Ontario is the last province in Canada that still has bulk sales legislation. For many years, lawyers and the business community have been advocating to have the Bulk Sales Act repealed. It appears that the Ontario government is finally prepared to repeal the Bulk Sales Act. The government has introduced Bill 218, the Burden Reduction Act, 2016 and it passed first reading on June 8, 2016. If enacted, Bill 218 will amend or repeal more than 50 statutes, including the Bulk Sales Act, with the goal of reducing the legal burdens placed on Ontario businesses.
What is the Bulk Sales Act?
The Bulk Sales Act was adopted in 1917. Its purpose is to protect a business’ secured and unsecured creditors from a business owner selling the business’ assets and leaving the creditors unpaid. The Bulk Sales Act only applies to the sale of assets “in bulk”. It does not apply to the sale of shares. The Bulk Sales Act protects a business’ creditors by imposing certain duties and requirements on the purchaser of the business’ assets. If the purchaser fails to comply, the sale of the assets is voidable and the purchaser is liable to the creditors for the value of the purchased assets. The Bulk Sales Act has a very broad application, so it applies to most asset sales that occur outside the ordinary course of business.
Why is the Bulk Sales Act Being Repealed?
The Bulk Sales Act is generally viewed as antiquated and a nuisance. It generally adds time, complexity and cost to the sale of the assets of a business. Its goal of protecting a business’ creditors is now achieved by other more modern means. Creditors now have better credit investigation tools, they can easily register their security interest across Canada under the various personal property security legislation, by registering a purchase money security interest or other security interest, and they have other tools under the federal Bankruptcy and Insolvency Act.
The repeal of the Bulk Sales Act will be good news for Ontario’s business community. Hopefully, Bill 218 will soon receive all of the necessary legislative approvals and the Bulk Sales Act will finally be repealed.