If you’re buying or selling a business through an asset purchase, you may encounter references to “bulk sales law.” This area of law has changed dramatically over the past 35 years—most states have repealed their bulk sales statutes entirely—but a handful of jurisdictions still enforce them, and failing to comply can expose a buyer to the seller’s unpaid creditors.
Here’s what business owners need to understand about bulk sales law, where it still applies, and what’s replaced it in states that moved on.
What Is Bulk Sales Law?
Bulk sales law originated in the early 1900s to address a specific problem: a business owner would sell off all or substantially all of their inventory and assets in a single transaction—outside the ordinary course of business—pocket the proceeds, and disappear, leaving creditors unpaid.
The law’s solution was a notice requirement. Before a bulk sale could close, the buyer had to notify the seller’s creditors, giving them an opportunity to assert claims against the assets before they changed hands. If the buyer failed to provide notice, creditors could pursue the assets in the buyer’s hands as if the sale had never occurred.
Article 6 of the Uniform Commercial Code (UCC) codified these requirements into a standardized framework that most states adopted in some form.
UCC Article 6: The Original Framework
The original UCC Article 6—titled “Bulk Transfers”—applied when a business made a transfer “not in the ordinary course of the transferor’s business” of “a major part of the materials, supplies, merchandise or other inventory.” The statute imposed several requirements:
Creditor List. The seller was required to furnish the buyer with a sworn list of the seller’s existing creditors, including names, addresses, and amounts owed.
Schedule of Property. The parties were required to prepare a schedule of the property being transferred, including its description and location.
Notice to Creditors. The buyer was required to give notice of the pending bulk transfer to all creditors on the list—typically at least 10 days before the buyer took possession of the goods or paid for them.
Recording. Some states required the notice or transfer documents to be filed with a local government office.
The penalty for noncompliance was harsh: the bulk transfer was “ineffective” against the seller’s creditors, meaning creditors could levy on the transferred assets as if they still belonged to the seller.
The 1989 Recommendation to Repeal
By the late 1980s, Article 6 had come under sustained criticism. The National Conference of Commissioners on Uniform State Laws (NCCUSL)—the body responsible for drafting the UCC—studied the issue and in 1989 issued a formal recommendation: repeal Article 6 entirely, or at minimum adopt a significantly revised version.
NCCUSL’s reasoning was straightforward:
The problem had been solved by other laws. Fraudulent transfer statutes (now codified in most states as the Uniform Voidable Transactions Act, formerly the Uniform Fraudulent Transfer Act) gave creditors robust remedies against sellers who transferred assets to avoid debts. UCC Article 9 (secured transactions) protected creditors who properly perfected their security interests. These tools made Article 6’s belt-and-suspenders approach redundant.
Compliance costs were disproportionate. Every bulk asset sale—including legitimate business acquisitions with no intent to defraud anyone—required the buyer to compile creditor lists, send notices, and wait through notice periods. The costs fell on honest parties to prevent a fraud that other laws already addressed.
The penalties were draconian. Failing to comply with notice requirements—even through an innocent oversight—could render an entire transaction voidable. The punishment didn’t fit the crime.
The law was poorly adapted to modern commerce. Article 6 was drafted for a world of local businesses with local creditors. It didn’t account for businesses with hundreds of creditors across multiple states, or for sophisticated acquisition transactions with extensive due diligence.
NCCUSL offered states two options: an outright repealer statute, or Revised Article 6 with modernized requirements and more proportionate remedies.
Which States Repealed Article 6
The vast majority of states followed NCCUSL’s recommendation and repealed Article 6. Colorado was among the first, repealing its bulk sales law effective July 1, 1991. Over the following two decades, approximately 45 states eliminated their bulk sales statutes.
Minnesota repealed Article 6 as well. Minnesota Statutes Chapter 336—the state’s codification of the UCC—does not include Article 6. A buyer acquiring business assets in Minnesota has no bulk sales notice obligations under state commercial law.
States That Still Enforce Bulk Sales Requirements
A small number of jurisdictions have retained some form of bulk sales law. The most significant are:
California
California adopted Revised Article 6 and codifies its bulk sales law in Division 6 of the California Commercial Code (§§ 6101–6111). California’s law applies to bulk sales that are (1) not in the ordinary course of the seller’s business, (2) involve more than half of the seller’s inventory and equipment (measured by value on the date of the bulk sale agreement), and (3) meet certain revenue thresholds.
Key requirements include:
- The buyer must give at least 12 business days’ notice to the county tax collector and to creditors before the bulk sale closes
- The notice must be recorded with the county recorder in the county where the assets are located
- The notice must be published in a newspaper of general circulation
- A sale that doesn’t comply is voidable by creditors for up to one year after the date of the bulk sale (or, if concealed, one year after discovery)
California’s law is the most actively enforced bulk sales statute in the country. Businesses acquiring assets in California—particularly restaurants, retail stores, and manufacturing operations—must account for compliance in their acquisition timeline.
Maryland
Maryland retains Article 6 in Title 6 of the Maryland Commercial Law Code. Maryland’s statute requires notice to creditors before a bulk transfer and imposes tax-related notice obligations through the Comptroller’s office. Buyers acquiring business assets in Maryland should verify current requirements with Maryland counsel, as the state also has separate bulk sales tax clearance procedures.
District of Columbia
The District of Columbia adopted Revised Article 6. Bulk transfers in D.C. require creditor notification, and noncompliant transfers may be voidable by the seller’s creditors.
