98 -- S 2817 SUBSTITUTE A

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LC02173/SUB A
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S T A T E     O F    R H O D E    I S L A N D

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 1998

____________

A N     A C T

RELATING TO THE UNIFORM COMMERCIAL CODE -- BULK TRANSFERS

Introduced By: Senators Roney and Revens

Date Introduced : February 10, 1998

Referred To: Senate Judiciary Committee

It is enacted by the General Assembly as follows:

SECTION 1. Chapter 6A-6 of the General Laws entitled "Bulk Transfers" is hereby repealed in its entirety.

{DEL 6A-6-101. Short title. -- DEL}{DEL This chapter shall be known and may be cited as Uniform Commercial Code -- Bulk Transfers. DEL}

{DEL 6A-6-102. "Bulk transfer" -- Transfers of equipment -- Enterprises subject to this chapter -- Bulk transfers subject to this chapter. -- DEL}{DEL (1) A "bulk transfer" is any transfer in bulk and not in the ordinary course of the transferor's business of a major part of the materials, supplies, merchandise, or other inventory (section 6A-9-109) of an enterprise subject to this chapter. DEL}

{DEL (2) A transfer of a substantial part of the equipment (section 6A-9-109) of such an enterprise is a bulk transfer if it is made in connection with a bulk transfer of inventory, but not otherwise. DEL}

{DEL (3) The enterprises subject to this chapter are all those whose principal business is the sale of merchandise from stock, including those who manufacture what they sell. DEL}

{DEL (4) Except as limited by the following section all bulk transfers of goods located within this state are subject to this chapter. DEL}

{DEL 6A-6-103. Transfers excepted from this chapter. -- DEL}{DELThe following transfers are not subject to this chapter: DEL}

{DEL (1) Those made to give security for the performance of an obligation; DEL}

{DEL (2) General assignments for the benefit of all the creditors of the transferor, and subsequent transfers by the assignee thereunder; DEL}

{DEL (3) Transfers in settlement or realization of a lien or other security interests; DEL}

{DEL (4) Sales by executors, administrators, receivers, trustees in bankruptcy, or any public officer under judicial process; DEL}

{DEL (5) Sales made in the course of judicial or administrative proceedings for the dissolution or reorganization of a corporation and of which notice is sent to the creditors of the corporation pursuant to order of the court or administrative agency; DEL}

{DEL (6) Transfers to a person maintaining a known place of business in this state who becomes bound to pay the debts of the transferor in full and gives public notice of that fact, and who is solvent after becoming so bound; DEL}

{DEL (7) A transfer to a new business enterprise organized to take over and continue the business, if public notice of the transaction is given and the new enterprise assumes the debts of the transferor and he or she receives nothing from the transaction except an interest in the new enterprise junior to the claims of creditors; DEL}

{DEL (8) Transfers of property which is exempt from execution. DEL}

{DEL 6A-6-104. Schedule of property, list of creditors. -- DEL}{DEL (1) Except as provided with respect to auction sales (section 6A-6-107), a bulk transfer subject to this chapter is ineffective against any creditor of the transferor unless: DEL}

{DEL (a) The transferee requires the transferor to furnish a list of his or her existing creditors prepared as stated in this section; and DEL}

{DEL (b) The parties prepare a schedule of the property transferred sufficient to identify it; and DEL}

{DEL (c) The transferee preserves the list and schedule for six (6) months next following the transfer and permits inspection of either or both and copying therefrom at all reasonable hours by any creditor of the transferor, or files the list and schedule in the office of the secretary of state. DEL}

{DEL (2) The list of creditors must be signed and sworn to or affirmed by the transferor or his or her agent. It must contain the names and business addresses of all creditors of the transferor, with the amounts when known, and also the names of all persons who are known to the transferor to assert claims against him or her even though such claims are disputed. DEL}

{DEL (3) Responsibility for the completeness and accuracy of the list of creditors rests on the transferor, and the transfer is not rendered ineffective by errors or omissions therein unless the transferee is shown to have had knowledge. DEL}

{DEL 6A-6-105. Notice to creditors. -- DEL}{DEL In addition to the requirements of the preceding section, any bulk transfer subject to this chapter, except one made by auction sale (section 6A-6-107) is ineffective against any creditor of the transferor unless at least ten (10) days before he or she takes possession of the goods or pays for them, whichever happens first, the transferee gives notice of the transfer in the manner and to the persons hereafter provided (section 6A-6-106). DEL}

{DEL 6A-6-106. The notice. -- DEL}{DEL (1) The notice to creditors (section 6A-6-105) shall state: DEL}

{DEL (a) That a bulk transfer is about to be made; and DEL}

{DEL (b) The names and business addresses of the transferor and transferee, and all other business names and addresses used by the transferor within three (3) years last past so far as known to the transferee; and DEL}

{DEL (c) Whether or not all the debts of the transferor are to be paid in full as they fall due as a result of the transaction, and if so, the address to which creditors should send their bills. DEL}

{DEL (2) If the debts of the transferor are not to be paid in full as they fall due or if the transferee is in doubt on that point then the notice shall state further: DEL}

{DEL (a) The location and general description of the property to be transferred and the estimated total of the transferor's debts; DEL}

{DEL (b) The address where the schedule of property and list of creditors (section 6A-6-104) may be inspected; DEL}

{DEL (c) Whether the transfer is to pay existing debts and if so the amount of such debts and to whom owing; DEL}

{DEL (d) Whether the transfer is for new consideration and if so the amount of such consideration and the time and place of payment. DEL}

