Revised Statutes of Newfoundland 1990 Chapter B-11

(c) "creditor" means a person to whom a seller is indebted, whether or not the debt is due, for stock, trade fixtures, goods, wares, merchandise, chattels, money or services, provided for the purpose of enabling the seller to carry on a business and includes a surety and the endorser of a promissory note or bill of exchange who has given the security or endorsement for that purpose and who would, upon payment of the debt, promissory note or bill of exchange, in respect of which the suretyship was entered into or the endorsement was given becomes a creditor of the seller;

(d) "proceeds of the sale" includes the purchase price or consideration payable to the seller, or passing from the buyer to the seller, on a sale in bulk and the money realized by a trustee under a security or by the sale or other disposition of property, coming into the seller's hands as the consideration or part of the consideration for the sale;

(e) "sale" whether used alone or in the expression "sale in bulk", includes a transfer, conveyance, pledge, charge, mortgage, barter or exchange and an agreement to sell, transfer, convey, pledge, charge, mortgage, barter or exchange, but does not include

(i) a mortgage of real property,

(ii) a chattel mortgage, unless it affects substantially the entire stock of the seller,

(iii) a chattel mortgage that is given in the ordinary course of business as security for the repayment of a loan or the guarantee of repayment of a loan, even though it affects substantially the entire stock of the seller,

(iv) a floating charge given to secure the bonds or debentures of a corporation,

(v) a security for indebtedness given to a bank in the ordinary course of business, or

(vi) a security given for a past due indebtedness;

(f) "sale in bulk" means a sale

(i) out of the usual course of business or trade of the seller of stock or part of it,

(ii) of substantially the entire stock of the seller, or

(iii) of an interest in the business of the seller;

(g) "sell" has a meaning similar to "sale";

(h) "seller" means a person who sells stock in bulk or an interest in stock to another person by a sale in bulk, for a valuable consideration;

(i) "stock" means

(i) a stock of goods, wares, merchandise or chattels ordinarily the subject of trade and commerce, or

(ii) the goods, wares, merchandise or chattels in which a person trades, or that the person produces, or that are the output of a business,

and includes

(iii) leases,

(iv) accounts receivable,

(v) choses in action,

(vi) franchises,

(vii) patents,

(viii) goodwill,

(ix) trade fixtures, and

(x) other assets,

appertaining to, or with which a person carries on a business;

(j) "stock in bulk" means stock or part of it that is the subject of a sale in bulk;

(k) "trade fixtures" means the fixtures, machinery and other chattels, other than stock, with which a person carries on a business; and

(l) "trustee" means a trustee under the Bankruptcy Act (Canada) appointed for the bankruptcy district in which the stock of the seller or a part of it is located, or the seller's business or a part of it is carried on, at the time of the sale in bulk, or a person named as trustee by the seller or by the seller's creditors in their written consent to a sale in bulk or a person appointed as a trustee under subsection 8(2).

RSN1970 c28 s2

3. This Act applies only to sales in bulk by

(a) persons who, as their ostensible occupation or part of it, buy and sell goods, wares or merchandise, ordinarily the subject of trade and commerce;

(b) commission merchants;

(d) proprietors of hotels, rooming houses, restaurants, motor vehicle service stations, oil or gasoline stations, or machine shops.

RSN1970 c28 s3

4. (1) Nothing in this Act applies to or affects

(a) a sale by an executor, administrator, receiver, assignee or trustee for the benefit of creditors, a trustee under the Bankruptcy Act (Canada), a liquidator or official receiver, a public official acting under judicial process, or a trader or merchant selling exclusively by wholesale; or

(b) an assignment by a trader or merchant for the general benefit of creditors.

(2) Where a seller proposes to sell a part only of his or her stock, the seller may apply to a judge of the Trial Division for an order exempting the sale from the application of this Act and if satisfied, that the proposed sale

(a) is not a sale of substantially the entire stock of the seller; and

(b) is advantageous to the seller and will not impair the seller's ability to pay his or her creditors in full,

the judge may make the order and after the order this Act shall not apply to the sale.

RSN1970 c28 s4; 1986 c42 Sch B

5. (1) Except as otherwise provided in this Act, a buyer of stock in bulk, before paying to the seller a part of the purchase price or giving a promissory note or security for the purchase price or part of it or executing a transfer, conveyance or encumbrance of property, shall demand of and receive from the seller and a seller of stock in bulk shall provide to the buyer, a written statement in Form 1 verified by the affidavit of the seller or an authorized agent or, if the seller is a corporation, by the affidavit of an officer, director, manager or authorized agent of the corporation.

(2) When the buyer receives the statement, if it shows that the seller has no creditors, the buyer may pay the purchase price to the seller and section 11 does not apply.

(3) Where the affidavit is made by an agent of the seller or, if the seller is a corporation, by an officer, director, manager or authorized agent of the corporation, the affidavit shall state that the deponent has a personal knowledge of the facts sworn to or affirmed.

