Continuity of business enterprise doctrine

Continuity of business enterprise doctrine,

Definition of Continuity of business enterprise doctrine:

  1. Taxation principle that in an acquisition of one firm by another, the acquiring firm must carry on the acquired firms usual business, or must employ a significant proportion of its assets in the combined-business for the acquisition to qualify as a tax-deferred transaction.

  2. In summary, the doctrine applies to how taxes are treated when a firm changes hands. The purchasing entity must maintain the business operationally or retain most of the assets when two entities merge to get tax-deferred status. It is vital to many mergers, including the reverse triangle merger.

  3. The continuity of business enterprise doctrine is a taxation principle applicable to corporate mergers and acquisitions. The doctrine holds that, in order to qualify as a tax-deferred 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 when conducting business.

Meaning of Continuity of business enterprise doctrine & Continuity of business enterprise doctrine Definition