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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.
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.
- (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
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.
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.
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.
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
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
Access to lists.
- Transferee must make list of property and creditors available at all reasonable hours.
- Transferee may file lists at circuit court.
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.
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.
- 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.
- 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.