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Bulk Transfer

seller business creditors debts

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 These laws have been superseded in most states by Article 6 of the UNIFORM COMMERCIAL CODE (UCC), which shares the same purpose but establishes uniform requirements to simplify commercial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 creditors' 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 creditors for the outstanding debts.

A bulk transfer is not the same as a secured transaction.

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