Bulk Sales

A bulk sale is a sale, not in the ordinary course of the seller’s business, of more than half of the seller’s inventory and equipment (as measured by value on the date of the bulk sale agreement).

 

Public Notice Required

When the owner of an enterprise whose principal business is the sale of merchandise desires to affect a bulk sale, the buyer must give public notice to the seller’s creditors by:

  1. Recordation of a notice in the Office of the County Recorder (of the county or counties in which the property to be sold is located) at least 12 business days before the bulk sale is to be consummated.
  2. Publication of the notice at least once in a newspaper of general circulation published in the judicial district in which the property is located and in the judicial district in which the chief executive office of the seller, or, if the chief executive office is not in California, the principal business office in California, is located, if in either case there is one, and if there is none, then in a newspaper of general circulation in the county embracing such judicial district. Notice must be published at least 12 business days before the bulk sale is to be consummated.
  3. Sending a copy of the notice by registered or certified mail at least 12 business days before the bulk sale is to be consummated to the county tax collector in the county or counties in which the property to be transferred is located.

 

 

The notice to creditors shall state:

  • That a bulk sale will be made;
  • The names and business addresses of the seller and the buyer, and all other business names and addresses used by the seller within the last three years so far as known to the buyer;
  • The location and general description of the property to be sold;
  • The place, and the date on or after which the bulk sale is to be consummated; and
  • Whether or not the bulk sale is subject to UCC Section 6106.2 (consideration is $2,000,000 or less, substantially all cash or cash plus an obligation to pay the balance in the future) and, if so, the information required by subdivision (f) of Section 6106.2 (the name and address of the person with whom claims may be filed and the last date claims may be filed, which is the last business day before the date of the bulk sale).

 

 

Noncompliance

The principal purpose of the bulk transfer law is to afford the creditors of a business an opportunity to satisfy their claims before the owner can sell the assets and vanish with the proceeds

When the statutory filing and publication requirements are not met, the buyer is liable to creditors who hold valid claims based on transactions or events occurring before the bulk transfer. Creditors must take action within one year of the date of transfer of possession to satisfy their claims, unless the transfer was concealed, in which case action may be brought within one year after its discovery by the creditor.

Compliance does not exclude compliance with other applicable statutes, such as the transfer of liquor licenses under the Alcoholic Beverage Control Act and the Uniform Fraudulent Transfer Act.

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