Language

Technology License Agreement: "This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns; provided, however, that the licenses granted under Section 2 are personal to Licensee and shall not inure to the benefit of, or be exercisable by, any successor of Licensee that is a Competitor (as defined herein) of Licensor, unless Licensor provides its prior written consent. For purposes of this Section, a 'successor' includes any entity that acquires all or substantially all of Licensee's assets or that merges with or into Licensee."

Private Equity Fund Agreement (LPA): "This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, executors, administrators, legal representatives, successors, and permitted assigns. No Limited Partner may transfer, assign, or encumber its Interest except in compliance with Article IX. Any purported transfer in violation of Article IX shall be void and of no effect."

Employment Agreement: "This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and upon the Executive and the Executive's heirs, executors, administrators, and legal representatives. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform it."

Common Contract Types

Merger and Acquisition Agreements: Critical for ensuring representations, warranties, and indemnification obligations bind the surviving or acquiring entity post-closing.
Commercial Leases: Determines whether lease obligations pass to a tenant's successor in a merger or sublease, and whether the landlord's obligations bind a successor building owner.
Software and Technology Licenses: Controls whether license rights survive a merger or acquisition of the licensee, especially where the acquirer may be a competitor of the licensor.
Employment and Executive Agreements: Ensures the executive's rights (severance, bonuses, equity vesting) are enforceable against a successor employer following an acquisition.
Partnership and LLC Operating Agreements: Governs transfer of partnership interests and membership interests, including rights upon death of a partner or member.
Loan and Credit Agreements: Addresses the lender's right to assign the loan (syndication, securitization) and the borrower's succession through permitted reorganization transactions.
Government Contracts: Subject to novation requirements under FAR 42.12, meaning the government must approve transfer of contracts to successor entities even in a merger.

Negotiation Playbook

Key Drafting Notes

Always use "permitted assigns": Dropping the word "permitted" can create ambiguity about whether the successors clause independently authorizes assignments that the anti-assignment clause prohibits. This has been litigated extensively, and the safest approach is to include the qualifier.
Address mergers explicitly in the anti-assignment clause: Under Delaware law and the law of most states, a change of control by merger is not an "assignment" for purposes of an anti-assignment clause. If you want merger-based transfers to require consent, say so expressly in both the assignment clause and the successors clause.
Coordinate with change-of-control triggers: If the agreement has change-of-control consent rights or termination rights, ensure those provisions are not undermined by a broad successors clause that independently binds the agreement to successors without limitation.
Require successor assumption agreements in M&A contexts: In employment and executive agreements, require the company to obtain an express assumption agreement from any successor entity as a condition of closing.
Consider reverse successors language: In vendor agreements, the vendor's successor may not be acceptable to the customer. The successors clause should not prevent the customer from exercising termination rights if the vendor is acquired by an unacceptable successor.

Common Pitfalls

Treating it as pure boilerplate: Copying the successors clause without reading it in context with the assignment, change-of-control, and termination provisions creates gaps and conflicts that surface in transactions - usually at the worst possible time.
Omitting "heirs" for individual parties: If one party to the contract is an individual (common in consulting, employment, and real estate), failing to include "heirs, executors, administrators, and personal representatives" creates uncertainty about enforcement upon death.
Creating unintended third-party beneficiary rights: Adding "affiliates" or "related entities" to the successors and assigns language can create enforceable third-party beneficiary rights. If that is not the intent, exclude them and disclaim third-party beneficiary status.
Assuming statutory merger always equals succession: While most states provide that the surviving entity in a merger succeeds to all contracts, some contracts include "anti-transfer" provisions that may be triggered by a merger. If your client is acquiring via merger and relying on contract continuity, review each contract's successors clause individually.
Ignoring bankruptcy override: Section 365(f) of the U.S. Bankruptcy Code permits assignment of executory contracts notwithstanding anti-assignment clauses, subject to adequate assurance of future performance. The successors clause cannot prevent this, but understanding its interaction with bankruptcy rights is important for risk assessment.

Jurisdiction Notes

United States: State law governs the interpretation of successors and assigns clauses, with Delaware law being particularly influential due to the volume of corporate transactions governed by Delaware entities. Delaware courts have consistently held that anti-assignment provisions do not prevent transfer of contracts by operation of law in a merger (Meso Scale Diagnostics, LLC v. Meso Scale Technologies, LLC, Del. Ch. 2011). The UCC (Article 2) provides default rules for delegation of performance and assignment of rights in goods contracts. Federal anti-assignment statutes (41 U.S.C. § 6305) restrict assignment of government contract claims without agency approval.

United Kingdom: English law distinguishes between assignment (transfer of rights) and novation (transfer of rights and obligations, requiring counterparty consent). A successors clause that purports to bind assigns to obligations may be ineffective as to obligations, since obligations generally cannot be transferred without novation. The Contracts (Rights of Third Parties) Act 1999 may give successors and assigns enforcement rights if the contract expressly identifies them as beneficiaries - making the no-third-party-beneficiary exclusion (which is standard in English law contracts) particularly important. In company law, a merger under the Companies (Cross-Border Mergers) Regulations 2007 effects a universal succession of all rights and obligations.

European Union and Civil Law Jurisdictions: Civil law systems generally recognize universal succession by operation of law in mergers, meaning that the surviving entity automatically assumes all contractual rights and obligations without the need for counterparty consent. In Germany, this is governed by the Transformation Act (Umwandlungsgesetz), which provides for universal succession in mergers, demergers, and changes of legal form. In France, the principle of universal succession (transmission universelle) applies in mergers under the Commercial Code. However, contracts with intuitu personae elements (those entered into on the basis of the personal qualities of a party) may be excepted from automatic transfer, even in a universal succession context. The EU Cross-Border Mergers Directive (2005/56/EC, recast as 2019/2121/EU) harmonizes the principle that cross-border mergers effect universal succession across member states.

Related Clauses

Assignment Clause - The primary companion clause; governs voluntary transfers and must be carefully coordinated with successors language.
Change of Control Clause - Addresses ownership changes that do not create a legal "successor" but may trigger consent or termination rights.
Entire Agreement Clause - Another boilerplate provision that interacts with successors language in defining the scope of the contractual relationship.
Third-Party Beneficiary Clause - Determines whether non-parties (including potential successors and assigns) have enforcement rights.
Non-Compete Clause - May be drafted as "personal" to the original party, raising questions about enforcement against successors.
Survival Clause - Governs which provisions survive termination or expiration; interacts with whether successors remain bound post-termination.

This glossary entry is provided for informational and educational purposes only and does not constitute legal advice. The enforceability and interpretation of successors and assigns provisions depend on the applicable jurisdiction, the specific contract language, and the nature of the transaction. Parties should consult qualified legal counsel when drafting or negotiating these provisions, particularly in the context of mergers, acquisitions, or other structural transactions.