(4) The statement shall show the names and addresses of the creditors of the seller and the amount of the indebtedness or liability due, or accruing due, or to become due by the seller to each of the creditors.

(5) A buyer, before obtaining the statement, may pay to the seller on account of the purchase price a sum not exceeding 5% of the purchase price or $500, whichever is the lesser amount.

(6) From and after the providing of the statement and affidavit, no preference or priority shall be obtainable by a creditor of the seller in respect of the stock in bulk or the proceeds of sale of it by attachment, garnishment proceedings, contract or otherwise.

RSN1970 c28 s5

6. (1) Where the amount to be realized from a proposed sale in bulk is not sufficient to pay in full all creditors of the seller, the seller shall

(a) at least 20 days before the sale, send by registered mail with postage prepaid, to each of the creditors; and

(b) publish in an issue of the Gazette, the publication date of which is at least 20 days before the sale,

a notice to the creditors and all others whom it may concern, setting out the particulars required by subsection (2).

(2) The notice required by subsection (1) shall state

(a) the intention of the seller to make the sale and the date and place and all other particulars of it;

(b) whether the creditors will be paid in full on or before the completion of the sale;

(c) that, if the creditors will not be paid in full on or before the completion of the sale, a written consent to the sale or a written waiver of the provisions of this Act is requested;

(d) that, if creditors sufficient as to number and amount of their claims do not waive the provisions of this Act but consent to the sale, the creditors who consent may, in their consents, name a trustee as provided in section 8; and

(e) the name of a person suggested by the seller as a suitable trustee.

RSN1970 c28 s6

7. (1) Before the completion of a sale in bulk

(a) the claims of the creditors of the seller, as shown by the written statement, shall be paid in full;

(b) the seller shall produce and deliver to the buyer a written waiver in Form 2 of the provisions of this Act, other than the provisions contained in section 5, from creditors of the seller representing not less than 60% in number and amount of the claims exceeding $50 as shown by the written statement; or

(c) the seller shall produce and deliver to the buyer the written consent to the sale of creditors of the seller representing not less than 60% in number and amount of the claims exceeding $50 as shown by the written statement.

(2) Before the completion of a sale in bulk the seller shall give written notice by registered mail to each of the secured creditors requiring the creditor, within 20 days of the mailing of the notice, to deposit with the seller an affidavit stating in it the full particulars of his or her security, the date when it was given and the value at which the creditor assesses it.

(3) Where a creditor fails, within the time fixed, to value his or her security and deposit an affidavit as required under subsection (2), the indebtedness owing to the creditor for which the security was given shall not be included in reckoning the number and amount of the claims in respect of which waivers or consents are required under subsection (1).

(4) Where a creditor

(a) fails, within the time fixed, to value his or her security and deposit an affidavit as required by subsection (2); or

(b) values his or her security at more than the amount of the indebtedness the creditor secured,

no consent from the creditor, in respect of the secured indebtedness, is required under paragraph (1)(c).

(5) Where a creditor values his or her security at less than the amount of the debt secured, only the difference between the value at which the creditor assesses the security and the amount of the indebtedness secured shall be included in reckoning the amount of the claim in respect of which waivers or consents are required under subsection (1).

(6) The seller or other creditor who is not satisfied with the valuation placed by a creditor on his or her security may apply to a judge of the Trial Division for an order assessing the value of the security and the judge, on the evidence that seems sufficient to him or her, may assess the value of the security and make an order declaring that for all purposes of this Act, the value of the security is fixed at the amount stated in the order.

(7) An application under subsection (6) shall be made within 30 days of the date of the mailing of the notice to which subsection (2) refers.

RSN1970 c28 s7; 1986 c42 Sch B

8. (1) Where a sale in bulk is completed with the written consent of the creditors of the seller under paragraph 7(1)(c), the buyer shall pay, deliver or convey the entire proceeds of the sale to the person named as trustee by the creditors in the written consent or, where no trustee is named, to the trustee named by the seller or appointed under subsection (2), to be dealt with as provided by section 9.

(2) Upon the application of an interested person, where neither the seller nor the creditors of the seller in their written consent to a sale in bulk have named a trustee, a judge of the Trial Division at the time of the sale in bulk, shall by order appoint a trustee and fix the security, to be given by the trustee.

RSN1970 c28 s8; 1986 c42 Sch B

9. (1) Where the proceeds of the sale are paid, delivered or conveyed to a trustee under section 8, the trustee shall be a trustee for the general benefit of the creditors of the seller and shall distribute the proceeds of the sale among the creditors of the seller in proportion to the amounts of their claims proved as required under subsection (2) and the other creditors of the seller that file claims with the trustee in accordance with the Bankruptcy Act (Canada).

(2) The distribution shall be made in the manner that money is distributed by a trustee under the Bankruptcy Act (Canada) and in making the distribution all creditors' claims shall be proved in the same manner and are subject to the same contestation and entitled to the same priorities as in the case of a distribution under that Act.

