Bulk sale notice requirements apply when a buyer acquires more than half of a business’s inventory in a single transaction outside the ordinary course of business. In states that still enforce UCC Article 6, the buyer must send written notice to every one of the seller’s known creditors at least 45 days before the sale closes, and the notice must contain specific information about the deal and how the proceeds will be distributed. Most states have repealed these rules, so your first job is to find out whether they apply to your transaction at all.
Check Whether Your State Still Has a Bulk Sales Statute
When the Uniform Law Commission revised Article 6 in 1989, it gave states a choice: adopt the revised version or repeal the article altogether. The Commission recommended repeal, and most states agreed. A handful still enforce some version of Article 6, and the details differ. Some adopted the revised 1989 text; others kept the older “bulk transfer” framework.
Before you spend time drafting a notice, confirm what the state where the seller operates actually requires. A business attorney in that state can give you a definitive answer in a short consultation. And separately from the UCC question, most states impose their own tax-related bulk sale notice duties, which survive even where Article 6 was repealed. Those are covered further down.
Transactions That Trigger the Notice
Under the revised UCC, a bulk sale is a sale outside the ordinary course of a seller’s business of more than half the seller’s inventory, measured by value on the date the parties sign the agreement, where the buyer knows or should know the seller will not continue running the same kind of business afterward.1Legal Information Institute. Uniform Commercial Code 6-102 – Definitions and Index of Definitions Each piece of that definition matters. Day-to-day sales to customers are in the ordinary course, so they never trigger the rules. A sale of 40 percent of the seller’s inventory falls below the threshold even if the dollar figure is large.
The article also narrows which sellers are covered. It applies only when the seller’s principal business is selling inventory from stock.2Legal Information Institute. Uniform Commercial Code 6-103 – Applicability of Article Retailers, wholesalers, and restaurants typically fall within scope. Service businesses and manufacturers whose main output is not inventory sold from stock usually do not.
Small Deals and Other Exemptions
Article 6 does not apply when the assets being sold have a value, net of liens and security interests, of less than $10,000.2Legal Information Institute. Uniform Commercial Code 6-103 – Applicability of Article For that calculation, the price the buyer agrees to pay is presumed to equal the value of the assets.
Other exempt transactions include sales made to pay off a secured lender, transfers to an entity that assumes all of the seller’s business debts, and sales ordered by a court. Stock sales fall outside Article 6 entirely because the assets stay with the same legal entity and remain reachable by its creditors.
What the Notice Must Say
Before anything goes out, the buyer collects two documents from the seller: a list of every business name and address the seller has used in the past three years, and a verified, dated list of every known claimant with each one’s address and claim amount.3Legal Information Institute. Uniform Commercial Code 6-104 – Obligations of Buyer The claimant list must reflect creditors as of three days before the seller hands it over. During due diligence, cross-check those names and amounts against the seller’s books. Omissions you catch now are cheaper than ones you discover later.
The written notice itself must include, at a minimum:
- A statement that the parties have entered into an agreement that may constitute a bulk sale, and the date of that agreement.
- The date on or after which more than ten percent of the assets will transfer, and the date on or after which more than ten percent of the net contract price will be paid.
- The seller’s name and mailing address, any prior business names, and the buyer’s name along with an address where creditors can get information about the sale.
- Either a general statement describing the type of assets or an item-by-item list.
- How the buyer will make the list of claimants available to interested parties.
A copy of the schedule of distribution (the written agreement between buyer and seller on how proceeds will be divided) must go out with the notice.4Legal Information Institute. Uniform Commercial Code 6-105 – Notice to Claimants
Delivery, Timing, and the 45-Day Window
The buyer sends written notice to every claimant on the seller’s list and to any other claimant the buyer knows about. If the seller has 200 or more claimants (excluding secured creditors and employees owed compensation), the buyer may file the notice with the Secretary of State’s office instead of mailing it to each one individually.4Legal Information Institute. Uniform Commercial Code 6-105 – Notice to Claimants
Timing is strict. The notice has to go out at least 45 days before the bulk sale date. If the buyer is sending individual notices rather than filing with the Secretary of State, the notice also has to be sent no more than 30 days after receiving the claimant list.4Legal Information Institute. Uniform Commercial Code 6-105 – Notice to Claimants Until the 45 days run, the sale cannot legally close. Creditors use that window to review the proposed distribution, verify what they are owed, and raise objections. Certified mail with return receipt gives you proof of delivery if anyone later questions whether notice was properly served.
Some states layer on extra duties, such as publishing the notice in a local newspaper for a set number of weeks. Confirm the specific publication, filing, and fee rules before you set a closing date.
The Schedule of Distribution
Buyer and seller must agree in writing on how the net contract price (the purchase price minus the cost of complying with bulk sale requirements) will be paid out. That written agreement is the schedule of distribution, and a copy accompanies every notice.5Legal Information Institute. Uniform Commercial Code 6-106 – Schedule of Distribution
The schedule can send proceeds to any person at any time, including directing the full amount to the seller. The notice itself is the protection: creditors see the plan and can object before the sale closes. If a court order, legal process, or other legal obligation later makes part of the expected price unavailable, the buyer is excused from following the original schedule as long as the remaining funds are distributed in the priority order the schedule set, pro rata among creditors at the same level.5Legal Information Institute. Uniform Commercial Code 6-106 – Schedule of Distribution
Tax Clearance Certificates Are a Separate Track
Even in states that repealed Article 6, a separate set of tax statutes usually requires the buyer to notify the state taxing authority before completing an asset purchase. These rules address a different problem: successor liability. In many states, the buyer of a business becomes personally responsible for the seller’s unpaid sales tax, use tax, employment tax, and sometimes franchise tax unless protective steps are taken.
The standard protection is a tax clearance certificate from the state revenue department confirming the seller has met its tax obligations as of a stated date. If the seller has unpaid liabilities, the state may require the buyer to withhold a portion of the purchase price to cover the balance. Request the certificate early, before you lock in a closing date. A deal can comply flawlessly with Article 6 (or sit in a state that repealed it) and still leave the buyer holding five or six figures of inherited tax debt.
What Happens If You Skip or Botch the Notice
Consequences depend on which version of Article 6 the state follows. Under the revised version, the sale itself stays valid. Noncompliance does not void the transfer or impair the buyer’s title. Instead, the buyer is directly liable to each creditor who was harmed. A buyer who fails to distribute proceeds according to the agreed schedule owes creditors the amount of their claims, reduced by what the creditor would not have recovered even with full compliance.6Legal Information Institute. Uniform Commercial Code 6-107 – Liability for Noncompliance
States still on older versions of the statute are harsher. Under some of those laws, a noncompliant bulk transfer is presumed fraudulent and void as to the seller’s creditors. Creditors can disregard the transfer and levy on the goods as if they still belonged to the seller. Good faith is no defense, and reselling or commingling the inventory does not help. The practical result is paying twice: once to the seller, and again to the seller’s creditors.
How Long Creditors Have to Sue
Under the revised Article 6, a creditor must file suit within one year after the date of the bulk sale. If the buyer concealed the sale, the clock starts when the creditor discovers or should have discovered it, with an outer limit of two years from the sale date.7Legal Information Institute. Uniform Commercial Code 6-110 – Limitation of Actions Simply failing to send the notice is not concealment on its own. A buyer who skipped the notice but did not actively hide the sale still gets the one-year deadline.
In states following older versions of the law, the limitations period may be different. Confirm the applicable deadline with local counsel before relying on it.