Legal Definitions - continuity-of-enterprise doctrine

The continuity-of-enterprise doctrine, also known as the substantial-continuity doctrine, is a principle that holds a successor corporationresponsible for the actions of its predecessor corporation if the successor continues the same business as the predecessor. This means that if the successor corporation maintains the same employees, supervisors, working conditions, production processes, and customers as the predecessor, it can be held liable for any legal claims against the predecessor.

For example, if Company A sells its assets to Company B, and Company B continues to operate the same business with the same employees, equipment, and customers, then Company B can be held liable for any legal claims against Company A. This is because Company B has essentially taken over the operations of Company A and is continuing the same enterprise.

Another example is if a company changes its name or ownership structure but continues to operate the same business with the same employees, equipment, and customers. In this case, the continuity-of-enterprise doctrine would apply, and the company could be held liable for any legal claims against its predecessor.

These examples illustrate how the continuity-of-enterprise doctrine works by holding successor corporations responsible for the actions of their predecessors if they continue the same business operations. This principle helps ensure that companies cannot escape liability by simply changing their name or ownership structure while continuing to operate the same business.