What is substantial-continuity doctrine? Simple Definition & Meaning

Definition of substantial-continuity doctrine

The substantial-continuity doctrine is a principle that holds a successor corporation responsible 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 issues that the predecessor faced.

For example, if Company A sells its business to Company B, and Company B continues to produce the same products, using the same employees, supervisors, and production processes, then Company B can be held responsible for any legal issues that Company A faced. This is because Company B has continued the same business as Company A, and therefore, has inherited its legal responsibilities.

The substantial-continuity doctrine is different from the mere-continuation doctrine, which only holds a successor corporation responsible if it is a mere continuation of the predecessor corporation, without any substantial changes to the business.

Simple Definition

The substantial-continuity doctrine is a rule that says if a new company takes over another company and continues to do the same business, with the same employees, doing the same jobs, for the same bosses, under the same working conditions, and using the same production methods to make the same products for the same customers, then the new company can be held responsible for the old company's actions. This is also called the continuity-of-enterprise doctrine. It is different from the mere-continuation doctrine.

Legal Definitions - substantial-continuity doctrine

Definition of substantial-continuity doctrine

Simple Definition