Bulk Transfers

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Bulk Transfers
2015-07-15 20:42:53

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  1. What is in Article 6 World – bulk transfers.
    • (1) Transfer of all/substantially all of a transferor’s assets
    • (2) Not in the ordinary course of business
    • (3) Which occurs in MD.
  2. What is exempted from Article 6 World
    • (1) Granting or repossession of a security interest
    • (2) Assignment of benefits for all creditors
    • (3) Forced sales in court or bankruptcy
    • (4) Sales in bankruptcy reorganization
    • (5) To a person obligated to pay full debt, remains solvent, operates business in MD and gives public notice.
    • (6) To an entity that assumes debt and provides public notice.
  3. Public Notice
    • (1) Advertisement in a newspaper at least once per week for two weeks
    • (2) Names and address of transferor and transferee
    • (3) Effective date of transfer
  4. What happens if the bulk transfer is subject to Article 6 but does not meet its obligations?
    The bulk transfer is ineffective, and creditor is entitled to take property despite the transfer.
  5. General Requirements for Bulk Transfers
    • (1) List of creditors
    • (2) List of property
    • (3) Keep list for 6 months
    • (4) Notice before transfer or sale
    • (5) New consideration goes to transferor’s debts.
    • Burden is on Transferee.
  6. Notice to Creditors
    • Proper notice to creditors requires:
    • (1) Notice to all creditors and MD State Comptroller
    • (2) 10 days before transfer/sale
    • Notice through personal service or certified mail.
  7. Form of notice requires
    • (1) Bulk transfer is to be made
    • (2) Names of the transferor/ee
    • (3) Whether debts will be paid in full
    • (4) Address to submit bills
  8. If debts not paid in full, notice also requires
    • (1) Location and description of property
    • (2) Address where property can be inspected
    • (3) Amount of debts that are being paid
    • (4) Whether transfer for new consideration
    • (5) Where to submit claims
  9. Access to lists.
    • Transferee must make list of property and creditors available at all reasonable hours.
    • Transferee may file lists at circuit court.
  10. Payment to the creditors
    • For any new consideration, the transferee must ensure that the payment is applied to the debts of creditors.
    • Any creditor can dispute this for benefit of all creditors.
    • If consideration is less than debts, pro-rata distribution.
  11. Timeframe to Assert Creditor Rights
    • A creditor must assert rights within 6 months.
    • If transfer concealed, a creditor must assert rights within 6 months of discovery.
  12. Subsequent Transferees
    • When the initial transferee transfers property to another. Need not be bulk.
    • (1) If no consideration, creditors have priority.
    • (2) If consideration given, subsequent transferee takes free and clear.
  13. Auctioneers
    • Auctioneer is like a transferee.
    • If auctioneer knows of bulk transfer, he is liable for the full amount of the auction.
    • Auctioneers are jointly and severably liable.