{DEL (3) The notice in any case shall be delivered personally or sent by registered mail to all the persons shown on the list of creditors furnished by the transferor (section 6A-6-104) and to all other persons who are known to the transferee to hold or assert claims against the transferor. DEL}

{DEL 6A-6-107. Auction sales -- "Auctioneer". -- DEL}{DEL (1) A bulk transfer is subject to this chapter even though it is by sale at auction, but only in the manner and with the results stated in this section. DEL}

{DEL (2) The transferor shall furnish a list of his or her creditors and assist in the preparation of a schedule of the property to be sold, both prepared as before stated (section 6A-6-104). DEL}

{DEL (3) The person or persons other than the transferor who direct, control, or are responsible for the auction are collectively called the "auctioneer". The auctioneer shall: DEL}

{DEL (a) Receive and retain the list of creditors and prepare and retain the schedule of property for the period stated in this chapter (section 6A-6-104); DEL}

{DEL (b) Give notice of the auction personally or by registered mail at least ten (10) days before it occurs to all persons shown on the list of creditors and to all other persons who are known to the auctioneer to hold or assert claims against the transferor. DEL}

{DEL (4) Failure of the auctioneer to perform any of these duties does not affect the validity of the sale or the title of the purchasers, but if the auctioneer knows that the auction constitutes a bulk transfer such failure renders the auctioneer liable to the creditors of the transferor as a class for the sums owing to them from the transferor up to but not exceeding the net proceeds of the auction. If the auctioneer consists of several persons their liability is joint and several. DEL}

{DEL 6A-6-108. What creditors protected. -- DEL}{DEL The creditors of the transferor mentioned in this chapter are those holding claims based on transactions or events occurring before the bulk transfer, but creditors who become such after notice to creditors is given (sections 6A-6-105 and 6A-6-106) are not entitled to notice. DEL}

{DEL 6A-6-109. Subsequent transfers. -- DEL}{DEL When the title of a transferee to property is subject to a defect by reason of his or her noncompliance with the requirements of this chapter, then: DEL}

{DEL (1) A purchaser of any such property from such transferee who pays no value or who takes with notice of such noncompliance takes subject to such defect; but DEL}

{DEL (2) A purchaser for value in good faith and without notice takes free of the defect. DEL}

{DEL 6A-6-110. Limitation of actions and levies. -- DEL}{DEL No action under this chapter shall be brought nor levy made more than six (6) months after the date on which the transferee took possession of the goods unless the transfer has been concealed. If the transfer has been concealed, actions may be brought or levies made within six (6) months after its discovery. DEL}

SECTION 2. Title 6A of the General Laws entitled "Uniform Commercial Code" is hereby amended by adding thereto the following chapter:

{ADD 6A-6-101. Short title. -- ADD} {ADD This chapter shall be known and may be cited as Uniform Commercial Code -- Bulk sales. ADD}

{ADD 6A-6-102. Definitions and index of definitions. -- ADD} {ADD (1) In this chapter, unless the context otherwise requires: ADD}

{ADD (a) "Assets" means the inventory that is the subject of a bulk sale and any tangible and intangible personal property used or held for use primarily in, or arising from, the seller's business and sold in connection with that inventory, but the term does not include: ADD}

{ADD (i) fixtures (6A-9-313(1)(a)) other than readily removable factory and office machines; ADD}

{ADD (ii) the lessee's interest in a lease of real property; or ADD}

{ADD (iii) property to the extent it is generally exempt from creditor process under nonbankruptcy law. ADD}

{ADD (b) "Auctioneer" means a person whom the seller engages to direct, conduct, control, or be responsible for a sale by auction. ADD}

{ADD (c) "Bulk sale" means: ADD}

{ADD (i) in the case of a sale by auction or a sale or series of sales conducted by a liquidator on the seller's behalf, a sale or series of sales not in the ordinary course of the seller's business of more than half of the seller's inventory, as measured by value on the date of the bulk-sale agreement, if on that date the auctioneer or liquidator has notice, or after reasonably inquiry would have had notice, that the seller will not contribute to operate the same or a similar kind of business after the sale or series of sales; and ADD}

{ADD (ii) in all other cases, a sale not in the ordinary course of the seller's business of more than half the seller's inventory, as measured by value on the date of the bulk-sale agreement, if on that date the buyer has notice, or after reasonable inquiry would have had notice, that the seller will not continue to operate the same or a similar kind of business after the sale. ADD}

{ADD (d) "Claim" means a right to payment from the seller, whether or not the right is reduced to judgment, liquidated, fixed, matured, disputed, secured, legal, or equitable. The term includes costs of collection and attorney's fees only to the extent that the laws of this state permit the holder of the claim to recover them in an action against the obligor. ADD}

{ADD (e) "Claimant" means a person holding a claim incurred in the seller's business other than: ADD}

{ADD (i) an unsecured and unmatured claim for employment compensation and benefits, including commissions and vacation, severance, and sick-leave pay; ADD}

{ADD (ii) a claim for injury to an individual or to property, or for breach of warranty, unless: ADD}

{ADD (A) a right of action for the claim has accrued; ADD}

{ADD (B) the claim has been asserted against the seller; and ADD}

{ADD (C) the seller knows the identity of the person asserting the claim and the basis upon which the person has asserted it; and ADD}

