Jul 25, 2016
Farewell at last: Ontario takes first steps to repeal Bulk Sales Act
Ontario remains the only jurisdiction in Canada that still has bulk sales legislation. Bulk Sales legislation prohibits a sale of assets in bulk unless certain protections are given to the sellers' creditors. The current version of the Bulk Sales Act (Ontario) ("BSA") was adopted by Ontario in 1959. Compliance with the BSA can add significant costs and delay to an asset purchase and sale transaction. With the objective of creditor protection now served by more modern statutes, the BSA is generally considered to be obsolete and a nuisance.
On June 8, 2016, Bill 218, the Burden Reduction Act, 2016, passed its first reading in the Ontario Legislature. Bill 218 is part of a government initiative to reduce the regulatory burden on business. It will repeal the BSA, if it is passed into law. Even after Bill 218 becomes law, the creditors will have protection under the existing legislations, both at the provincial and federal levels, including the Personal Property Security Act (Ontario), Business Corporations Act (Ontario), Fraudulent Conveyances Act (Ontario), Bankruptcy and Insolvency Act (Canada) and Canada Business Corporations Act.
Bill 218 still needs to be carried forward through all the stages of the legislative process. Bill 218 imposes no transition rule. Therefore, any deals completed before it comes into force must still comply with the BSA. The purchaser who fails to comply or agrees to waive compliance with the BSA will continue to do so at its own peril. Consequently, the purchasers and their lenders should consider the consequences of completing any transaction where there is non-compliance before Bill 218 comes into force.
Our Business Law Group will monitor and update our readers on the progress of Bill 218.
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