BULK TRANSFER
A sale of all or most of the materials, supplies,
merchandise, or other inventory of a business at
one time that is not normally done in the ordinary
course of the seller’s business.
Bulk transfers, commonly called bulk sales,
have, in the past, been governed by individual
state laws, generally called Bulk Sales Acts, which
imposed certain requirements on such transfers.
These acts were aimed at preventing a seller
from secretly selling his or her business and
absconding with the proceeds in order to avoid
the repayment of any outstanding debts. These
laws have been superseded in most states by
Article 6 of the UNIFORM COMMERCIAL CODE
(UCC), which shares the same purpose but
establishes uniform requirements to simplify
commercial transactions. A prospective buyer of
a business must obtain a list of the creditors of
the seller and notify them in advance of the sale
so they can take steps to protect themselves
against the seller’s possible default on his or her
debts. Failure of a bulk transfer to comply with
the UCC neither makes the transfer void nor
destroys the creditor’s rights to repayment.
Depending upon the jurisdiction, the buyer may
become personally liable to the seller’s creditors
up to the value of the assets purchased or the
property sold may be levied upon by the credi-
tors for the outstanding debts.
A bulk transfer is not the same as a secured transaction.
