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Current through October 23, 2012
(a) Except as otherwise provided in subsection (c) of this section, this article applies to a bulk sale if:
(1) The seller's principal business is:
(A) The sale of inventory from stock; or
(B) A restaurant, cafe, bakery, tavern, or similar establishment where food or drink is furnished for consideration; and
(2) On the date of the bulk-sale agreement the seller is located in the District or, if the seller is located in a jurisdiction that is not a part of the United States, the seller's major executive office in the United States is in the District.
(b) A seller is deemed to be located at his or her place of business. If a seller has more than one place of business, the seller is deemed located at his or her chief executive office.
(c) This article does not apply to:
(1) A transfer made to secure payment or performance of an obligation;
(2) A transfer of collateral to a secured party pursuant to § 28:9-609;
(3) A disposition of collateral pursuant to § 28:9-610;
(4) Retention of collateral pursuant to § 28:9-620;
(5) A sale of an asset encumbered by a security interest or lien if (i) all the proceeds of the sale are applied in partial or total satisfaction of the debt secured by the security interest or lien, or (ii) the security interest or lien is enforceable against the asset after it has been sold to the buyer and the net contract price is zero;
(6) A general assignment for the benefit of creditors or to a subsequent transfer by the assignee;
(7) A sale by an executor, administrator, receiver, trustee in bankruptcy, or any public officer under judicial process;
(8) A sale made in the course of judicial or administrative proceedings for the dissolution or reorganization of an organization;
(9) A sale to a buyer whose principal place of business is in the United States and who:
(A) Not earlier than 21 days before the date of the bulk sale, (i) obtains from the seller a verified and dated list of claimants of whom the seller has notice 3 days before the seller sends or delivers the list to the buyer, or (ii) conducts a reasonable inquiry to discover the claimants;
(B) Assumes in full the debts owed to claimants of whom the buyer has knowledge on the date the buyer receives the list of claimants from the seller or on the date the buyer completes the reasonable inquiry, as the case may be;
(C) Is not insolvent after the assumption; and
(D) Gives written notice of the assumption not later than 30 days after the date of the bulk sale by sending or delivering a notice to the claimants identified in subparagraph (B) of this paragraph or by filing a notice in the office of the Mayor;
(10) A sale to a buyer whose principal place of business is in the United States and who:
(A) Assumes in full the debts that were incurred in the seller's business before the date of the bulk sale;
(B) Is not insolvent after the assumption; and
(C) Gives written notice of the assumption not later than 30 days after the date of the bulk sale by sending or delivering a notice to each creditor whose debt is assumed or by filing a notice in the office of the Mayor;
(11) A sale to a new organization that is organized to take over and continue the business of the seller and that has its principal place of business in the United States if:
(A) The buyer assumes in full the debts that were incurred in the seller's business before the date of the bulk sale;
(B) The seller receives nothing from the sale except an interest in the new organization that is subordinate to the claims against the organization arising from the assumption; and
(C) The buyer gives written notice of the assumption not later than 30 days after the date of the bulk sale by sending or delivering a notice to each creditor whose debt is assumed or by filing a notice in the office of the Mayor;
(12) A sale of assets having:
(A) A value, net of liens and security interests, of less than $10,000. If a debt is secured by assets and other property of the seller, the net value of the assets is determined by subtracting from their value an amount equal to the product of the debt multiplied by a fraction, the numerator of which is the value of the assets on the date of the bulk sale and the denominator of which is the value of all property securing the debt on the date of the bulk sale; or
(B) A value of more than $25,000,000 on the date of the bulk-sale agreement; or
(13) A sale required by, and made pursuant to, statute.
(d) The notice under subsection (c)(9)(D) of this section must state (i) that a sale that may constitute a bulk sale has been or will be made; (ii) the date or prospective date of the bulk sale; (iii) the individual, partnership, or corporate names and the addresses of the seller and buyer; (iv) the address to which inquiries about the sale may be made, if different from the seller's address; and (v) that the buyer has assumed or will assume in full the debts owed to claimants of whom the buyer has knowledge on the date the buyer receives the list of claimants from the seller or completes a reasonable inquiry to discover the claimants.
(e) The notice under subsections (c)(10)(C) and (c)(11)(C) of this section must state (i) that a sale that may constitute a bulk sale has been or will be made; (ii) the date or prospective date of the bulk sale; (iii) the individual, partnership, or corporate names and the addresses of the seller and buyer; (iv) the address to which inquiries about the sale may be made, if different from the seller's address; and (v) that the buyer has assumed or will assume the debts that were incurred in the seller's business before the date of the bulk sale.
(f) For purposes of subsection (c)(12) of this section, the value of assets is presumed to be equal to the price the buyer agrees to pay for the assets. However, in a sale by auction or a sale conducted by a liquidator on the seller's behalf, the value of assets is presumed to be the amount the auctioneer or liquidator reasonably estimates the assets will bring at auction or upon liquidation.
(Dec. 30, 1963, 77 Stat. 714, Pub. L. 88-243, § 1; Apr. 9, 1997, D.C. Law 11-239, § 2, 44 DCR 936; Oct. 26, 2000, D.C. Law 13-201, § 201(g)(2), 47 DCR 7576.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Sections 6-102 and 6-103 (1987 Official Text).Changes
New choice-of-law provision; exclusions from the Article clarified, revised, and expanded.Purposes of Changes and New Matter
1. Subsection (1)(a) follows Section 6-102(3) of the 1987 Official Text and makes Article 6 applicable only when the seller's principal business is the sale of inventory from stock. This Article does not apply to a sale by a seller whose principal business is the sale of goods other than inventory, e.g., a farmer, is the sale of inventory not from stock, e.g., a manufacturer who produces goods to order, or is the sale of services, e.g., a dry cleaner, barber, or operator of a hotel, tavern, or restaurant.