(3) The creditor, vendor and trustee have in all respects the same rights, liabilities and powers as the creditors, bankrupt and trustee, respectively, have under the Bankruptcy Act (Canada), the vendor and the trustee being considered for that purpose to be a bankrupt and a trustee respectively under that Act, and the priorities of creditors shall be determined as of the date of the completion of the sale.

(4) Before making the distribution the trustee shall publish a notice once in the Gazette and in at least 2 issues of a newspaper published in the province and having a circulation in the locality in which the stock in bulk was situated at the time of the sale and the trustee shall not make the distribution until at least 14 days after the last publication.

(5) It is not necessary to publish an advertisement or notice of the distribution other than that required by subsection (4).

RSN1970 c28 s9

10. (1) The fees or commission of the trustee shall not exceed 3% of the proceeds of the sale that come into the trustee's hands and in the absence of an agreement by the seller to the contrary, the fees or commission, together with disbursements made by the trustee shall be paid by being deducted from the money to be received by the creditors and shall not be charged to the seller.

(2) Where the proceeds of the sale exceed the amount required to pay in full all indebtedness to creditors that must be included in reckoning the amount of the claims in respect of which waivers or consents are required under subsection 7(1), the fees or commission of the trustee and a disbursement made by the trustee shall be paid from the excess proceeds, to the extent of that excess and a balance remaining shall be paid as provided in subsection (1).

RSN1970 c28 s10

11. (1) Unless this Act is complied with, a sale in bulk shall be considered to be fraudulent and void as against the creditors of the seller, and every payment made on account of the purchase price and every delivery of a note or other security and every transfer, conveyance and encumbrance of property by the buyer shall be considered to be fraudulent and void as between the buyer and the creditors of the seller, but where the buyer has received or taken possession of the stock in bulk or a part of it, the buyer is personally liable to account to the creditors of the seller for the value of it including all money, security or property realized or taken by the buyer from, out of or on account of the sale or other disposition of the stock in bulk or a part of it.

(2) In an action brought or proceeding taken by a creditor of the seller within the time limited by section 13 to set aside or have declared void a sale in bulk, or in the event of a seizure of the stock or a part of it in the possession of the buyer under judicial process issued by or on behalf of a creditor of the seller within that period, the buyer is estopped from denying that the stock in his or her possession at the time of the action, proceeding or seizure is the stock purchased or received by him or her from the seller.

(3) Where the stock then in the possession of the buyer, or a part of it, was in fact purchased by the buyer after the sale in bulk from a person other than the seller and has not been paid for in full, the creditors of the buyer, to the extent of the amounts owing to them for the goods so supplied, are entitled to share with the creditors of the seller in the amount realized on the sale or other disposition of the stock in the possession of the buyer at the time of the action, proceeding or seizure in the same manner and within the same time as if they were creditors of the seller.

RSN1970 c28 s11

12. In an action or proceeding in which a sale in bulk is attacked or comes in question, whether directly or collaterally, the burden of proof that this Act has been complied with is upon the person upholding the sale in bulk.

RSN1970 c28 s12

13. An action shall not be brought or proceeding had or taken to set aside or have declared void a sale in bulk for failure to comply with this Act, unless the action is brought or proceeding had or taken within 6 months from the date of the completion of the sale.

RSN1970 c28 s13

FORM 1

(Section 5)

STATEMENT AND DECLARATION

Statement showing names and addresses of all creditors of , of the of in the of.

I, of the of in the of, make oath (or affirm) and say:

1. The foregoing (or annexed) is a true statement of the names and addresses of all the creditors of the, and shows correctly the amount of the indebtedness or liability due, or accruing due or become due, by the to each of the creditors.

(If the affidavit is made by an agent, add:)

2. I am the authorized agent of the seller and have a personal knowledge of the facts sworn to.

(Or, if the seller is a corporation)

I, , of the of in the of, make oath (or affirm) and say:

1. The foregoing (or annexed) is a true statement of the names and addresses of all the creditors of (name of corporation) and shows, correctly the amount of the indebtedness or liability due, or accruing due or to become due, by the corporation to each of the creditors.

2. I am the of the corporation and have a personal knowledge of the facts sworn to (or affirmed).

Sworn (affirmed) before me, etc.

RSN1970 c28 Form 1

FORM 2

(Section 7)

WAIVER

We, the undersigned creditors of, of the of in the of waive the provisions of the Bulk Sales Act where that Act would apply to, affect or cause to make fraudulent or void, the sale in bulk by of his or her stock of goods, wares, merchandise and fixtures or part of them or an interest in the seller's business to , of the of in the of, and we admit having received notice of the intended sale and agree not to disturb, dispute or question the validity of the sale under the provisions of that Act.

Dated this day of, 19.

WITNESS:

RSN1970 c28 Form 2