Legal Definitions - bulk sales acts

Definition: Bulk sales acts are state laws that require a seller of a business, including their inventory, to take certain steps to protect the interests of their creditors. These steps include publishing notice of the sale, giving written notice to all creditors, and setting up an escrow account for the funds from the sale. The purpose of these laws is to prevent a seller from selling their inventory and disappearing without paying their creditors.

For example, let's say that John owns a small grocery store and wants to sell it to Mary. Before the sale can take place, John must follow the bulk sales acts in his state. He must publish a notice of the sale in a local newspaper, give written notice to all of his creditors, and set up an escrow account for the funds from the sale. This gives John's creditors a chance to make a claim on the funds before he can use them to pay off other debts or disappear.

Another example would be if Sarah owns a clothing store and wants to sell it to her sister. Even though they are family, Sarah still needs to follow the bulk sales acts in her state. She must publish a notice of the sale, give written notice to all of her creditors, and set up an escrow account for the funds from the sale. This ensures that Sarah's creditors have a chance to make a claim on the funds before she can use them to pay off other debts or disappear.

These examples illustrate how bulk sales acts work to protect the interests of a seller's creditors. By requiring the seller to take certain steps before selling their business, these laws ensure that creditors have a chance to make a claim on the funds from the sale before the seller can use them to pay off other debts or disappear.