{ADD (iii) a claim for taxes owing to a governmental unit ADD}

{ADD (f) "Creditor" means a claimant or other person holding a claim. ADD}

{ADD (g)(i) "Date of the bulk sale" means: ADD}

{ADD (A) if the sale is by auction or is conducted by a liquidator on the seller's behalf, the date on which more than then percent (10%) of the net proceeds is paid to or for the benefit of the seller; and ADD}

{ADD (B) in all other cases, the later of the date on which: ADD}

{ADD (l) more than ten percent (10%) of the net contract price is paid to or for the benefit of the seller; or ADD}

{ADD (ll) more than ten percent (10%) of the assets, as measured by value, are transferred to the buyer. ADD}

{ADD (ii) For purposes of this subsection: ADD}

{ADD (A) Delivery of a negotiable instrument (6A-3-104(1)) to or for the benefit of the seller in exchange for assets constitutes payment of the contract price pro tanto; ADD}

{ADD (B) To the extent that the contract price is deposited in an escrow, the contract price is paid to or for the benefit of the seller when the seller acquires the unconditional right to receive the deposit or when the deposit is delivered to the seller or for the benefit of the seller, whichever is earlier; and ADD}

{ADD (C) An asset is transferred when a person holding an unsecured claim can no longer obtain through judicial proceedings rights to the asset that are superior to those of the buyer arising as a result of the bulk sale. A person holding an unsecured claim can obtain those superior rights to a tangible asset at least until the buyer has an unconditional right, under the bulk-sale agreement, to possess the asset, and a person holding an unsecured claim can obtain those superior rights to an intangible asset at least until the buyer has an unconditional right, under the bulk-sale agreement, to use the asset. ADD}

{ADD (h) "Date of bulk-sale agreement" means: ADD}

{ADD (i) in the case of a sale by auction or conducted by a liquidator (subsection (c)(i)), the date on which the seller engages the auctioneer or liquidator; and ADD}

{ADD (ii) in all other cases, the date on which a bulk-sale agreement becomes enforceable between the buyer and the seller. ADD}

{ADD (i) "Debt" means liability on a claim. ADD}

{ADD (j) "Liquidator" means a person who is regularly engaged in the business of disposing assets for businesses contemplating liquidation or dissolution. ADD}

{ADD (k) "Net contract price" means the new consideration the buyer is obligated to pay for the assets less: ADD}

{ADD (i) the amount of any proceeds of the sale of an asset, to the extent the proceeds are applied in partial or total satisfaction of a debt secured by the asset; and ADD}

{ADD (ii) the amount of any debt to the extent it is secured by a security interest or lien that is enforceable against the asset before and after it has been sold to a buyer. If a debt is secured by an asset and other property of the seller, the amount of the debt secured by a security interest or lien that is enforceable against the asset is determined by multiplying the debt by a fraction, the numerator of which is the value of the new consideration for the asset on the date of the bulk sale and the denominator of which is the value of all property securing the debt on the date of the bulk sale. ADD}

{ADD (l) "Net proceeds" means the new consideration received for assets sold at a sale by auction or a sale conducted by a liquidator on the seller's behalf less: ADD}

{ADD (i) commissions and reasonable expenses of the sale; ADD}

{ADD (ii) the amount of any proceeds of the sale of an asset, to the extent the proceeds are applied in partial or total satisfaction of a debt secured by the asset; and ADD}

{ADD (iii) the amount of any debt to the extent it is secured by a security interest or lien that is enforceable against the asset before and after it has been sold to a buyer. If a debt is secured by an asset and other property of the seller, the amount of the debt secured by a security interest or lien that is enforceable against the asset is determined by multiplying the debt by a fraction, the numerator of which is the value of the new consideration for the asset on the date of the bulk sale and the denominator of which is the value of all property securing the debt on the date of the bulk sale. ADD}

{ADD (m) A sale "in the ordinary course of the seller's business" if the sale comports with usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices. ADD}

{ADD (n) "United States" includes the territories and possessions and the Commonwealth of Puerto Rico. ADD}

{ADD (o) "Value" means fair market value. ADD}

{ADD (p) "Verified" means signed and sworn to or affirmed. ADD}

{ADD (2) The following definitions in other chapters apply to this chapter: ADD}

{ADD (a) "Buyer". 6A-2-103(1)(a). ADD}

{ADD (b) "Equipment". 6A-9-109(2). ADD}

{ADD (c) "Inventory." 6A-9-109(4). ADD}

{ADD (d) "Sale." 6A-2-106(1). ADD}

{ADD (e) "Seller." 6A-2-103(1)(d). ADD}

{ADD (3) In addition, chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter. ADD}

{ADD 6A-6-103. Applicability of chapter. -- ADD} {ADD (1) Except as otherwise provided in subsection (3), this chapter applies to a bulk sale if: ADD}

{ADD (a) the seller's principle business is the sale of inventory from stock; and ADD}

{ADD (b) on the date of the bulk sale agreement the seller is located in this state or, if the seller is located in a jurisdiction that is not a part of the United States, the seller's major executive office in the United States is in this state. ADD}

{ADD (2) A seller is deemed to be located at his [or her] place of business. If a seller has more than one place of business, the seller is deemed located at his [or her] chief executive office. ADD}

{ADD (3) This chapter does not apply to: ADD}

{ADD (a) a transfer made to secure payment or performance of an obligation; ADD}

{ADD (b) a transfer of collateral to a secured party pursuant to 6A-9-503; ADD}

{ADD (c) a sale of collateral pursuant to 6A-9-504 ADD}

{ADD (d) retention of collateral pursuant to 6A-9-505 ADD}

{ADD (e) a sale of an asset encumbered by a security interest or lien if (i) all the proceeds of the sale are applied in partial or total satisfaction of the debt secured by the security interest or lien or (ii) the security interest or lien is enforceable against the asset after it has been sold to the buyer and the net contract price is zero; ADD}

