A bulk sale is a sale of goods by a business which engages in selling items out of inventory, often in liquidating or selling a business, and is governed by Article 6 of the Uniform Commercial Code (UCC) which deals with bulk sales. Article 6 has been adopted at least in part in all states. If the parties do not comply with the notification process for a bulk sale, creditors of the seller may obtain a declaration that the sale was invalid against the creditors and the creditors may take possession of the goods or obtain judgment for any proceeds the buyer received from a subsequent sale.
UCC Section 6-104 specifies the duties of the bulk sales buyer, including determining the identity of the seller, and preparation of a list of claimants and a schedule of distribution. These duties are imposed on the buyer in order to give claimants the opportunity to learn of the bulk sale before the seller has been paid and disappeared with the money.
The South Dakota Provision in a Bulk Sales Agreement Regarding Information to be Supplied by the Seller is a crucial element that ensures transparency and protects the interests of all parties involved in a bulk sales transaction. This provision mandates specific information that the seller must disclose to the buyer before the sale is finalized in compliance with South Dakota state laws. Here are some key aspects and types of South Dakota Provision in Bulk Sales Agreement Regarding Information to be Supplied by Seller: 1. Inventory Description: The seller is required to provide a detailed description of the inventory included in the sale. This may include the quantity, quality, condition, and any distinguishing features of the goods involved. 2. Liens and Encumbrances: The seller must reveal if there are any liens, mortgages, or other encumbrances attached to the inventory. This information is essential for the buyer to assess the financial and legal risks associated with the transaction. 3. Financial Statements: The seller is often obligated to furnish financial statements, including balance sheets, income statements, and cash flow statements. These statements provide insights into the seller's financial condition, helping the buyer evaluate the viability and profitability of the business. 4. Tax Records: The South Dakota Provision may require the seller to supply tax records, such as sales tax returns, income tax returns, and other relevant tax forms. These documents help the buyer ensure compliance with tax regulations and gauge the financial stability of the business. 5. Contracts and Agreements: The seller must disclose existing contracts, leases, licensing agreements, permits, and any other legal arrangements that would be transferred to the buyer. This helps the buyer understand the ongoing commitments and obligations associated with the purchase. 6. Intellectual Property Rights: If the sale involves any intellectual property, such as trademarks, patents, or copyrights, the seller must provide documentation confirming their ownership and transferability. This ensures that the buyer receives the complete rights and protection associated with the intellectual property assets. 7. Pending or Threatened Litigation: The seller should disclose any pending legal disputes, claims, or threatened litigation that may affect the business. This information allows the buyer to assess potential liabilities and legal risks associated with the sale. 8. Employee Information: The South Dakota Provision may require the seller to reveal details about their employees, including their contracts, compensation, benefits, and any relevant employment agreements. This information enables the buyer to evaluate the workforce and potential obligations related to employment. It's important to note that the specific requirements and content of the South Dakota Provision may vary depending on the nature of the transaction, size of the sale, and other factors. Therefore, it is crucial for both parties to carefully review and negotiate the Agreement to ensure compliance with South Dakota law and protect their respective interests.
