Selling off Bulk Assets in California

Selling off Bulk Assets in California

Are you a struggling business in California considering a bulk sale (or bulk transfer)? While you might just want to overload everything you own and be done, there are still some rules you have to follow. If you are looking to get out of your business, throw in the inventory, and leave the building it’s in, you most likely have creditors. While bypassing creditors and selling all your assets to one entity used to solve your worries, it doesn’t anymore. Let’s go over the process of selling off bulk assets in California.

 

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Why Do a Bulk Sale?

California drafted the Bulk Sales Act as a means to protect purchasers and creditors. It was done in mind that the person who owned the business incurred the debt. The people buying the business shouldn’t pay anything extra to the previous owner’s creditors. However, the previous owners shouldn’t legally be able to get around paying the creditors by selling everything off to one person. This catch-22 caused California to draft CA UCC Division 6, Bulk Sale Code.

 

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What Qualifies as a Bulk Sale?

To be considered a Bulk Sale in California, the seller themselves must be a resident of the state. The assets included in the bulk sale must not only be the business itself but everything it entails. That means if there’s any leftover product, appliances, or anything else that helped the business run like normal, they must be included in the sale.

Anything your business bought with the business’ money is an asset to creditors. If someone else were to run your business and pay your creditors, they would be using that equipment or selling those items.

 

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Procedures for Bulk Sale

If you’re interested in purchasing a bulk sale, you are required to provide notice of this proposed sale. The buyer gets a complete list of the business’ names and addresses over the past three years from the seller and includes this information in the notice.

Additionally, a list of assets sold, location, and anticipated date of bulk sale must also be stated. Lastly, buyers have to include if the Bulk Sale is a Small Cash Sale. Small cash sales require additional information to be divulged.

Buyers must supply every county where tangible assets are located with a notice. The notice has to be published in a newspaper that’s in general circulation of the county that the seller lives in. It must also be in the newspapers of any county where tangible assets reside. Lastly, the notice must be certified mail delivered to the County Tax Collector of any county with assets.

 

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