I see. Thank you for the additional information, Erik. That is really unfortunate.
Assuming you did your due diligence and the purchase agreement required full disclosures with regard to the business, the failure by the seller to disclose such relevant information would typically support a cause of action
for negligent or even intentional misrepresentation (depending on the language in the purchase documents). In such a case, a plaintiff must normally prove that the seller knew or should have known of this detrimental compliance issue and they had a duty to disclose such information.
Here is a link that sets out the elements one must prove in such a case typically:
It would be best to retain a local business law or civil litigation attorney to represent you in this matter. It may be a case that could be settled without filing suit or going to trial through mediation or other negotiations if the seller wishes to avoid a potentially costly lawsuit.
I hope this helps clarify the situation for you.
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