Last year, we reported that Ontario introduced legislation which passed its first reading in the Ontario legislature and, if carried forward through all the stages of the legislative process, would repeal the Ontario's Bulk Sales Act (the "BSA").
The BSA applied to any sale of assets of all or part of a business, when the sale was not considered part of the ordinary course of business. Under the BSA, the buyer in an asset deal was required to obtain from the vendor a list of all the vendor's secured and unsecured trade creditors, verified by an affidavit of the vendor, and to ensure such trade creditors were paid unless claims of the secured and unsecured trade creditors did not each exceed a total of $2,500. Within five days of the completion of the transaction, the buyer had to file with the applicable court house its own affidavit (and related materials) setting out the particulars of the sale. The potential consequences of the failure to comply with the BSA were severe. For instance, the trade creditors could apply to the court to have the transaction set aside rendering the transaction void. Needless to say, the process of complying with the BSA was a nuisance, adding time and cost to the transaction. The BSA was also viewed by many as antiquated since its objective of creditor protection was served by more modern legislations.
The good news is that Bill 27 (the Burden Reduction Act) received Royal Assent on March 22, 2017, effectively abolishing the last remaining bulk sales legislation in Canada. Certainly, this change will be well received by anyone looking to do an asset deal in Ontario as the repeal of the BSA is likely to result in a reduction in both time and cost for the parties involved.
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