On March 22, 2017, the Burden Reduction Act, 2017 (the "Act"), which, as its name indicates, is part of an initiative to reduce the regulatory burden on Ontario businesses, received Royal Assent and came into force. Schedule 3 of the Act repeals the Bulk Sales Act (the "BSA"), which was enacted in 1917 and had long been a source of frustration to people doing asset deals in Ontario.
The BSA was intended to protect trade creditors from a situation in which a vendor liquidates its assets over a short period of time, leaving its trade creditors unpaid. Typically, the parties to an asset purchase transaction dealt with the BSA in one of three ways: (1) by applying to a court for an order to exempt the transaction from compliance with the BSA; (2) by the vendor agreeing to indemnify the purchaser for any non-compliance with the BSA; or (3) by complying with the BSA through onerous reporting and verification requirements.
Overall, the costs and risks of applying for exemption, complying with the BSA or opting out of compliance with the BSA were burdensome and out of line with all other provincial legislation as Ontario was the only remaining Canadian jurisdiction with bulk sales legislation.
The adoption of the Act and the repeal of the BSA signals that Ontario lawmakers have concluded, like their counterparts in other provinces, that the costs of complying with the BSA are no longer justified when other rights and remedies exist for trade creditors (for instance, under bankruptcy and insolvency and assignment and preference legislation). Parties doing deals where the vendor's assets are located in Ontario will benefit from reduced risk and cost. As such, the repeal of the BSA should be a welcomed change for Ontario businesses.
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