Farewell Bulk Sales Act


In our July 2016 M&A Law Update, we asked the question: Could this finally be farewell to the last remaining bulk sales legislation in Canada?

We are pleased to report that the answer is (finally) yes. On March 22, 2017, Bill 27, entitled the Burden Reduction Act, 2017, received Royal Assent in the Ontario Legislature and Schedule 3, Bulk Sales Act Repeal, came into force resulting in the repeal of the Bulk Sales Act (Ontario) (the "BSA") and making consequential amendments to other statutes.

The Ontario M&A community should welcome the repeal of the BSA with open arms. Originally enacted approximately 100 years ago, the BSA was designed to protect unpaid creditors in the event the debtor business sold all of its assets in bulk. More recently, compliance with the BSA has been seen as a needless, burdensome and costly exercise. In fact, it had become common practice for parties to agree to waive compliance with the BSA and provide indemnities in lieu of complying. Recognizing the lack of utility the BSA provided, Ontario has finally caught up with the rest of the jurisdictions in Canada by repealing its bulk sales legislation.

Life and Laws After the BSA Repeal

Now that the BSA has been repealed, creditors in Ontario still have a variety of protections available to them at both the provincial and the federal levels, including the following:

Creditor Protections at the Provincial Level

The Personal Property Security Act (Ontario) (the "PPSA") enables a supplier of goods to obtain security in the goods provided to both commercial customers and consumers. In contrast, the BSA only applied to the disposition of the tangible property of a business. Under the PPSA, a supplier can take and perfect a super-priority purchase-money security interest (PMSI) in the goods (equipment, vehicles and inventory) it supplies. The Fraudulent Conveyances Act (Ontario) assists a creditor to recover real or personal property that the debtor has conveyed or transferred to others with the intent to defeat, delay or defraud the rights of creditors or others. The Assignment and Preferences Act (Ontario) gives one group of creditors the right to recover property that a debtor transfers to one or more of its other...

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