Tax-Related Bulk Sales Requirements
Several states that repealed UCC Article 6 still maintain separate bulk sales notification requirements under their tax codes. These aren’t technically “bulk sales law” in the UCC sense, but they create similar obligations:
- New York requires the purchaser to notify the Commissioner of Taxation and Finance at least 10 days before taking possession of bulk-transferred assets (N.Y. Tax Law § 1141(c)). Failure to notify makes the buyer personally liable for any sales tax, withholding tax, or other taxes the seller owes.
- New Jersey requires 10 days’ advance notice to the Director of the Division of Taxation before any bulk sale closing (N.J.S.A. 54:50-38). The Director may then escrow a portion of the purchase price to satisfy the seller’s tax obligations.
- Other states have similar tax notification provisions. Even if no UCC Article 6 compliance is required, buyers should verify whether the state has a bulk sales tax clearance process.
What Replaced Bulk Sales Law: Modern Creditor Protections
In states that repealed Article 6, the legal framework for protecting creditors in asset sales now rests on several other bodies of law:
Fraudulent Transfer / Voidable Transactions Law
The Uniform Voidable Transactions Act (UVTA)—adopted in most states, including Minnesota (Minn. Stat. §§ 513.41–513.51)—allows creditors to avoid transfers made with actual intent to hinder, delay, or defraud creditors, or transfers made for less than reasonably equivalent value when the debtor was insolvent or became insolvent as a result.
This is the primary tool creditors use today to challenge asset sales designed to avoid debts. Unlike Article 6, fraudulent transfer law targets the specific harm—intent to defraud or inadequate consideration—rather than imposing blanket notice requirements on all bulk transfers.
UCC Article 9: Secured Transactions
Creditors who hold a properly perfected security interest in the seller’s assets retain their interest even after the assets are sold in a bulk transfer. UCC Article 9 (Minn. Stat. ch. 336, Art. 9) gives secured creditors priority over both the buyer and unsecured creditors.
For buyers, this means that a thorough UCC lien search is essential before any asset acquisition. A buyer who purchases assets subject to a perfected security interest takes them subject to the lien—regardless of what the purchase agreement says.
Successor Liability Doctrine
Under common law successor liability principles—applicable in Minnesota and most states—a buyer of assets generally does not assume the seller’s liabilities unless one of several exceptions applies: (1) express or implied assumption, (2) a de facto merger, (3) the buyer is a mere continuation of the seller, or (4) the transaction was structured to fraudulently avoid liabilities.
Contractual Protections
Modern asset purchase agreements address creditor risk through contractual mechanisms that didn’t exist when Article 6 was drafted:
- Representations and warranties regarding the seller’s liabilities, debts, and pending claims
- Indemnification provisions requiring the seller to hold the buyer harmless from pre-closing liabilities
- Escrow arrangements where a portion of the purchase price is held to satisfy post-closing claims
- Purchase price adjustments based on working capital, net asset value, or liability discovery
These contractual protections, backed by thorough due diligence, are far more effective than Article 6’s blunt notice requirement ever was.
Practical Guidance for Buyers and Sellers
Whether you’re buying or selling business assets, here’s what you should do:
For Buyers
1. Check the applicable state’s law. If the assets are located in California, Maryland, or D.C., you likely have bulk sales notice obligations. If the seller has operations in multiple states, check each jurisdiction.
2. Run a UCC lien search. Search the Secretary of State’s office in every state where the seller is organized or has assets. Identify all perfected security interests and plan to either satisfy them at closing or obtain lien releases.
3. Verify tax clearance. Even in states without UCC Article 6, check whether the state requires a bulk sales tax notification. New York’s and New Jersey’s requirements are commonly overlooked by out-of-state buyers.
4. Conduct thorough due diligence. Review the seller’s accounts payable, pending litigation, tax returns, and known creditor claims. Don’t rely on the seller’s representations alone—verify independently.
5. Structure contractual protections. Your asset purchase agreement should include comprehensive representations about the seller’s debts and liabilities, indemnification obligations, and an escrow or holdback to cover undisclosed claims.
For Sellers
1. Disclose creditor obligations honestly. Concealing liabilities from a buyer doesn’t eliminate them—it creates fraudulent transfer exposure and breach of contract claims.
2. Satisfy or arrange for payment of debts. Use closing proceeds to pay down known creditors. Establish a mechanism—such as an escrow—for disputed or contingent claims.
3. Cooperate with buyer’s due diligence. Providing complete and accurate information reduces post-closing disputes and the risk that the buyer will invoke indemnification or escrow claims.
The Bottom Line for Minnesota Business Owners
Minnesota repealed its bulk sales law years ago. If you’re buying or selling business assets within Minnesota, you have no Article 6 compliance obligations. But that doesn’t mean creditor risk disappears—it means the risk is managed through fraudulent transfer law, UCC Article 9 lien searches, successor liability analysis, and well-drafted purchase agreements.
If the transaction involves assets in California, Maryland, D.C., or a state with bulk sales tax notification requirements, compliance with those jurisdictions’ laws is necessary regardless of where the buyer or seller is based.
The repeal of Article 6 in most states was a recognition that modern commercial law provides better tools for protecting creditors without burdening legitimate transactions. But those modern tools only work if you actually use them—due diligence, lien searches, and strong contractual protections aren’t optional. They’re what replaced the old notice requirements.
Attorney Aaron Hall represents Minnesota business owners in asset acquisitions, business sales, and commercial transactions. For more information, visit aaronhall.com.