Identifying the Material Facts (Bulk Sales Act)
The real estate practitioner should be aware that in order to close the deal, the seller must deliver Form 4, a Statement of Affairs under the Bulk Sales Act.
It deals with the assets that are included and those excluded. It also sets out the liabilities. While these documents are completed and exchanged by the lawyers closing the transaction, they are nevertheless the documents which are the subject of the transaction and need to be addressed in every transaction.
To a reasonable extent, they constitute the due diligence checklist for the business broker. This is the information which needs to be investigated, identified and verified. These are the material facts in the sale of a business.
Once clarified, they can form the basis of the agreement to be negotiated between the parties.
Here’s a summary of the Form:
STATEMENT OF AFFAIRS
Bulk Sales Act
(Section 8 (2) b)
Assets included in the Sale in Bulk
a) Amount of the proceeds of the sale
Assets not included in the Sale in Bulk
b) Stock-in-trade at cost price not exceeding fair value
c) Trade fixtures, fittings, utensils etc.
d) Book debts- Good,
Estimated to produce
e) Bills of exchange, promissory notes etc.
f) Cash in bank
g) Cash on hand
i) Machinery, equipment and plant
j) Real estate
k) Estimated value of securities in hands
m) life insurance policies
n) Stocks and bonds
o) Interest in estates
p) Other property, viz.
q) Unsecured trade creditors
r) Secured trade creditors
s) Preferred creditors
t) All other liabilities, except contigent liabilities set out below
Surplus or deficiency
u) Liabilities under endorsements and guarantees
v) All other contingent liabilities
Brian Madigan LL.B., Broker