How seized property is sold at auction

Lawyer Antonov A.P.

Seized property is sold at public auctions, which are held as part of enforcement proceedings. It is implemented by territorial bodies of the Federal Property Management Agency or specialized organizations attracted by the Federal Property Management Agency. Money from the sale of property is transferred to the deposit account of the territorial department of the FSSP of Russia. After this, the Federal Property Management Agency / specialized organization draws up a report and also sends it to the bailiffs (clauses 2.9, 3.1 of the Agreement of the FSSP of Russia N 0001/13, Rosimushchestvo N 01-12/65 of 04/30/2015). The bailiff can withdraw property from sale in the following cases (clause 4.3 of the Agreement of the FSSP of Russia N 0001/13, Rosimushchestvo N 01-12/65 dated 04/30/2015): 1) there are grounds for ending enforcement proceedings. For example, when the requirements of the executive document are actually fulfilled (clause 1, part 1, article 47 of the Law on Enforcement Proceedings); 2) the period for the sale of the seized property is less than the period for which: enforcement proceedings are suspended, enforcement actions are postponed, or a deferment or installment plan for enforcement documents is granted. In case of revocation, the sale is terminated and the Federal Property Management Agency / specialized organization returns the property and/or documents for it to the bailiff (clause 4.4 of the Agreement of the FSSP of Russia N 0001/13, the Federal Property Management Agency N 01-12/65 of 04/30/2015).

Features of the sale of securities Securities , if they are traded at organized auctions, are subject to sale only at such auctions. They are sold by a broker or manager to whom they are transferred for management. Trades are conducted by trade organizers, such as stock exchanges. Not all rules of the Law on Enforcement Proceedings apply to these auctions (Parts 3, 4, Article 89 of the Law on Enforcement Proceedings, Clause 1, Part 1, Article 2 of the Law on Organized Auctions).

Features of the sale of a share in the right of common ownership A share in the right of common ownership of property is transferred to auction only after the co-owners have renounced their pre-emptive right to purchase. If they were not notified of the foreclosure on the debtor’s share and the property was sold at public auction to other persons, the co-owners can restore the preemptive right in the manner provided for in paragraph 3 of Art. 250 of the Civil Code of the Russian Federation (clause 63 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of November 17, 2015 N 50, Determination of the Supreme Court of the Russian Federation of February 14, 2018 N 8-КГ17-15).

Sincerely, lawyer Anatoly Antonov, managing partner of the law firm Antonov and Partners.

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Procedure and deadlines for implementation

The conditions for the sale of property seized by a bailiff during enforcement proceedings are regulated by Federal Law No. 229-FZ.

Where does property go after arrest? From the moment of seizure of things, objects and objects, the owner loses the right to freely dispose of them without the consent of FSSP officials. In this case, until the moment of actual sale, the property may be transferred for safekeeping to the debtor with the right of limited use.

The procedure for selling the debtor's assets consists of the following stages:

issuing a seizure order;
sending the debtor a notice of the upcoming seizure of items for sale at auction or through direct sale - the document is drawn up 30 days before the date of the announced auction so that the debtor has the opportunity to repay the debt;
valuation of property to be sold;
sale without an auction - if its value is less than 500,000 rubles;
appointment and holding of a specialized auction - if the valuation exceeds 500,000 rubles.

How is the sale value of seized property determined? The determination of the price in an out-of-court procedure is carried out by bailiffs in relation to the assets seized by them. To do this, FSSP officials use an inventory of assets compiled during the seizure process. Based on the inventory, an agreement is concluded with a professional independent appraiser, who uses various assessment methods to prepare a final report.

Determination of the sale price in court occurs as a result of foreclosure on the mortgaged property. In this case, FSSP employees apply the assessment indicators recorded in the judicial act and writ of execution. If there is no such value indicator, the bailiffs are obliged to send the collector a notice of the need to go to court to establish the sale price.

In order to buy property seized and transferred for sale from bailiffs, it is necessary to monitor public notices of the FSSP service, which they are required to post on the website fssprus.ru/torgi. Sales without auctions are carried out under the control of the state, and the transaction price will be the estimated indicator recorded in the appraiser's report.

Seizure of property: features of the procedure

After the bailiff carries out the procedure for seizing the debtor’s property, he can leave it to the debtor himself or his relatives for storage, since there is not enough space in the warehouses for all the confiscated items.
This solution is offered by the corresponding article of the Civil Code. As for the safety of the seized property during its stay with the debtor, for the sale or damage of such things he may face punishment, even criminal. It is important to know that the debtor has no right to use the seized property, be it household appliances or a car.

The procedure for inventorying the debtor's property is carried out according to certain rules. Thus, the result of enforcement proceedings is a resolution authorizing the seizure of the debtor’s property. The bailiff assigned to this borrower appears at the debtor’s registered address, where he draws up an inventory report, including the following:

date of the procedure and production number;
an indication of whether the debtor himself or his relatives are present during the inventory (the presence of the owners is not required, since the court order gives the bailiffs the right to enter the premises without the permission of the debtor);
a list of described items with a detailed description;
estimated value (the bailiff himself determines how much the seized property may be worth);
information about witnesses;
a resolution prohibiting the exploitation of seized property;
information about the storage features of the described property;
information mark explaining the rights of participants in the process.

Executive document

In the Federal Law of October 2, 2007 No. 229-FZ “On Enforcement Proceedings” (Law No. 229-FZ) there is no special article that would reveal the content of the concepts used.
For this logical operation of defining concepts, we will mainly adhere to the above-mentioned law.

However, the definition of concepts can be derived from the context of the law or from the explanations of higher courts, which resolve certain disputes and are forced to interpret the concepts for the correct application of a specific norm.

