ACT No.

3952
THE BULK SALES LAW (as amended)

AN ACT TO REGULATE THE SALE, TRANSFER, MORTGAGE OR ASSIGNMENT OF GOODS,

WARES, MERCHANDISE, PROVISIONS OR MATERIALS, IN BULK, AND PRESCRIBING
PENALTIES FOR THE VIOLATION OF THE PROVISIONS THEREOF

Section 1. This Act shall be known as "The Bulk Sales Law."

Sec. 2. Sale and transfer in bulk. — Any sale, transfer, mortgage or assignment of a stock of
goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade
and the regular prosecution of the business of the vendor, mortgagor, transferor, or assignor, or
sale, transfer, mortgage or assignment of all, or substantially all, of the business or trade theretofore
conducted by the vendor, mortgagor, transferor, or assignor, or of all, or substantially all, of the
fixtures and equipment used in and about the business of the vendor, mortgagor, transferor, or
assignor, shall be deemed to be a sale and transfer in bulk, in contemplation of this Act: Provided,
however, That if such vendor, mortgagor, transferor or assignor, produces and delivers a written
waiver of the provisions of this Act from his creditors as shown by verified statements, then, and in
that case, the provisions of this section shall not apply.

Sec. 3. Statement of creditors. — It shall be the duty of every person who shall sell, mortgage,
transfer, or assign any stock of goods, wares, merchandise, provisions or materials in bulk, for cash
or on credit, before receiving from the vendee, mortgagee, or his, or its agent or representative any
part of the purchase price thereof, or any promissory note, memorandum, or other evidence therefor,
to deliver to such vendee, mortgagee, or agent, or if the vendee, mortgagee, or agent be a
corporation, then to the president, vice-president, treasurer, secretary or manager of said
corporation, or, if such vendee or mortgagee be a partnership firm, then to a member thereof, a
written statement, sworn to substantially as hereinafter provided, of the names and addresses of all
creditors to whom said vendor or mortgagor may be indebted, together with the amount of
indebtedness due or owing, or to become due or owing by said vendor or mortgagor to each of said
creditors, which statement shall be verified by an oath to the following effect:

PHILIPPINE ISLANDS
PROVINCE OR CITY OF _________________}

Before me, the undersigned authority, personally appeared __________________ (vendor,

mortgagor, agent or representative, as the case may be), bearing cedula No. ____________
issued at ___________ on the day of _____________ who, by me being first duly sworn,
upon his oath, deposes and states that the foregoing statement contains the names of all of
the creditors of ________________ (vendor, or mortgagor) together with their addresses,
and that the amount set opposite each of said respective names, is the amount now due and
owing, and which shall become due and owing by _____________ (vendor or mortgagor) to
such creditors, and that there are no creditors holding claims due or which shall become due,
for or on account of goods, wares, merchandise, provisions or materials purchased upon
credit or on account of money borrowed, to carry on the business of which said goods,
wares, merchandise, provisions or materials are a part, other than as set forth in said
statement.

______________________

Subscribed and sworn to before me this _______ day of ______, 19___, at ________
Sec. 4. Fraudulent and void sale, transfer or mortgage. — Whenever any person shall sell,
mortgage, transfer, or assign any stock of goods, wares, merchandise, provisions or materials, in
bulk, for cash or on credit, and shall receive any part of the purchase price, or any promissory note,
or other evidence of indebtedness for said purchase price or advance upon mortgage, without
having first delivered to the vendee or mortgagee or to his or its agent or representative, the sworn
statement provided for in section three hereof, and without applying the purchase or mortgage
money of the said property to the pro rata payment of the bona fide claim or claims of the creditors of
the vendor or mortgagor, as shown upon such sworn statement, he shall be deemed to have
violated this Act, and any such sale, transfer or mortgage shall be fraudulent and void.

Sec. 5. Inventory. — It shall be the duty of every vendor, transferor, mortgagor, or assignor, at least
ten days before the sale, transfer or execution of a mortgage upon any stock of goods, wares,
merchandise, provisions or materials, in bulk, to make a full detailed inventory thereof and to
preserve the same showing the quantity and, so far as is possible with the exercise of reasonable
diligence, the cost price to the vendor, transferor, mortgagor or assignor of each article to be
included in the sale, transfer or mortgage, and notify every creditor whose name and address is set
forth in the verified statement of the vendor, transferor, mortgagor, or assignor, at least ten days
before transferring possession thereof, personally or by registered mail, of the price, terms
conditions of the sale, transfer, mortgage, or assignment.

Sec. 6. Any vendor, transferor, mortgagor or assignor of any stock of goods, wares, merchandise,
provisions or materials, in bulk, or any person acting for, or on behalf of any such vendor, transferor,
mortgagor, or assignor, who shall knowingly or willfully make, or deliver or cause to be made or
delivered, a statement, as provided for in section three hereof, which shall not include the names of
all such creditors, with the correct amount due and to become due to each of them, or shall contain
any false or untrue statement, shall be deemed to have violated the provisions of this Act.

Sec. 7. It shall be unlawful for any person, firm or corporation, as owner of any stock of goods,
wares, merchandise, provisions or materials, in bulk, to transfer title to the same without
consideration or for a nominal consideration only.

Sec. 8. Nothing in this Act contained shall apply to executors, administrators, receivers, assignees in
insolvency, or public officers, acting under judicial process.

Sec. 9. The sworn statement containing the names and addresses of all creditors of the vendor or
mortgagor provided for in section three of this Act, shall be registered in the Bureau of Commerce.
For the registration of each such sworn statement a fee of five pesos shall be charged to the vendor
or mortgagor of the stock of goods, wares, merchandise, provisions or materials, in bulk.