2. The choice-of-law rule in subsections (1)(b) and (2) derives from Section 9-103(3) and should be interpreted consistently with the Official Comment and case law construing that Section. Any agreement between the buyer and the seller with regard to the law governing a bulk sale does not affect the choice-of-law rule in this Article.
3. Some of the transactions excluded by subsection (3), e.g., those excluded by subsection (3)(a), may not be bulk sales. This Article nevertheless specifically excludes them in order to allay any doubts about the Article's applicability. Certain transactions, e.g., the sale of fully encumbered inventory that remains subject to a security interest, may be excluded by more than one subsection.
4. Subsections (3)(a), (b), (c), (d), and (e) derive from subsections (1) and (3) of Section 6-103 (1987 Official Text).
5. Subsections (3)(f), (g), and (h) restate subsections (2), (4), and (5) of Section 6-103 with minor changes.
6. Subsections (3)(i), (j), and (k) relate to sales in which the buyer assumes specified debts of the seller. A bulk sale does not fall within any of these subsections unless the buyer's assumption of debts is binding and irrevocable.
Subsection (3)(j) derives from subsection (6) of Section 6-103 (1987 Official Text) and is available to buyers who are not insolvent (as defined in Section 1-201(23)), assume all the seller's business debts in full, and give notice of the assumption. Subsection (3)(k) derives from subsection (7) of Section 6-103 (1987 Official Text) and excludes transactions in which the risks to creditors are minimal. Like subsection (3)(j), this subsection applies only if the buyer assumes all the seller's business debts in full and gives notice of the assumption. In addition, the buyer must be a new organization that is organized to take over and continue the seller's business, the seller must receive nothing from the sale other than an interest in the new organization, and the seller's interest must be subordinate to the claims arising from the assumption. Sales that may qualify for the exclusion include the incorporation of a partnership or sole proprietorship.
Buyers often are reluctant to assume debts of which they have no knowledge. Subsection (3)(i), which is new, permits a qualifying buyer to exclude a sale from this Article by assuming only those debts owed to claimants of whom the buyer has knowledge after the buyer either conducts a reasonable inquiry to discover claimants or obtains a list of claimants from the seller. A buyer who takes a verified list from the seller is held to have knowledge of the claimants on the list and is entitled to rely in good faith on the list without making further inquiry. The protection afforded by the assumption of these debts, while not perfect, is sufficiently great to eliminate the need for compliance with Article 6.
7. Subsection (3)(l) is new. Although the bulk sale of even a very small business may be of concern to some creditors, losses to creditors from sales of assets in which the seller's equity is less than $10,000 are not likely to justify the costs of complying with this Article. Sales of assets having a value of more than $25,000,000 have not presented serious risks to creditors. Publicity normally attends sales of that magnitude, and the sellers are unlikely to be able successfully to remove the proceeds from the reach of creditors. As used in this subsection, "price" includes all consideration for the assets, not only new consideration. Compare "Net contract price" (Section 6-102(1)(k)). If the auctioneer or liquidator does not make an estimation, then no presumption arises.
8. Subsection (3)(m) is new. This Article assumes that creditors are aware of statutes that may require their debtors to conduct bulk sales under specified circumstances, e.g., upon the termination of a franchise or of a contract between a dealer and supplier, and are able to take account of any risk that those sales may impose.
Cross-References
Point 1: Section 9-109.
Point 2: Sections 1-105 and 9-103.
Point 3: Section 6-102.
Point 4: Sections 9-111, 9-503, 9-504, and 9-505.
Point 6: Sections 1-201 and 1-203.
Point 7: Section 6-102.
Definitional Cross-References
"Asset". Section 6-102.
"Auctioneer". Section 6-102.
"Bulk sale". Section 6-102.
"Buyer". Section 2-103.
"Claimant". Section 6-102.
"Collateral". Section 9-105.
"Date of the bulk sale". Section 6-102.
"Date of the bulk-sale agreement". Section 6-102.
"Debt". Section 6-102.
"Insolvent". Section 1-201.
"Inventory". Section 9-109.
"Knowledge". Section 1-201.
"Liquidator". Section 6-102.
"Net contract price". Section 6-102.
"Notice". Section 1-201.
"Organization". Section 1-201.
"Presumed". Section 1-201.
"Proceeds". Section 9-306.
"Sale". Section 2-106.
"Secured party". Section 9-105.
"Security interest". Section 1-201.
"Seller". Section 2-103.
"Send". Section 1-201.
"United States". Section 6-102.
"Value". Section 6-102.
"Verified". Section 6-102.
Prior Codifications
1981 Ed., § 28:6-103.
1973 Ed., § 28:6-103.
Effect of Amendments
D.C. Law 13-201, enacting a new Article 9 of the Uniform Commercial Code applicable July 1, 2001, made conforming amendments to this section applicable upon the same date.
Legislative History of Laws
Law 3-49, the "Uniform Commercial Code--Bulk Transfers Amendment Act of 1979," was introduced in Council and assigned Bill No. 3-104, which was referred to the Committee on Public Services and Consumer Affairs. The Bill was adopted on first and second readings on November 6, 1979 and November 20, 1979, respectively. Signed by the Mayor on December 12, 1979, it was assigned Act No. 3-135 and transmitted to both Houses of Congress for its review.
For legislative history of D.C. Law 11-239, see Historical and Statutory Notes following § 28:6-101.
For Law 13-201, see notes following § 28:6-102.
