Calculation of remuneration of arbitration managers in case of satisfaction of the claims of the secured creditor (Nazarenko S.V.)

“Look for the good side in everything. If you can't pay your bills, be glad you're not one of your creditors..."

Profitable sale of property within the framework of bankruptcy procedures

There is a common myth in the business community that as a result of bankruptcy, the owners of the debtor lose all valuable property. But that's not true.

Bankruptcy in capable hands is the only possible legal way to maintain control over the valuable financial assets of an organization, canceling all arrests on property and allowing them to be disposed of relatively freely.

Timely initiation of bankruptcy proceedings, preventing unfriendly creditors from achieving their goals, conducting effective negotiations with secured creditors, creating a pool of loyal creditors and representing their interests, competent bidding - a combination of these measures allows you to preserve valuable assets as much as possible. Therefore, there should be a purely philosophical attitude towards the sale of property within the framework of bankruptcy procedures: “it is better to lose less in order to save more.”

Different bankruptcy procedures – different purposes for selling property

The sale of the debtor's property is traditionally carried out:

• at the recovery stage - external control

and/or

• at the stage of “liquidation” – bankruptcy proceedings.

The sale of part of the debtor’s property (and even the entire company) at the stage of external management, along with such measures as replacement of assets, repurposing or closing of “unprofitable” production, issuing additional shares, provided that such a sale does not lead to the cessation of business activities, is aimed at to restore the company's solvency.

At the stage of bankruptcy proceedings, after the debtor has been officially declared bankrupt, the procedure for the sale of assets has a different goal, namely, to obtain funds for proportionate repayment of creditors’ claims. In fact, get rid of the debt burden and, if desired, invest the saved assets in a new business project.

Isn't there enough for everyone?

Be mentally prepared for the fact that it will not be possible to pay all creditors in full, and some of them will not be included in the register of claims at all (due to missed deadlines for filing an application or as a result of an audit).

But, even despite the incomplete repayment of debt obligations, due to insufficient funds received from the sale of the debtor’s assets, they are also assigned the status of repaid. All debts are written off, the legal entity is “excluded” from the Unified State Register of Legal Entities, and from this moment creditors do not lose the right to make claims against the liquidated company.

Regulatory acts of the Russian Federation, in accordance with which trading is carried out

Briefly about the procedure for selling property

Stage 0. Formation of the bankruptcy estate

In order to make payments on the debtor's debt obligations, a bankruptcy estate is formed, which includes real estate objects for industrial and non-productive purposes, vehicles, raw materials and materials, equipment, money, shares, receivables, etc., belonging to the organization's property. Not only those directly owned by the debtor, but also those obtained as a result of the work of the manager to challenge transactions, collect receivables, as well as property from someone else’s illegal possession.

You can read more about the formation and distribution of the bankruptcy estate in our article: What is sold in bankruptcy

Stage 1. Inventory

An inventory is carried out in order to identify the presence of assets “in kind”, compare actual data with accounting data and eliminate any discrepancies found.

Stage 2. Property valuation

The price of unsecured assets included in the bankruptcy estate is determined on the basis of the maximum probable proceeds from the upcoming sale and is agreed upon with the Meeting of Creditors. The valuation of the collateral is carried out by the collateral creditors. Conflicts of interest regarding the price of property are resolved by an arbitration court.

Stage 3. Direct sale of property

The debtor's property is sold at auction, closed or open auction. More details about this in the following article: On what basis are auctions held.

A more profitable sale of property, as an intermediate stage before the actual sale of the bankruptcy estate, is facilitated by thoughtful work with buyers (“before” and in parallel with the formation of lots), as well as work with creditors. The course of action depends on the individual goals of the debtor’s representatives.

2 important questions that concern the debtor

Before directly selling the property, the debtor is interested in two questions:

• At what price will the property be sold?
• Who will the property be sold to?

Collateral claim secured by a pledge of bills issued by the debtor

In banking practice, there is widespread experience in issuing loans secured by bills of exchange issued by the borrower himself, but how is such a collateral claim taken into account and repaid in the event of bankruptcy of the borrower?

From an economic point of view, in contrast to the pledge of ordinary property, the pledge of bills issued by the borrower does not increase the guarantee of debt repayment through the possibility of satisfying claims at the expense of the value of the collateral subject to foreclosure. However, the use of the mechanism of pledging the borrower's bills of exchange increases the likelihood of fulfillment of the obligation to the pledgee due to the fact that the borrower's creditors for other debts converted into bills of exchange cannot obtain performance from the borrower earlier than the pledgee. As a result, the pledgee of the bills begins to control the debt burden on the borrower on the part of the creditors (payees) who pledged the bills.

