Last year we reported on Ontario's distinction as the only Canadian province that has not repealed its century-old Bulk Sales Act (the Act). With its goal of creditor protection now served by more modern legislation, the Act is generally viewed as a nuisance, adding time and cost to transactions. However, the wait may soon be over, as Ontario recently introduced legislation that would repeal the Act.
The aim of the Act is to protect creditors from a vendor selling its assets without first paying its debts owed to creditors. The Act achieves this aim by imposing certain duties on the purchaser of the assets. A failure to comply by the purchaser can render the sale voidable and the purchaser liable for the value of the purchased assets. The Act broadly applies to every "sale in bulk". This includes a sale of goods made outside the vendor's usual course of business, making the Act a necessary consideration in the context of any M&A transaction structured as an asset deal.
Bill 218, the Burden Reduction Act, 2016 (the Bill) is a recent package of proposed legislative amendments advanced by the Ministry of Economic Development, Employment and Infrastructure. The Bill proposes to amend more than 50 different statutes and is intended to reduce various regulatory roadblocks for business. The Bill would repeal the antiquated Act, thereby bringing Ontario in line with all other Canadian jurisdictions, and recognizing that other, more effective avenues are now available to creditors to protect their interests in the context of a "bulk sale" transaction.
The Bill is still in the early stages, having passed first reading in the Ontario legislature on June 8, 2016. Dealmakers now wait with bated breath for the Bill to make its way through the remainder of the legislative process and bring the repeal of Ontario's bulk sales legislation at long last.
The author would like to thank Peter Valente, summer student, for his assistance in preparing this legal update.
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