Does the Bulk Sales Act apply when buying business assets in Ontario?

The Bulk Sales Act, R.S.O. 1990, c. B.14, was repealed on March 22, 2017. If you are buying the assets of an Ontario business now, no step under that Act is required. Older checklists, forms and advice still describe it, so check the date on anything that mentions it. This page covers Ontario only. If the seller or the assets are in another province, ask your lawyer which rules apply there.

What the Act used to require

The Act applied to a sale in bulk, defined as a sale of stock in bulk out of the usual course of business or trade of the seller. It excluded sales by executors, receivers, trustees in bankruptcy and some other office-holders. The seller had to give a statement of its creditors, and the Act listed ways to complete the sale, such as a seller’s statement, verified by affidavit, that the claims of all trade creditors of which the buyer had notice had been paid in full, or, with the proceeds paid to a trustee, the consent of unsecured trade creditors representing a set share of their claims together with the seller’s affidavit of notice to its creditors. None of that is in force.

What still deserves a check

The repeal does not make the seller’s debts disappear. WSIB tells buyers and sellers of a business’s assets that they should get a purchase certificate. It says it may hold the purchaser liable for all amounts the vendor owed up to the date of sale if there is no valid certificate. The request must be made before the date of sale, and a certificate is valid for 30 days from its issue date. WSIB adds that a share sale creates no new legal entity, so no certificate is needed.

Ontario’s Personal Property Security Act, s.25(1)(a), provides that, where collateral gives rise to proceeds, the security interest in it continues as to the collateral unless the secured party expressly or impliedly authorized the dealing with it free of the security interest. The Act has other rules on when a buyer takes free of a security interest. Ask your lawyer to search the registry against the seller before closing. The page on buying assets from a company that owes its suppliers covers other routes creditors can use.

Questions to put to your lawyer

• Which clearances or certificates apply to this seller and these assets, and when must each be requested?
• Should part of the price be held back until a certificate arrives?
• Do the purchase agreement’s excluded liabilities and indemnity cover what a search or certificate turns up?