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Simple English definitions for legal terms
continuity-of-entity doctrine
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A quick definition of continuity-of-entity doctrine:
The continuity-of-entity doctrine is a legal principle that says if a company transfers its assets to another company and only one company remains, the new company will be held responsible for the actions of the old company if they have the same owners and directors. This means that the new company cannot escape liability for the old company's actions just by changing its name or structure.
A more thorough explanation:
The continuity-of-entity doctrine, also known as the mere-continuation doctrine, is a legal principle that holds a successor corporation responsible for the actions of a predecessor corporation if only one corporation remains after the transfer of assets, and both corporations share an identity of stock, shareholders, and directors.
For example, if Corporation A sells all of its assets to Corporation B and then dissolves, but Corporation B continues to operate the same business with the same shareholders and directors, then Corporation B can be held liable for any legal claims against Corporation A.
This doctrine is based on the idea that the successor corporation is essentially a continuation of the predecessor corporation, and therefore should be held responsible for its actions.