{ADD (f) a general assignment for the benefit of creditors or to a subsequent transfer by the assignee; ADD}

{ADD (g) a sale by an executor, administrator, receiver, trustee in bankruptcy, or any public officer under judicial process; ADD}

{ADD (h) a sale made in the course of judicial or administrative proceedings for the dissolution or reorganization of an organization; ADD}

{ADD (i) a sale to a buyer whose principal place of business is in the United States and who ADD}

{ADD (i) not earlier than twenty one (21) days before the date of the bulk sale, (A) obtains from the seller a verified and dated list of claimants of whom the seller has notice three (3) days before the seller sends or delivers the list to the buyer or (B) conducts a reasonable inquiry to discover the claimants; ADD}

{ADD (ii) assumes in full the debts owed to claimants of whom the buyer has knowledge on the date the buyer receives the list of claimants of whom the buyer has knowledge on the date the buyer receives the list of claimants from the seller or on the date the buyer completes the reasonable inquiry, as the case may be; ADD}

{ADD (iii) is not insolvent after the assumption; and ADD}

{ADD (iv) gives written notice of the assumption not later than thirty (30) days after the date of the bulk sale by sending or delivering a notice to the claimants identified in subparagraph (ii) or by filing a notice in the office of the Secretary of State; ADD}

{ADD (j) a sale to a buyer whose principal place of business is in the United States and who: ADD}

{ADD (i) assumes in full the debts that were incurred in the seller's business before the date of the bulk sale; ADD}

{ADD (ii) is not insolvent after the assumption; and ADD}

{ADD (iii) gives written notice of the assumption not later than thirty (30) days after the bulk sale by sending or delivering a notice to each creditor whose debt is assumed or by filing a notice in the office of the Secretary of State.; ADD}

{ADD (k) a sale to a new organization that is organized to take over and continue the business of the seller and that has its principal place of business in the United States if: ADD}

{ADD (i) the buyer assumes in full the debts that were incurred in the seller's business before the date of the bulk sale; ADD}

{ADD (ii) the seller receives nothing from the sale except an interest in the new organization that is subordinate to the claims against the organization arising from the assumption; and ADD}

{ADD (iii) the buyer gives written notice of the assumption not later than thirty (30) days after the date of the bulk sale by sending or delivering a notice to each creditor whose debt is assumed or by filing a notice in the office of the Secretary of State; ADD}

{ADD (l) as sale of assets having: ADD}

{ADD (i) a value, net of liens and security interests of less than ten thousand dollars ($10,000). If a debt is secured by assets and other property of the seller, the net value of the assets is determined by subtracting from their value an amount equal to the product of the debt multiplied by a fraction, the numerator of which is the value of the assets on the date of the bulk sale and the denominator of which is the value of all property securing the debt on the date of the bulk sale; or ADD}

{ADD (ii) a value of more than twenty five million dollars ($25,000,000) on the date of the bulk sale agreement; or ADD}

{ADD (m) a sale required by, and made pursuant to, statute. ADD}

{ADD (4) The notice under subsection (3)(i)(iv) must state: (i) that a sale that may constitute a bulk sale has been or will be made; (ii) the date or prospective date of the bulk sale; (iii) the individual, partnership, or corporate names and the addresses of the seller and buyer; (iv) the address to which inquiries about the sale may be made, if different from the seller's address; and (v) that the buyer has assumed or will assume in full the debts owed to claimants of whom the buyer has knowledge on the date the buyer receives the list of claimants from the seller or completes a reasonable inquiry to discover the claimants. ADD}

{ADD (5) The notice under subsections (3)(j)(iii) and 3(k)(iii) must state: (i) that a sale that may constitute a bulk sale has been or will be made; (ii) the date or prospective date of the bulk sale; (iii) the individual, partnership, or corporate names and the addresses of the seller and buyer; (iv) the address to which inquiries about the sale may be made, if different from the seller's address; and (v) that the buyer has assumed or will assume the debts that were incurred in the seller's business before the date of the bulk sale. ADD}

{ADD (6) For purposes of subsection (3)(l), the value of assets is presumed to be equal to the price the buyer agrees to pay for the assets. However, in a sale by auction or a sale conducted by a liquidator on the seller's behalf, the value of assets is presumed to be the amount the auctioneer or liquidator reasonably estimates the assets will bring at auction or upon liquidation. ADD}

{ADD 6A-6-104. Obligations of buyer. -- ADD} {ADD (1) In a bulk sale as defined in 6A-6-102(1)(c)(ii) the buyer shall: ADD}

{ADD (a) obtain from the seller a list of all business names and addresses used by the seller within three (3) years before the date the list is sent or delivered to the buyer; ADD}

{ADD (b) unless excused under subsection (2), obtain from the seller a verified and dated list of claimants of whom the seller has notice three (3) days before the seller sends or delivers the list to the buyer and including, to the extent known by the seller, the address of and the amount claimed by each claimant; ADD}

{ADD (c) obtain from the seller or prepare a schedule of distribution (6A-6-106 (1)); ADD}

{ADD (d) give notice of the bulk sale in accordance with 6A-6-105; ADD}

{ADD (e) unless excused under 6A-6-106(4), distribute the net contract price in accordance with the undertakings of the buyer in the schedule of distribution; and ADD}

