Bulk Sales Law - Explained
What is Bulk Sales Law?
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What is a Bulk Sales Law?
A bulk sales law is a federal or state law that guides the transfer of bulk sales (all of the business assets or inventory) from a business to a buyer (generally another business) that occurs outside of the ordinary course of the business.
Where do Bulk Sales Laws come from?
This law protects creditors and also prevents business owners from avoiding creditors through bulk transfers. Bulk sales must be registered with a federal or state government agency so that creditors can be notified of bulk transfers whenever they occur.
Bulk sales laws at the state level fall under the Universal Commercial Code (UCC). Bulk sales laws at the federal level are contained in the Uniform Fraudulent Transfer Act, Chapter 11 of the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure.
Bulk sale done outside the tenets of either federal or state bulk sales laws include the following:
- sales done with or without the intention of defrauding or evading creditors but which eventually turned out to be fraudulent.
- A bulk sale with no adequate payment or fair value of assets sold.
- A bulk sales or transfer to an entirely different business entity outside the course of the business.
- A bulk sale to just one party.
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