Compare the substantial continuity test in regard to successor liability with the mere continuation test. Which test is applied by the majority of states?
The substantial continuity test imposes successor liability when the purchaser of assets maintains the same business, with the same employees doing the same jobs, under the same supervisors, working conditions, and production process, and produces the same products for the same customers as the seller corporation. Under the mere continuation test, successor liability is imposed only when there is a single corporation after the transfer of assets with the same shareholders and directors before and after the acquisition. Most states apply the mere continuation test.
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