Structuring Asset Transactions - Bulk sales law and stockholder approval

The bulk sales law refers to Uniform Commercial Code, Article 6.10, which for many years required advance notice to creditors and taxing authorities of a pending sale of a business, along with disclosures regarding payment of seller debts, and in some states, actual payment of the debts.

In 2018, the Uniform Law Commission revised Article 6.10 and enabled state legislatures to either adopt the revised version or to repeal their bulk sales statutes entirely.

Are any stockholder approvals required for an asset transaction?

Yes. Under Delaware law, for example, a sale of all or substantially all of the assets requires the approval of a majority (more than 50 percent) at a meeting of stockholders that have voting rights (common stockholders), who must receive 20 days’ notice of the meeting.

In some cases, the company’s charter and/or bylaws might even require a higher percentage (known as a supermajority provision).