The likelihood of fulfilling a loan obligation increases due to the fact that in the relationship between the bank and the creditor, who has issued security in the form of collateral for his bill of exchange claim to the borrower, satisfaction at the expense of the debtor’s property will be received first by the bank and then by the creditor-mortgagor. Thus, the mortgagor’s claim to the borrower is actually subordinated to the bank’s claim (in relation to the rules of Article 309.1 of the Civil Code of the Russian Federation).

In the event of bankruptcy of the borrower, such a collateral claim, secured by the pledge of bills issued by the debtor himself, will be recorded in the register and satisfied taking into account the following features.

In relation to the claims of all creditors of the borrower not participating in security transactions with the pledge of bills of exchange, the loan debt and bill of exchange debt will be accounted for as a single consolidated claim belonging to one creditor.
At the same time, the pledgee (bank) is taken into account in the register as a creditor for such a consolidated claim, since by virtue of paragraph 19 of the Regulations on promissory notes and bills of exchange, the pledgee under a pledge endorsement has the right to receive execution of the bill. However, satisfaction of the consolidated claim is carried out in the following order: at the expense of funds distributed from the debtor's bankruptcy estate to repay the consolidated claim, the collateral claim secured by the debtor's bills of exchange is first repaid, and then (in the case of full repayment of the collateral claim) the claims from the bills are satisfied. At the same time, within the meaning of paragraph 4 of Article 329 of the Civil Code of the Russian Federation, after full repayment of the collateral claim secured by the pledge of bills of exchange, the rights of the creditor with respect to the remaining outstanding part of the consolidated claim (for the bill of exchange debt) are transferred to the pledgor. In this case, the replacement in the register of the creditor from the pledgee to the pledgor is carried out by the arbitration manager automatically without issuing an additional judicial act (determination of the Supreme Court of the Russian Federation of May 21, 2020 No. 308-ES19-17398). Bankruptcy lawyer, candidate of legal sciences Evgeniy Grigoriev www.advokat-msk.ru (495) 543-43-79

What selling price is beneficial to the debtor?

The struggle between the interests of creditors and the debtor can begin already from the stage of property valuation.

If we are talking about restoring the debtor’s solvency, then a conflict, as a rule, does not arise, since it is beneficial for both creditors and the debtor’s representatives that the property be sold at the highest possible price. In order to quickly find buyers and sell assets with maximum profit, specialized enterprises and organizations in related industries are being studied. For example, in parallel with the formation of lots or proactively, mass mailing of letters is carried out on behalf of the manager with offers beneficial to potential buyers.

If we are talking about bankruptcy proceedings, then the debtor may be interested in maximizing the price reduction, changing the bidding step, and selling the property through a public offer to friendly creditors. Disloyal creditors still benefit from selling at “maximum rates.”

How to “transfer” property into safe hands?

Most often, it is beneficial for the debtor to “transfer” the property to “his” buyers or to acquire his assets himself, including collateral? But according to the law, any registered and accredited legal entity or individual can acquire the assets of a bankrupt (unless we are talking about closed auctions). Read more about the conditions for participating in the auction in the article How and on what basis are auctions held.

Who will the property be sold to?

Main characters. Instruments of “influence” of the arbitration manager

A loyal arbitration manager is, of course, the main strategic advantage of a debtor in the fight for valuable property.

The manager occupies a privileged position compared to other participants in the bankruptcy case, both in determining the price of unsecured property and in the process of determining the procedure for its sale, and has maximum freedom of action. Including in matters of choosing an auction organizer and an electronic platform for conducting them.

The arbitration manager essentially takes over the management of the debtor company:

• maintains a register of creditors' claims;
• conducts an inventory of property;
• evaluates property or engages an independent appraiser;
• is responsible for the safety of the bankrupt’s property;
• organizes auctions;

distributes funds according to the stated requirements of creditors included in the register. Read more about the powers of the auction organizer in the article by Sergei Storozhenko Who conducts the auction and where.