An entire Chapter 2 of Law No. 229-FZ is devoted to executive documents (ID), which contains, among other things, an open list of ED, but does not define the concept itself.

The definition of the concept of ID can be derived based on the totality of the norms of Art. 1, 12, 13, 14 of Law No. 229-FZ.

Thus, an executive document is an act of a judicial or executive authority, an act of government officials, containing requirements for the transfer of funds and other property to other citizens, organizations or the relevant budgets, or the performance of certain actions in their favor or the abstention from performing certain actions. .

It is worth noting that the order of the bailiff itself in some cases can also be an executive document (clause 7, part 1, article 12, part 6, article 30). For example, when removing from the consolidated enforcement proceeding the requirement to collect the costs of carrying out enforcement actions or the enforcement fee into a separate enforcement proceeding (IP), when the main enforcement proceeding is completed (Part 7 of Article 47).

Responsibilities of the seller and auction organizer

An auction is a competitive form of sale of property assets, in which the buyer is determined based on the highest price offer. In the process of enforcement proceedings, the seller will be the FSSP service, which is entrusted with the following responsibilities:

determining the organizer of the auction and the form of the auction (by conducting it in person or using a specialized electronic platform);
concluding an agreement with the auction organizers and determining the auction commission;
evaluation of the auction item and determination of the starting price of each object;
determining the minimum auction step by which participants in the bidding procedure will make subsequent offers;
conclusion of an agreement with the winner of a public auction.

The auction is carried out on the principles of openness and accessibility; any interested person has the right to participate. At the registration stage, participants are required to make a deposit, the amount of which is determined by the seller.

Conducting auctions is the responsibility of the organizer. The organizer of the auction can be a specialized enterprise or individual entrepreneur who has a permit. The responsibilities of the organizer, after concluding an agreement with the seller, will include:

publishing notices of auctions and attracting potential buyers;
accepting applications from participants and conducting bidding procedures, including on specialized electronic resources;
summing up the results of the auction procedure and transferring information about the winners of the auction to the seller.

Since the auction can be held for each specific item or object from the total amount of seized property, several winners can be determined at the auction. A purchase and sale agreement will be concluded with each of them.

After completion of the bidding procedure, the proceeds are transferred by the bailiffs to pay off the debt under the writ of execution. If, after full repayment of debts, there are free funds remaining, they are subject to transfer to the debtor.

Enforcement actions and enforcement measures

Here the definition is given by the legislator.

However, in practice, lawyers often confuse these terms.

Enforcement actions are actions aimed at creating conditions for the application of enforcement measures (Part 1 of Article 64).

For example, a temporary restriction of the debtor’s right to leave the country or a temporary restriction on the debtor’s use of a special right are enforcement actions when, for example, the ID contains a requirement to collect funds, etc.

That is, enforcement actions act as certain interim measures used by the bailiff for the purpose of fully applying enforcement measures in the future.

Compulsory enforcement measures are actions specified in the executive document (Part 1 of Article 68). It’s as simple as that, that is, these are actions that are prescribed in the ID itself, this must be taken literally.

For example, when executing a writ of execution containing demands for the collection of funds, writing off money from the account will be the above-mentioned enforcement measure.

But in a situation where the disposal of funds in the debtor’s account is prohibited (the so-called freezing of money in the account, when money remains in the account, but cannot be withdrawn or transferred), this action will be an executive action. Similarly, when there is a ban on registration actions with movable (ban on a vehicle in the State Traffic Safety Inspectorate) and immovable property (ban on housing in Rosreestr) of the debtor, these actions are executive, and not enforcement measures.

Understanding the differences between these concepts will help when applying, for example, the rules on the postponement and suspension of individual entrepreneurs; when applying the rules on a five-day period for voluntary execution.

Property sold through auction

The legislation specifically specifies what type of objects must be sold through sale at auction. Public tenders must be organized for:

real estate objects;
The agency tries to sell the most significant and expensive lots independently
objects valuable from the point of view of history or art;
items whose price is more than half a million;
valuable papers;
mutual fund shares (by decision of the bailiff);
accounts receivable;
property rights.

The agency tries to sell the most significant and expensive lots independently.

The agency is obliged to sell the property within a two-month period. The result of a successful sale is the receipt of money from it to the FSSP accounts. The implementation process is considered complete.

In what cases does the law provide for the sale of a citizen’s property?

The need and procedure for the sale of property is regulated by the provisions of No. 127-FZ, often simply called the Bankruptcy Law. Article 213.6 of the document provides for three possible court decisions, which are made based on the results of consideration of an application to declare the debtor financially insolvent:

opening a case and launching a debt restructuring procedure;
leaving the application without progress;
termination of the case.

If events develop according to the first option, but debt restructuring is impossible, the Bankruptcy Law provides for a transition to the sale of the citizen’s property. The basis for such a court decision are:

absence of a restructuring plan provided by the parties to the case;
lack of approval of this document by the court or creditors;
repeated violations by the debtor of the terms of the approved and agreed upon restructuring plan.

In practice, the initiative to introduce a procedure for the sale of property often belongs to the debtor himself or to the insolvency administrator appointed on his recommendation. This can be explained extremely simply: in this way it is possible to reduce the overall duration of bankruptcy by quickly moving on to strictly time-regulated stages of the event.

Among the latter are the formation of a bankruptcy estate and the conduct of electronic auctions. As a result, an individual quickly acquires bankrupt status, which allows unpaid debts to creditors to be written off. Therefore, it is not surprising that many debtors immediately initiate the asset sale stage and do not waste time trying to negotiate a debt restructuring.

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?

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.