{ADD (f) unless excused under subsection (2), make available the list of claimants (subsection (1)(b)) by: ADD}

{ADD (i) promptly sending or delivering a copy of the list without charge to any claimant whose written request is received by the buyer no later than six months after the date of the bulk sale; ADD}

{ADD (ii) permitting any claimant to inspect and copy the list at any reasonable hour upon request received by the buyer no later than six (6) months after the date of the bulk sale; or ADD}

{ADD (iii) filing a copy of the list in the office of the Secretary of State no later than the time for giving a notice of the bulk sale (6A-6-105(5)). A list filed in accordance with this subparagraph must state the individual, partnership, or corporate name and a mailing address of the seller. ADD}

{ADD (2) A buyer who gives notice in accordance with 6A-6-105(2) is excused from complying with the requirements of subsections (1)(b) and (1)(f). ADD}

{ADD 6A-6-105. Notice to claimants. -- ADD} {ADD (1) Except as otherwise provided in subsection (2), to comply with 6A-6-104(1)(d), the buyer shall send or deliver a written notice of the bulk sale to each claimant on the list of claimants (6A-6-104(1)(b)) and to any other claimant of who, the buyer has knowledge at the time the notice of the bulk sale is sent or delivered. ADD}

{ADD (2) A buyer may comply with 6A-6-104(1)(d) by filing a written notice of the bulk sale in the office of the Secretary of State if: ADD}

{ADD (a) on the date of the bulk sale agreement the seller has 200 or more claimants, exclusive of claimants holding secured or matured claims for employment compensation and benefits, including commissions and vacation, severance, and sick leave pay; or ADD}

{ADD (b) the buyer has received a verified statement from the seller stating that, as of the date of the bulk sale agreement, the number of claimants, exclusive of claimants holding secured or matured claims for employment compensation and benefits, including commissions and vacation, severance, and sick leave pay, is 200 or more. ADD}

{ADD (3) The written notice of the bulk sale must be accompanied by a copy of the schedule of distribution (6A-6-106(1)) and state at least: ADD}

{ADD (a) that the seller and buyer have entered into an agreement for a sale that may constitute a bulk sale under the laws of the State of Rhode Island; ADD}

{ADD (b) the date of the agreement; ADD}

{ADD (c) the date on or after which more than ten percent (10%) of the assets were or will be transferred; ADD}

{ADD (d) the date on or after which more than ten percent (10%) of the net contract price was or will be paid, if the date is not stated in the schedule of distribution; ADD}

{ADD (e) the name and a mailing address of the seller; ADD}

{ADD (f) any other business name and address listed by the seller pursuant to 6A-6-104(1)(a); ADD}

{ADD (g) the name of the buyer and an address of the buyer from which information concerning the sale can be obtained; ADD}

{ADD (h) a statement indicating the type of assets or describing the assets item by item; ADD}

{ADD (i) the manner in which the buyer will make available the list of claimants (6A-6-104-(1)(f)), if applicable; and ADD}

{ADD (j) if the sale is in total or partial satisfaction of an antecedent debt owed by the seller, the amount of the debt to be satisfied and the name of the person to whom it is owed. ADD}

{ADD (4) For purposes of subsections (3)(e) and (3)(g), the name of the person is the person's individual, partnership, or corporate name. ADD}

{ADD (5) The buyer shall give notice of the bulk sale and, if the buyer gives notice in accordance with subsection (1), not more than thirty (30) days after obtaining the list of claimants. ADD}

{ADD (6) A written notice substantially complying with the requirements of subsection (3) is effective even though it contains minor errors that are not seriously misleading. ADD}

{ADD (7) A form substantially as follows is sufficient to comply with subsection (3): ADD}

{ADD Notice of Sale ADD}

{ADD (1) , whose address is , is described in this notice as the "seller." ADD}

{ADD (2) , whose address is , is described in this notice as the "buyer." ADD}

{ADD (3) The seller has disclosed to the buyer that within the past three years the seller has used other business names, operated at other addresses, or both, as follows: . ADD}

{ADD (4) The seller and the buyer have entered into an agreement dated , for a sale that may constitute a bulk sale under the laws of the state of . ADD}

{ADD (5) The date on or after which more than ten percent of the assets that are the subject of the sale were or will be transferred is , and [if not stated in the schedule of the distribution] the date on or after which more than ten percent of the net contract price was or will be paid is . ADD}

{ADD (6) The following assets are the subject of the sale: . ADD}

{ADD (7) [If applicable] The buyer will make available o claimants of the seller a list of the seller's claimants in the following manner: . ADD}

{ADD (8) [If applicable] The sale is to satisfy $ of an antecedent debt owed by the seller to . ADD}

{ADD (9) A copy of the schedule of distribution of the net contract price accompanies this notice. ADD}

{ADD 6A-6-106. Schedule of Distribution. -- ADD}{ADD(1) The seller and buyer shall agree on how the net contract price is to be distributed and set forth their agreement in a written schedule of distribution. ADD}

{ADD (2) The schedule of distribution may provide for distribution to any person at any time, including distribution of the entire net contract price to the seller. ADD}

{ADD (3) The buyer's undertakings in the schedule of distribution run only to the seller. However, a buyer who fails to distribute the net contract price in accordance with the buyer's undertakings in the schedule of distribution is liable to a creditor only as provided in 6A-6-107(1). ADD}

