HELPS CHI

BULK SALES
LAW RA 3952

A SALE IS CONSIDERED
IN BULK WHEN:
1. There is a sale, transfer, mortgage or
assignment of stock other than in the
ordinary course of business;
2. All or substantially all of the trade or
business is sold, transferred or mortgaged;
or
3. All or substantially all of the fixtures and
equipment of the business are sold.

PURPOSE OF THE LAW

To prevent the defrauding of creditors by
secret sale or disposal in bulk of all or
substantially all of the merchant's stock or
goods. "Substantially" means 80%. It doesn't
only apply to creditors whose claims are
already due at the time of the sale, but also to
those whose claims aren't due but are already
existing at the time of the sale.

WHEN NOT APPLICABLE:

1. Sales/transfers in the ordinary course of
trade or business;
2. There is a written waiver from the
creditors;
3. If the sale is made by an executor,
administrator, receiver or assignee in
insolvency proceedings or a public officer
acting under judicial process

PENALTIES
Violations of the bulk sales law makes the
sale valid between the parties but void for
the affected creditors. The buyer will hold
the property in trust for the seller and is
liable to the seller's creditors for properties
forming part of the bulk and already
disposed by him.
Also, the seller can be punished with a
prison term of 6 months to 5 years and/or a
fine of up to Php5,000.00.