Continuation: Overview, definition, and example
What is continuation?
Continuation refers to the process of maintaining the validity or operation of a legal entity, contract, or legal proceeding beyond its original term or jurisdiction. In business and legal contexts, continuation often applies to corporate entities moving to a different jurisdiction, contract extensions, or legal claims that persist despite changes in circumstances.
For example, a company incorporated in Delaware may choose to continue its existence in Nevada by filing for a corporate continuation, allowing it to retain its business structure while changing its state of incorporation.
Why is continuation important?
Continuation is important because it provides legal and operational stability for businesses and contractual agreements. It allows corporations to relocate or extend their existence without dissolving, prevents disruptions in ongoing agreements, and ensures that rights and obligations remain enforceable despite external changes.
For businesses, continuation can be a strategic tool for relocating to more favorable regulatory environments while preserving corporate history. For contracts, continuation clauses prevent automatic termination, ensuring that obligations continue as intended.
Understanding continuation through an example
Imagine a technology startup incorporated in Canada decides to expand operations to the United States. Instead of dissolving and reincorporating, the company files a continuation application, allowing it to retain its existing legal structure while operating under U.S. laws. This ensures business continuity without disrupting contracts, assets, or ownership.
In another scenario, a business lease agreement includes a continuation clause, stating that if negotiations for renewal are ongoing, the lease will remain valid until a new agreement is signed. This prevents the tenant from losing occupancy rights while discussions are in progress.
An example of a continuation clause
Here’s how a continuation clause might appear in a contract or corporate document:
“This Agreement shall continue in full force and effect unless terminated in accordance with its terms. If a renewal or extension is under negotiation at the time of expiration, the Agreement shall remain in effect until a new agreement is executed or negotiations are concluded.”
Conclusion
Continuation ensures the ongoing validity of contracts, corporate entities, or legal obligations despite changes in jurisdiction, term expiration, or negotiations. It provides businesses with flexibility, stability, and legal clarity, allowing them to maintain operations without unnecessary disruption.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.