Bulk Sales Act: In Laymen Terms
Author: Puru Grover
As a creditor have you ever come across a situation when a company, say company X was bought over by Company Y. When you approached X for payment you were told to go to Y and when you went to Y they told you that they were not responsible since they only bought the assets of X. Sounds familiar?
What have you done in a case like the above?
In a case like the one for X and Y there is legislation to prevent X from selling or disposing its assets in bulk to Y and then pocketing all the money obtained from the proceeds of the sale. The legislation is called the ‘Bulk Sales Act’. The Act is designed to prevent business owners from secretly transferring their business assets to another company to avoid paying creditors. These laws apply mainly to retail, wholesale and manufacturing businesses. Basically, a bulk sales law requires X to notify creditors that the assets of the business are being transferred to Y.
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