Sec. 10. The provisions of this Act shall be administered by the Director of the Bureau of Commerce
and Industry, who is hereby empowered, with the approval of the Department Head, to prescribe and
adopt from time to time such rules and regulations as may be deemed necessary for the proper and
efficient enforcement of the provisions of this Act.

Sec. 11. Any person violating any provision of this Act shall, upon conviction thereof, be punished by
imprisonment not less than six months, nor more than five years, or fined in sum not exceeding five
thousand pesos, or both such imprisonment and fine, in the discretion of the court.

Sec. 12. This Act shall take effect on its approval.

 “Bulk sales” laws are intended to prevent business owners from defrauding or evading
creditors by transferring all (or a substantial portion) of the assets of the business to
another individual or entity. The law is also intended to avert the possibility of
businesses selling their assets below fair market value in a “sweetheart sale,” in which
the owner of the business manages to maintain a degree of control. For example, the
law applies when the business assets are sold to another business that is controlled by
the same owner. Virtually all states have adopted the Uniform Commercial Code that
gives notice to creditors of bulk transfers of a business’s assets.

Generally, when an existing business incorporates there is no plan to defraud

creditors. These companies are simply changing the form of the business, and have
every intention of honoring the debts of any previous incarnations. In cases where the
corporation receives the assets of the unincorporated business and assumes its debts,
the bulk sales law is a mere formality. The corporation is accountable for the debts of
the business transferring the assets in proportion to the value of the transferred assets.

Concern arises when the business transferring all of its assets to the corporation has
debts that the corporation does not assume. The corporation’s officers should confer
with a lawyer to ensure that the corporation will not be held legally responsible for
those debts when it takes the assets from the other business. Bulk sales laws are
intended to facilitate settling disputes around this issue.

If the company that is transferring the assets has debts that the corporation is not
going to assume, the Fraudulent Transfers Act requires the corporation to take a
number of steps before it can issue equities:

 The corporation must prepare a Notice to Creditors of Bulk Transfer. The notice is
printed in a general circulation paper that covers the judicial district in which the
property being transferred is located, at least 12 business days prior to the date of
transfer of the property.
 The notice must also be published in the judicial district where the principal
executive office of the prior business is located.
 Copies must be filed in each judicial district or county where the property is
located and where the prior business had its principal executive office, with the
county tax collector and the county recorder, at least 12 business days prior to the
transfer.

If the creditors have no objection to the transfer, the corporation can take possession
and title to the assets, free of all creditors’ claims. If, on the other hand, the prior
business’s creditors have claims against the property, then special rules come into
play under Section 6-106 Commercial Code. When a bulk transfer is about to be made
the notice to creditors (Sections 6-105) has to state:
 The names and business addresses of the transferor and transferee
 All other business names and addresses used by the transferor within the last
three years
 Whether all of the debts of the transferor will be paid in full, and if so, the address
to which creditors should send their bills

If the debts of the transferor are not to be paid in full as they become due, or if there is
any doubt about that, the notice must also state the following:

 Location and general description of the property to be transferred

 Estimate of the transferor’s total debts
 Address where the schedule of property and list of creditors may be inspected
 Whether the transfer is to pay existing debts
 The amount of the debts and to whom they are owed
 Whether the transfer is for new consideration
 The time and place where creditors of the transferor should file their claims

The notice must either be delivered personally or be sent by registered or certified

mail to everyone on the list of creditors provided by the transferor. It must also be sent
to all other people whom the transferee knows to hold or declare claims against the
transferor.

In cases where the corporation is attempting to gain ownership of the property of a

prior business in return for its stock, and where the creditors are asserting their rights,
the corporation must either pay the creditors (which essentially means they are paying
twice for the property) or place the shares in the care of the court and let it determine
ownership. In this scenario the corporation may wind up with unforeseen
shareholders, leading to unforeseen difficulties.

ONE relatively obscure law is the Bulk Sales Law (Act no. 3952). Under the Bulk Sales law, a
sale is a sale in bulk within the contemplation of the Bulk Sales Law when: (a) there is a
sale, transfer, mortgage or disposition other than in the ordinary course of trade and
regular prosecution of business, (b) the sale is of all or substantially all of the business or
trade, or (c) when the sale is of all or substantially all of the fixtures and equipment used in
business (Sec. 2, Act. No. 2952).

The purpose of this law is to prevent the defrauding of creditors by the secret sale or
disposal in bulk of all or substantially all of a merchant's stock of goods. (Sundiang,
Commercial Law, p. 169). There are several formalities required by the Bulk Sales Law: The
sale in bulk to be accompanied by sworn statement of the vendor/mortgagor listing the
names and addresses of, and amounts owing to, creditors; The sworn statement shall be
furnished to the buyer, the seller is required to prepare an inventory of stocks to be sold,
the seller is required to notify the creditors of the projected sale at least 10 days before
such sale. (Secs. 3 and 4, Act. No. 3952).

One does not have to comply with the above formalities if: (a) the sale is made in the
ordinary course of business, (b) there is a written waiver from all the creditors, (c) sale is
by virtue of a judicial order, (d) those sold by assignee in insolvency or those beyond the
right of creditors. (Act No. 3952).

In the event the Bulk Sales Law is violated (meaning the above requirements are not met)
the sale in bulk is considered still valid as between the parties but void as to affected
creditors. And as such, the purchase is considered to hold the property in trust for the
seller, and the purchase is also considered liable to seller's creditors for the properties
forming part of the bulk and already disposed by him. Thus, before buying all or
substantially all of the assets of a business, one must comply with the Bulk Sales Law.