[newfocogi]

"Former Yahoo CEO Marissa Meyer is closing the doors on her consumer software startup Sunshine, and is selling the company’s assets to her new AI startup, Dazzle" and "all of Sunshine’s employees will move to the new company".

Under what conditions is it better to buy the assets and hire the employees instead of just change the name and product offering of the company? Is it just to get the investors off the cap table?

[taeric]

Ostensibly, it is in what you left out of your question? If you can buy the assets, specifically, you can not buy the liabilities.

Obviously, getting some people off of obligation lists is one of them. There could be others?

[xp84]

Indeed; and when you don't want the brand it's even more ideal. We saw a few months ago an example of the "new company" buying the brand and the assets but not the liabilities, including some suckers who bought "lifetime" subscriptions[1] from the old owners that they allegedly didn't even disclose, and which legally speaking weren't the liability of this random unrelated company which just bought the assets and the brand of the defunct company who made the promises.

In this case though with a new name and product that won't be an issue.

[1] someone else will remember the name of that company - it escapes me

[eig]

Is it not illegal in the US to break up a company to isolate liabilities?

[prasadjoglekar]

Clean cap table is quite valuable.

[bix6]

Valuable to new investors. Old investors get hosed. I really struggle with these sorts of situations. She’s presumably doing something similar with the new company so all the old investors who didn’t participate (presuming a pay to play) get hosed. Is that really fair?

[ajross]

It's "valuable" to the company and to new investors. It's quite the opposite to old investors. In the world of public companies, a "liquidate a shell company" trick like this is presumptively fraud. If you want to liquidate the company you have to buy back the stock at market price, not whatever your purchaser is offering.

It's legitimate only if the existing investors are getting enough liquidity back from the sale to make it worth the transaction. The article says that "almost" all the investors are on board, so... maybe.

[mbesto]

Clean cap table and she probably provided a decent amount of the funding for the first startup. It's also more than likely a tax thing here. I don't think people ought to get too obsessed with the contractual details on this one.

[brudgers]

Liabilities don’t transfer, Corporate structure doesn’t transfer, and as you point out investors don’t either.

Soft liabilities may be significant. For example here we are talking about the move. The headline “Sunshine launches Dazzle” is about a failing company and we wouldn’t be talking about it on the HN front page.

And if you are adequately capitalized (you probably are not), starting a new company is an easy business decision. And if you are a serial entrepreneur, starting new companies is what you do.

[caycep]

the old "burn down the restaurant to avoid taxes, build new restaurant under another name" play common here in the San Gabriel valley area...

[SMAAART]

When new capital is needed, the old investors (investors in the old company) are given the equivalent of cents on the dollar on the new company, while the new investors do the usual.

Old investors are welcome to put new money into the new venture, of course.

[freejazz]

Because you can get rid of liabilities...