Features of the collateral being appropriated by the bankruptcy creditor at the stage of the public offer
January 22, 2020

Under Article 138 of the Bankruptcy Law, a bankruptcy creditor for obligations secured by a pledge of property of a debtor has the right to appropriate a pledged item during the auction for the sale of property of a debtor through a public offer at any stage of reducing the price of such property, but in the absence of applications for participation in the auction at the price set for this stage of property price reduction.

The bankruptcy creditor for obligations secured by the pledge of the property of the debtor, when appropriating the subject of a pledge during the bidding for the sale of property through a public offer, is obliged to transfer funds to a special bank account at the same time as sending an application to the bankruptcy trustee which says the bankruptcy creditor appropriates the subject of a pledge.

From the date of receipts of funds to a special bank account and the receipt by the arbitration manager of an application which says the bankruptcy creditor appropriates the subject of a pledge, the auction for the sale of the pledged item through a public offer must be completed.

Thus, the bankruptcy law spells out the essential conditions for a bankruptcy creditor to appropriate the subject of a pledge at the stage of a public offer:

- lack of applications for participation in tenders at the price set for this stage of property price reduction. If one or more bidders for the sale of the property of the debtor submitted applications through a public offer within a specified period containing proposals on the price of the property of the debtor, but not lower than the initial price of sale of the property of the debtor established for a certain period of the auction, the right to acquire the property of the debtor belongs to a bidder, who applied with the highest price for participation in tenders for the sale of the property of the debtor through a public offer.

- full payment of property at the price set for this stage of property price reduction, at the time of sending a notice of intent to the bankruptcy trustee to appropriate the subject of a pledge.


Elena Tovkan
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