I recently came across a discussion among members of the Business Law Section of the NYS Bar Association where a question was posed concerning the possible purchase by the client of the posting attorney of all or “substantially all” of the assets of a business. In reading the thread of replies, what struck me was the lack of information and, frankly, misinformation that exists among lawyers and laymen alike with respect to notice requirements to creditors in connection with the sale of assets in bulk.
The short answer is that Article 6 – Bulk Transfers and Bulk Sales of the New York Uniform Commercial Code, which had required a buyer of assets in bulk to notify the seller’s “claimants” (i.e. a person holding a claim incurred in the seller’s business), was REPEALED effective July, 1, 2001. Therefore, there is no longer a statutory obligation that requires buyers of assets in bulk to give notice to the seller’s creditors informing them of the impending sale of the assets.
There does, however, continue to be a requirement in connection with the purchase of some or all of the assets of an existing business, other than in the ordinary course, for the purchaser of such assets to comply with Section 1141(c) of Article 28 of the New York State Sales and Use Tax Law by providing notice to the NYS Commissioner of Taxation and Finance on Form AU-196.10 (Notification of Sale, Transfer, or Assignment in Bulk) at least ten days prior to paying for or taking possession of such assets. The primary purpose of this notice is to allow the NYS taxing authorities to determine if the selling party owes any sales tax to New York State. If the purchaser fails to comply with the sales tax notice filing provisions, then the purchaser can be held personally liable for the payment to the State of any and all sales and use taxes determined to be due to the State from the seller.