{ADD (4) If the buyer undertakes in the schedule of distribution to distribute any part of the net contract price to a person other than the seller, and, after the buyer has given notice in accordance with 6A-6-105, some or all of the anticipated net contract price is or becomes unavailable for distribution as a consequence of the buyer's or seller's having complied with an order of court, legal process, statute, or rule of law, the buyer is excused from any obligation arising under this Chapter or under any contract with the seller to distribute the net contract price in accordance with the buyer's undertakings in the schedule if the buyer: ADD}

{ADD (a) distributes the net contract price remaining available in accordance with any priorities for payment stated in the schedule of distribution and, to the extent that the price is insufficient to pay all the debts having a given priority, distributes the price pro rata among those debts shown in the schedule as having the same priority; ADD}

{ADD (b) distributes the net contract price remaining available in accordance with an order of court; ADD}

{ADD (c) commences a proceeding for interpleader in a court of competent jurisdiction and is discharged from the proceeding; or ADD}

{ADD (d) reaches a new agreement with the seller for the distribution of the net contract price remaining available, sets forth the new agreement in an amended schedule of distribution, gives notice of the amended schedule, and distributes the net contract price remaining available in accordance with the buyer's undertakings in the amended schedule. ADD}

{ADD (5) The notice under subsection (4)(d) must identify the buyer and the seller, state the filing number, if any, of the original notice, set forth the amended schedule, and be given in accordance with subsection (1) or (2) of 6A-6-105, whichever is applicable, at least 14 days before the buyer distributes any part of the net contract price remaining available. ADD}

{ADD (6) If the seller undertakes in the schedule of distribution to distribute any part of the net contract price, and, after the buyer has given notice in accordance with 6A-6-105, some or all of the anticipated net contract price is or becomes unavailable for distribution as a consequence of the buyer's or seller's having complied with an order of court, legal process, statue, or rule of law, the seller and any person in control of the seller are excused form any obligation arising under this Chapter or under any agreement with the buyer to distribute the net contract price in accordance with the seller's undertakings in the schedule if the seller: ADD}

{ADD (a) distributes the net contract price remaining available in accordance with any priorities for payment stated in the schedule of distribution and, to the extent that the price pro rata among those debts having a given priority, distributes the price pro rata among those debts shown in the schedule as having the same priority; ADD}

{ADD (b) distributes the net contract price remaining available in accordance with an order of court; ADD}

{ADD (c) commences a proceeding for interpleader in court of competent jurisdiction and is discharged from the proceeding; or ADD}

{ADD (d) prepares a written amended schedule of distribution of the net contract price remaining available for distribution, gives notice of the amended schedule, and distributes the net contract price remaining available in accordance with the amended schedule. ADD}

{ADD (7) The notice under subsection (6)(d) must identify the buyer and the seller, state the filing number, if any, of the original notice, set forth the amended schedule, and be given in accordance with subsection (1) or (2) of 6A-6-105, whichever is applicable , at least 14 days before the seller distributes any part of the net contract price remaining available. ADD}

{ADD 6A-6-107. Liability for Noncompliance. -- ADD{ADD(1) Except as provided in subsection (3), and subject to the limitation in subsection (4): ADD}

{ADD (a) a buyer who fails to comply with the requirements of 6A-6-104(1)(e) with respect to a creditor is liable to the creditor for damages in the amount of the claim, reduced by any amount that the creditor would not have realized if the buyer had complied; and ADD}

{ADD (b) a buyer who fails to comply with the requirements of any other subsection of 6A-6-104 with respect to a claimant is liable to the claimant for damages in the amount of the claim, reduced by any amount that the claimant would not have realized if the buyer had complied. ADD}

{ADD (2) In an action under subsection (1), the creditor has the burden of establishing the validity and amount of the claim, and the buyer has the burden of establishing the amount of the claim, and the buyer has the burden of establishing the amount that the creditor would not have realized if the buyer had complied. ADD}

{ADD (3) A buyer who: ADD}

{ADD (a) made a good faith and commercially reasonable effort to comply with the requirement of 6A-6-104(1) or to exclude the sale from the application of this Chapter under 6A -6-103(3); or ADD}

{ADD (b) on or after the date of the bulk-sale agreement, but before the date of the bulk sale, held a good faith and commercially reasonable belief that this Chapter does not apply to the particular sale is not liable to creditors for failure to comply with the requirements of 6A-6-104. The buyer has the burden of establishing the good faith and commercial reasonableness of the effort or belief. ADD}

{ADD (4) In a single bulk sale the cumulative liability of the buyer for failure to comply with the requirements of 6A-6-104(1) may not exceed an amount equal to: ADD}

{ADD (a) if the assets consists only of inventory and equipment, two the net contract price, less the amount of any part of the net contract price paid to or applied for the benefit of the seller or a creditor; or ADD}

{ADD (b) if the assets include property other than inventory and equipment, twice the net value of the inventory and equipment less the amount of the portion of any part of the net contract price paid to or applied for the benefit of the seller or a creditor which is allocable to the inventory and equipment. ADD}

{ADD (5) For the purposes of subsection (4)(b), the "net value" of an asset is the value of the asset less (i) the amount of any proceeds of the sale of an asset, to the extent the proceeds are applied in partial or total satisfaction of a debt secured by the asset and (ii) the amount of any debt to the extent it is secured by a security interest or lien that is enforceable against the asset before and after it has been sold to a buyer. If a debt is secured by an asset and other property of the seller, the amount of the debt secured by a security interest or lien that is enforceable against the asset is determined by multiplying the debt by a fraction, the numerator of which is the value of the asset on the date of the bulk sale and the denominator of which is the value of all property securing the debt on the date of the bulk sale. The portion of a part of the net contract price paid to or applied for the benefit of the seller or a creditor that is "allocable to the inventory and equipment" is the portion that bears the same ratio to that part of the net contract price as the net value of the inventory and equipment bears to the net value of all of the assets. ADD}

