Bulk Sales Escrow

Bulk Sales Escrow

An escrow agreement in which unsecured creditors force a business to give proceeds from sales of large a amount of inventory and certain other assets to a third party, known as the escrow agent. The escrow agent holds the proceeds until the sales are final and then gives them to the creditors. If a business has acquired too much debt in its activities, a bulk sales escrow is introduced to ensure that the business does not spend the money it receives on still more bad ventures. This protects creditors who do not have liens on specific assets. As with all escrow agreements, the escrow agent receives a fee for his/her services, which are usually split between the business and its creditors.