Bulk Sales

Bulk Sales ## What Is the Bulk Sales Act? The California Bulk Sales Act (California Commercial Code §6101 et seq.) protects creditors of a business when the business sells a major portion of its inventory or assets outside the ordinary course of business. When such a sale occurs — a "bulk sale" — the law requires the buyer to notify the seller's known creditors before the sale is completed, giving those creditors an opportunity to file claims against the sale proceeds before the seller receives payment and potentially disappears. Without the Bulk Sales Act, a business owner could secretly sell all inventory and equipment to a buyer, pocket the proceeds, and leave creditors with no assets to recover against. The Act disrupts this scheme by making the buyer legally responsible for notifying creditors and, if the procedure is not followed, potentially making the buyer liable for the seller's debts. --- ## Who Is Covered by the Bulk Sales Act? The Bulk Sales Act applies to sales of: - Inventory (merchandise held for sale in the ordinary course of business) - Equipment used in the business - A combination of inventory and equipment constituting a major part of the business's assets - Transactions made outside the ordinary course of business The Act applies broadly to retail and wholesale businesses, restaurants, manufacturers, and service businesses that hold inventory. It does NOT typically apply to: - Sales of a business in the ordinary course (a store selling its merchandise to customers daily — that's normal business) - Sales of real property (governed by real estate law) - Sales by a court-appointed trustee (bankruptcy sales are separately governed) - Financial institutions --- ##…