{ADD (6) A payment made by the buyer to a person to whom the buyer is, or believes he [or she] is, liable under subsection (1) reduces pro tanto the buyer's cumulative liability under subsection (4). ADD}

{ADD (7) No action may be brought under subsection (1)(b) by or on behalf of a claimant whose claim is unliquidated or contingent. ADD}

{ADD (8) A buyer's failure to comply with the requirements of section 6A-6-104(1) does not (i) impair the buyer's rights in or title to the assets, (ii) render the sale ineffective, void, or voidable, (iii) entitle a creditor to more than a single satisfaction of his [or her] claim, or (iv) create liability other than as provided in this chapter. ADD}

{ADD (9) Payment of the buyer's liability under subsection (1) discharges pro tanto the seller's debt to the creditor. ADD}

{ADD (10) Unless otherwise agreed, a buyer has an immediate right of reimbursement from the seller for any amount paid to a creditor in partial or total satisfaction of the buyer's liability under subsection (1). ADD}

{ADD (11) If the seller is an organization, a person who is in direct or indirect control of the seller, and who knowingly, intentionally, and without legal justification fails, or causes the seller to fail, to distribute the net contract price in accordance with the schedule of distribution is liable to any creditor to whom the seller undertook to make payment under the schedule for damages caused by the failure. ADD}

{ADD 6A-6-108. Bulk Sales by Auction -- Bulk Sales Conducted by Liquidator. -- ADD}{ADD(1) 6A-6-104, 6A-6-105, 6A-6-106, and 6A-6-107 apply to a bulk sale by auction and a bulk sale conducted by a liquidator on the seller's behalf with the following modifications: ADD}

{ADD (a) "buyer" refers to auctioneer or liquidator, as the case may be; ADD}

{ADD (b) "net contract price" refers to net proceeds of the auction or net proceeds of the sale, as the case may be; ADD}

{ADD (c) the written notice required under section 6A-6-105(3) must be accompanied by a copy of the schedule of distribution (section 6A-6-106(1)) and state at least: ADD}

{ADD (i) that the seller and the auctioneer or liquidator have entered into an agreement for auction or liquidation services that may constitute an agreement to make a bulk sale under the laws of the state of ; ADD}

{ADD (ii) the date of the agreement; ADD}

{ADD (iii) the date on or after which the auction began or will begin or the date on or after which the liquidator began or will begin to sell assets on the seller's behalf; ADD}

{ADD (iv) the date on or after which more than ten percent (10%) of the net proceeds of the sale were or will be paid, if the date is not stated in the schedule of distribution; ADD}

{ADD (v) the name and a mailing address of the seller; ADD}

{ADD (vi) any other business name and address listed by the seller pursuant to section 6A-104(1)(a); ADD}

{ADD (vii) the name of the auctioneer or liquidator and an address of the auctioneer or liquidator from which information concerning the sale can be obtained; ADD}

{ADD (viii) a statement indicating the type of assets or describing the assets item by item; ADD}

{ADD (ix) the manner in which the auctioneer or liquidator will make available the list of claimants (section 6A-6-104(1)(f), if applicable; and ADD}

{ADD (x) if the sale is in total or partial satisfaction of an antecedent debt owed by the seller, the amount of the debt to be satisfied and the name of the person to whom it is owed; and ADD}

{ADD (d) in a single bulk sale the cumulative liability of the auctioneer or liquidator for failure to comply with the requirements of this section may not exceed the amount of the net proceeds of the sale allocable to inventory and equipment sold less the amount of the portion of any part of the net proceeds paid to or applied for the benefit of a creditor which is allocable to the inventory and equipment. ADD}

{ADD (2) A payment made by the auctioneer or liquidator to a person to whom the auctioneer or liquidator is, or believes he or she is, liable under this section reduces pro tanto the auctioneer's or liquidator's cumulative liability under subsection (1)(d). ADD}

{ADD (3) A form substantially as follows is sufficient to comply with subsection (1)(c): ADD}

{ADD Notice of Sale ADD}

{ADD (1) , whose address is , is described in this notice as the "seller." ADD}

{ADD (2) , whose address is , is described in this notice as the "auctioneer" or "liquidator." ADD}

{ADD (3) The seller has disclosed to the auctioneer or liquidator that within the past three (3) years the seller has used other business names, operated at other addresses, or both, as follows: _____________. ADD}

{ADD (4) The seller and the auctioneer or liquidator have entered into an agreement dated_____ for auction or liquidation services that may constitute an agreement to make a bulk sale under the laws of the state of . ADD}

{ADD (5) The date on or after which the auction began or will begin or the date on or after which the liquidator began or will begin to sell assets on the seller's behalf is_____________ , and [if not stated in the schedule of distribution] the date on or after which more than ten percent (10%) of the net proceeds of the sale were or will be paid is . ADD}

{ADD (6) The following assets are the subject of the sale: . ADD}

{ADD (7) [If applicable] The auctioneer or liquidator will make available to claimants of the seller a list of the seller's claimants in the following manner: . ADD}

{ADD (8) [If applicable] The sale is to satisfy $ of an antecedent debt owed by the seller to . ADD}

{ADD (9) A copy of the schedule of distribution of the net proceeds accompanies this notice. ADD}

