Continuity Of Business Enterprise Doctrine

DEFINITION of 'Continuity Of Business Enterprise Doctrine'

A taxation principle applicable to corporate mergers and acquisitions. The doctrine holds that, in order to qualify as a tax-free reorganization, the acquiring entity must either continue the target company's historic business or should use a substantial portion of the target's business assets in a business.

BREAKING DOWN 'Continuity Of Business Enterprise Doctrine'

The continuity of business enterprise doctrine applies only to the business and business assets of the target company, and not to the acquiring company. Therefore, in a situation where most of the assets of a company are sought to be disposed of, one way of ensuring compliance with the continuity doctrine is by making this company the acquirer rather than the target. This is a technique that has been approved by the IRS.

RELATED TERMS
  1. Continuity Of Interest Doctrine ...

    A doctrine which stipulates that a corporate acquisition can ...
  2. Real Bills Doctrine

    An economic theory that surmises that when central banks loan ...
  3. Doctrine Of Utmost Good Faith

    A minimum standard that requires both the buyer and seller in ...
  4. Shingle Theory

    A suitability doctrine first introduced by the Securities and ...
  5. Privity

    A legal interpretation in contract law where contracts are only ...
  6. Borrowed Servant Rule

    A legal doctrine indicating that an employer may be held liable ...
Related Articles
  1. Personal Finance

    What Investors Can Learn From M&A Payment Methods

    How a company pays in a merger or acquisition can reveal a lot about the buyer and seller. We tell you what to look for.
  2. Options & Futures

    Mergers and Acquisitions: Doing The Deal

    Start with an Offer When the CEO and top managers of a company decide that they want to do a merger or acquisition, they start with a tender offer. The process typically begins with the acquiring ...
  3. Options & Futures

    Mergers and Acquisitions: Definition

    The Main Idea One plus one makes three: this equation is the special alchemy of a merger or an acquisition. The key principle behind buying a company is to create shareholder value over and ...
  4. Entrepreneurship

    Why Successful Business Owners Sell Out

    Learn the motives that drive companies into the arms of an acquirer.
  5. Professionals

    Characteristics and Income Taxation of Business Entities

    Characteristics and Income Taxation of Business Entities
  6. Options & Futures

    Mergers and Acquisitions: Valuation Matters

    Investors in a company that are aiming to take over another one must determine whether the purchase will be beneficial to them. In order to do so, they must ask themselves how much the company ...
  7. Professionals

    Taxation and Business Uses of Insurance

    Taxation and Business Uses of Insurance
  8. Investing Basics

    What Merger And Acquisition Firms Do

    The merger or acquisition process can be intimidating. This is why merger and acquisition firms step in to facilitate the process.
  9. Professionals

    Acquire A Career In Mergers

    This exciting sector demands a lot from its advisors. Are you up for it?
  10. Investing Basics

    How To Profit From Mergers And Acquisitions Through Arbitrage

    Making a windfall from a stock that attracts a takeover bid is an alluring proposition. But be warned – benefiting from m&a is easier said than done.
RELATED FAQS
  1. Why do some mergers and acqusitions fall through?

    Most merger and acquisition (M&A) activities are carried out successfully, but from time to time, you will hear that ... Read Answer >>
  2. Are acquisitions only for large companies?

    Learn how mergers and acquisitions, despite what the media portrays, actually take place more often among small companies ... Read Answer >>
  3. What is a stock-for-stock merger and how does this corporate action affect existing ...

    First, let's be clear about what we mean by a stock-for-stock merger. When a merger or acquisition is conducted, there are ... Read Answer >>
  4. What's the difference between a merger and a hostile takeover?

    Understand the difference between a merger and a hostile takeover, including the different ways one company can acquire another, ... Read Answer >>
  5. Why are the terms 'merger' and 'acquisition' always used together if they describe ...

    Learn about mergers and acquisitions and how these two corporate actions differ based on the size and participation of the ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center