Less than a year from the 100th anniversary of its enactment,
Ontario's Bulk Sales Act (the "BSA") seems
set for repeal. On June 8, 2016 Bill 218, the Burden Reduction
Act, 2016 received first reading. Section 1 of Schedule 3
simply says "The Bulk Sales Act is repealed." Ontario has
been a laggard in taking this step. All of the other common law
provinces have previously repealed their BSA legislation.
It was originally intended to protect creditors from business
owners selling their assets and disposing of the proceeds without
paying their creditors. In more recent times it has come to be
viewed as out dated legislation which interferes with M&A
transactions, both big and small, structured as asset sales by
creating delays and increasing the costs of such transactions. It
hasn't been substantially amended since 1959.
Repeal of the BSA was one of the key recommendations contained
in the June 15, 2015 report to Ontario's Minister of Government
and Consumer Services by a group of legal practitioners and
academics called Business Law Agenda: Priority Findings &
The panel noted in their Report that there are now other means
for protection of creditors such as credit reporting agencies, the
Personal Property Security Act, the oppression remedy
under the Ontario Business Corporations Act and
preferences, transfers at undervalue and 30 day goods recovery
under the Bankruptcy and Insolvency Act.
Compliance with the BSA in the manner originally intended can be
impossible where part of the purchase price is paid by the
assumption of debt or the issuance of shares or for other reasons
there is insufficient cash to pay all creditors on closing.
Often vendor and purchaser would waive compliance as between
themselves. That is not recognized under the BSA, which has a
number of provisions that can be a trap to the unwary. A
transaction completed without compliance with the BSA is voidable
at the instance of an unpaid creditor. A purchaser who completes an
asset purchase without complying can end up paying twice, first to
the vendor on closing of the transaction and a second time to the
unpaid creditors since the BSA makes the purchaser liable to the
creditors in the event of non-compliance.
The BSA is also uneven in its application. It doesn't apply
to a share purchase so sometimes a transaction that the parties
would prefer to complete as an asset sale would have to be
re-structured as a share deal in order to avoid application of the
BSA. The BSA also does not apply to a sale in bulk that only
involves intangibles. This has become a significant omission as the
value of intangibles such as intellectual property, accounts
receivable and goodwill have become a much more significant source
of assets for many companies.
Hopefully the legislature will follow through and enact the
repeal so that on royal asset we can say RIP BSA.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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