Bulk Sales Escrow

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DEFINITION of 'Bulk Sales Escrow'

A type of escrow agreement placed on the sale of inventory, business assets or an entire company. The escrow serves to protect the interests of unsecured creditors: it eliminates the risk that the seller of the assets will use the proceeds from the sale for purposes other than paying debts or taxes owed.

INVESTOPEDIA EXPLAINS 'Bulk Sales Escrow'

A company experiencing financial difficulty can ease its problems by downsizing its business and selling off portions of its inventory or business assets. To ensure the proceeds from these liquidations aren't lost in further unprofitable business operations, an escrow agent receives the funds from the seller, holds them until the transfer of the assets and then forwards the funds to the appropriate parties. Escrow fees are charged for this service and are usually shared by the buyer and the seller, but the escrow agreement can specify any fee payment arrangement agreed to by the parties.

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