Today, we will focus our attention on this aspect of the bankruptcy procedure, such as assessing the property of the debtor to be sold at the auction.

All creditors understand that, ideally, bankruptcy must end with the repayment of their claims against the debtor. The funds for such repayment appear in the insolvent debtor only as a result of the sale of the property belonging to it to other persons. In bankruptcy, such sale takes place in the form of trades, which are conducted by the arbitration manager.

However, even if all of the debtor’s assets are sold, the proceeds may not be enough to meet the requirements of all creditors. Such a risk exists always. It can only be minimized by monitoring the establishment of the initial value of the property put up for auction, as understating the value at this stage significantly reduces the creditors’ chances for full repayment of their claims.

The primary value of the property put up for auction can be determined with the help of an independent appraiser (it is “can”, but not “obliged”). Attraction of the appraiser to the bankruptcy procedure is sometimes mandatory, such cases are stipulated in the law.

The activity of the appraiser in the bankruptcy procedure is slightly different from other cases of providing valuation services. The procedure for rendering valuation services in bankruptcy has not received special legal regulation at the federal level. Therefore, the assessment of the value of property in bankruptcy cases is regulated by the general provisions of the legislation on appraisal activity and federal evaluation standards. Nevertheless, there are a number of nuances in this activity and it is worth paying attention to them.

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The object of evaluation is unlimited

Nobody can foresee what property belongs to one or another debtor, and therefore it is practically impossible to unify the approach to assessing the debtor’s property in bankruptcy. At the federal level, a number of evaluation standards have been developed that establish special rules for the evaluation of a particular type of object (real estate, shares and interests, intangible assets, and so on). Therefore, the appraiser, when faced with the need to evaluate an object for which there are special rules, uses them in addition to the general provisions of the law on appraisal activity.

Type of determined value

Before starting to evaluate, an appraiser is formulated for the evaluator, which is an integral part of the evaluation contract. It is the assignment for the evaluation that contains all the necessary information, directions and questions to the appraiser. In particular, it is especially important to indicate in the assignment what kind of value the evaluator should establish. As part of the bankruptcy procedure, as a rule, either market or liquidation value of the property is established. The liquidation value is always lower than the market value, because it involves taking into account the compressed deadlines for the implementation of the valuation object. Market value is established when there are no extraordinary circumstances, that is, the forced sale. The very essence of the trades implies limited sale terms and compulsory alienation, so the liquidation value of the valuation object is often established.

Terms of implementation

As can be seen from the previous paragraph, the final value of the value directly depends on the timing of the sale of the property. Thus, the time that remained until the end of the bankruptcy proceedings, in which the valuation object is to be sold at the auction, is of great importance when assessing property within the framework of bankruptcy. The higher it is, the higher the price it is possible to sell the property of the debtor, since in the presence of a large time interval for the implementation it is possible to establish the market value of the property, which always exceeds the liquidation value.

Obligation to attract an appraiser

As mentioned earlier, in some cases, the appraiser’s involvement in determining the value of property subject to sale is mandatory, that is, the right of the arbitration administrator to attract the appraiser is transformed into his duty. The law specifies several such cases:

  • debtor is a unitary enterprise;
  • debtor is a joint-stock company, more than twenty five percent of whose voting shares are state or municipal property.

Also subject to mandatory assessment by an independent appraiser is the property that is the subject of the pledge, and movable property, the book value of which exceeds the hundred thousand rubles for the last reporting date preceding the date of submission of the application for declaring the debtor bankrupt.

 

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