PRAGNUM helped a client to preserve a property purchased at an auction

Sometimes the question arises: whether or not to purchase a very attractive but potentially problematic asset? This is especially true when such an asset is being sold at auction as part of the debtor's bankruptcy proceedings.

Our Client, a well-known mineral water producer, found himself in such situation. Having received information about the sale of the debtor's assets (production buildings and land), the Client participated in the auction and won. However, after paying in full the value of the sold property and before the Client registering his ownership, one of the debtor's creditors challenged the auction results.

In this case, the invalidation of the auction provides for the unconditional return of the property to the debtor, but does not “guarantee” the simultaneous return of the paid funds to the buyer. In other words, the client won the auction, paid the full cost of the property, but found himself facing the risk of losing it and with a “hazy” prospect of returning the funds.

The PRAGNUM team timely joined the process of appealing the auction results and, together with the Client's legal department, developed a perfect defense strategy based on proving the complete legal purity of the auction - both on the part of its customer (arbitration manager) and organizer (exchange), as well as on the part of the buyer (Client).

The Commercial Court took into account all the Client's arguments and made a decision to completely reject the creditor's claim on invalidation the auction results. Moreover, the creditor (complainant) also accepted our arguments and, apparently, was convinced of the fallacy of his own position, since he refused to appeal the court's decision and further claims against the client.

PRAGNUM Recommendation:

Do not refuse attractive assets just because of their risks - involve experienced lawyers in this process at the stage of preparation for the acquisition.