{ADD [End of Notice] ADD}

{ADD (4) A person who buys at a bulk sale by auction or conducted by a liquidator need not comply with the requirements of section 6A-6-104(1) and is not liable for the failure of an auctioneer or liquidator to comply with the requirements of this section. ADD}

{ADD 6A-6-109. What Constitutes Filing -- Duties of Filing Officer -- Information From Filing Officer. -- ADD}{ADD(1) Presentation of a notice or list of claimants for filing and tender of the filing fee or acceptance of the notice or list by the filing officer constitutes filing under this chapter. ADD}

{ADD (2) The filing officer shall: ADD}

{ADD (a) mark each notice or list with a file number and with the date and hour of filing; ADD}

{ADD (b) hold the notice or list or a copy for public inspection; ADD}

{ADD (c) index the notice or list according to each name given for the seller and for the buyer; and ADD}

{ADD (d) note in the index the file number and the addresses of the seller and buyer given in the notice or list. ADD}

{ADD (3) If the person filing a notice or list furnishes the filing officer with a copy, the filing officer upon request shall note upon the copy the file number and date and hour of the filing of the original and send or deliver the copy to the person. ADD}

{ADD (4) The fee for filing and indexing and for stamping a copy furnished by the person filing to show the date and place of filing is $ for the first page and $ for each additional page. The fee for indexing each name more than two is $ . ADD}

{ADD (5) Upon request of any person, the filing officer shall issue a certificate showing whether any notice or list with respect to a particular seller or buyer is on file on the date and hour stated in the certificate. If a notice or list is on file, the certificate must give the date and hour of filing of each notice or list and the name and address of each seller, buyer, auctioneer, or liquidator. The fee for the certificate is $ if the request for the certificate is in the standard form prescribed by the [Secretary of State] and otherwise is $ . Upon request of any person, the filing officer shall furnish a copy of any filed notice or list for a fee of $______. ADD}

{ADD (6) The filing officer shall keep each notice or list for two (2) years after it is filed. ADD}

{ADD 6A-6-110. Limitation of Actions. --ADD} {ADD(1) Except as provided in subsection (2), an action under this chapter against a buyer, auctioneer, or liquidator must be commenced within one (1) year after the date of the bulk sale. ADD}

{ADD (2) If the buyer, auctioneer, or liquidator conceals the fact that the sale has occurred, the limitation is tolled and an action under this chapter may be commenced within the earlier of (i) one (1) year after the person bringing the action discovers that the sale has occurred or (ii) one (1) year after the person bringing the action should have discovered that the sale has occurred, but no later than two (2) years after the date of the bulk sale. Complete noncompliance with the requirements of this chapter does not of itself constitute concealment. ADD}

{ADD (3) An action under section 6A-6-107(11) must be commenced within one (1) year after the alleged violation occurs. ADD}

SECTION 3. Section 6A-1-105 of the General Laws in Chapter 6A-1 entitled "General Provisions" is hereby amended to read as follows:

6A-1-105. Territorial application of title 6A -- Parties' power to choose applicable law. -- (1) Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation, the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement, title 6A applies to transactions bearing an appropriate relation to this state.

(2) Where one of the following provisions of this title specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law (including the conflict of laws rules) so specified:

(a) Rights of creditors against sold goods. section 6A-2-402.

(b) Applicability of the chapter on leases. sections 6A-2.1-105 and 6A-2.1-106.

(c) Applicability of the chapter on bank deposits and collections. section 6A-4-102.

(d) Bulk {DEL transfers DEL} {ADD sales ADD} subject to the chapter on bulk {DEL transfers. DEL} {ADD sales. ADD} section 6A-6- {DEL 102. DEL} {ADD 103. ADD}

(e) Applicability of the chapter on investment securities. section 6A-8-106.

(f) Perfection provisions of the chapter on secured transactions. section 6A-9-103.

(g) Governing law in the article on funds transfers. section 6A-4.1-507.

SECTION 4. Section 6A-2-403 of the General Laws in Chapter 6A-2 entitled "Sales" is hereby amended to read as follows:

6A-2-403. Power to transfer -- Good faith purchase of goods -- "Entrusting". -- (1) A purchaser of goods acquires all title which his or her transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though:

(a) The transferor was deceived as to the identity of the purchaser, or

(b) The delivery was in exchange for a check which is later dishonored, or

(c) It was agreed that the transaction was to be a "cash sale", or

(d) The delivery was procured through fraud punishable as larcenous under the criminal law.

(2) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him or her power to transfer all rights of the entruster to a buyer in ordinary course of business.

(3) "Entrusting" includes any delivery and any acquiescence in retention of possession, regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law.

(4) The rights of other purchasers of goods and of lien creditors are governed by the chapters on secured transactions (chapter 9), bulk {DEL transfers DEL} {ADD sales ADD} (chapter 6), and documents of title (chapter 7).

SECTION 5. Section 9-1-36 of the General Laws in Chapter 9-1 entitled "Causes of Action" is hereby amended to read as follows:

9-1-36. Enumeration of statutes of limitation. -- The following compilation of statutes of limitation for civil actions is set forth as an aid to the public and is not intended to replace the specific statutes referred to herein. The omission of any statute of limitation from this list shall in no way affect the validity of that statute.

SECTION 6. This act shall take effect upon passage and shall apply to transfers occurring on or after the effective date.

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LC02173/SUB A
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This act provides the definitions and applicable laws concerning the Uniform Commercial Code - Bulk Sales.

This act would take effect upon passage and would apply to transfers occurring on or after the effective date.