I am looking for a sample application to the arbitration court for recognition of oneself (as a creditor)

The statement of claim is submitted to the court in writing. The statement of claim must indicate: the name of the court to which the application is filed; the name of the plaintiff, his place of residence or, if the plaintiff is an organization, its location, as well as the name of the representative and his address, if the application is submitted by a representative; the name of the defendant, his place of residence or, if the defendant is an organization, its location; what is the violation or threat of violation of the rights, freedoms or legitimate interests of the plaintiff and his demands; the circumstances on which the plaintiff bases his claims and evidence supporting these circumstances; the price of the claim, if it is subject to assessment, as well as the calculation of the collected or disputed amounts of money; information about compliance with the pre-trial procedure for contacting the defendant, if this is established by federal law or provided for by the agreement of the parties; list of documents attached to the application. The application may indicate telephone numbers, fax numbers, email addresses of the plaintiff, his representative, the defendant, other information relevant to the consideration and resolution of the case, as well as the plaintiff’s requests. The statement of claim is signed by the plaintiff or his representative if he has the authority to sign the statement and present it to the court. The statement of claim is accompanied by: its copies in accordance with the number of defendants and third parties; a document confirming payment of the state duty; power of attorney or other document certifying the authority of the plaintiff’s representative; documents confirming the circumstances on which the plaintiff bases his claims, copies of these documents for defendants and third parties, if they do not have copies; the text of the published normative legal act in case of challenge; evidence confirming the implementation of the mandatory pre-trial dispute resolution procedure, if such a procedure is provided for by federal law or agreement; calculation of the recovered or disputed amount of money, signed by the plaintiff, his representative, with copies in accordance with the number of defendants and third parties.

The judge, having determined that the statement of claim was filed in court without complying with the specified requirements, leaves the statement without movement. The judge returns the statement of claim if: the plaintiff has not complied with the pre-trial procedure for resolving the dispute established by federal law for this category of disputes or the pre-trial procedure for resolving the dispute provided for by the agreement of the parties, or the plaintiff has not submitted documents confirming compliance with the pre-trial procedure for resolving the dispute with the defendant, if this is provided for by federal law for this category disputes or agreement; the case is not within the jurisdiction of this court; the claim was filed by an incapacitated person; the statement of claim is not signed or the statement of claim is signed and filed by a person who does not have the authority to sign it and present it to the court; in the proceedings of this or another court or arbitration tribunal there is a case regarding a dispute between the same parties, about the same subject and on the same grounds; Before the court issued a ruling on accepting the statement of claim for court proceedings, the plaintiff received an application for the return of the statement of claim. The judge refuses to accept the statement of claim if: the statement is not subject to consideration and resolution in civil proceedings, since the statement is considered and resolved in another court procedure; the application was submitted in defense of the rights, freedoms or legitimate interests of another person by a state body, local government body, organization or citizen who is not granted such a right by this Code or other federal laws; in an application submitted on one’s own behalf, acts are contested that do not affect the rights, freedoms or legitimate interests of the applicant; there is a court decision that has entered into legal force on a dispute between the same parties, on the same subject and on the same grounds, or a court ruling to terminate the proceedings in connection with the acceptance of the plaintiff’s refusal of the claim or the approval of a settlement agreement between the parties; there is a decision of the arbitration tribunal that has become binding on the parties and adopted on a dispute between the same parties, on the same subject and on the same grounds, with the exception of cases where the court refused to issue a writ of execution for the forced execution of the arbitration tribunal's decision. Refusal to accept a statement of claim prevents the applicant from re-applying to the court with a claim against the same defendant, on the same subject and on the same grounds. (Article 131-136 Code of Civil Procedure of the Russian Federation)

The fate of pledged and seized property

The fate of collateral in bankruptcy proceedings is determined by law. This is always a sale at auction, transfer of the pledged item to the pledgee, or sale of property through a public offering, not counting cases where counterparties enter into a settlement agreement. If the debtor does not want to lose assets, the best option is to reach a compromise with the secured creditor or find an investor. In practice, banks often meet halfway, providing loans to the debtor on new terms.

The sale of the debtor's seized property is carried out with the participation of the Bailiff Service and the Federal Agency for State Property Management, as well as specialized organizations. (Federal Law dated 02.10.2007 N 229-FZ (as amended on 03.07.2016) “On enforcement proceedings”)

So, the real opportunity to influence the course and conditions of the sale of unmortgaged property during external administration and bankruptcy proceedings belongs to the arbitration (external, bankruptcy) manager.

The manager from hostile creditors most often deprives the company of all property and seeks to bring the controlling persons to justice. A friendly trustee acts in the interests of the debtor.