Bankruptcy Law

The bankruptcy judge may order the sale by judicial auction of the debtor's real estate assets, pursuant to Article L. 642-18(1) of the Commercial Code. Sale by judicial auction, also known as “sale at the bar of the court”, is the privileged method of disposal of the debtor's individual assets, because its transparency avoids some of the pitfalls of private treaty sales, which often lead to under …

Sale by judicial auction

The bankruptcy judge may order the sale by judicial auction of the debtor's real estate assets, pursuant to Article L. 642-18(1) of the Commercial Code. Sale by judicial auction, also known as “sale at the bar of the court”, is the privileged method of disposal of the debtor's individual assets, because its transparency avoids some of the pitfalls of private treaty sales, which often lead to undervalued prices and sometimes to fraudulent acquisitions. This type of sale is subject to the provisions of Titles I and II of Book III of the Code of Civil Enforcement Procedures, provided these provisions do not conflict with those of Book VI of the Commercial Code .

In his order, the bankruptcy judge sets the upset price and the essential conditions of the sale , which will take place before the enforcement judge of the judicial court in the place where the property is located. The ordinance must include, further to the indications mentioned in Article R. 642-22, certain information required by Article R. 321-3 of the Code of Civil Procedure .

Under Article R. 642-29, the bankruptcy judge may authorize the liquidator or the creditor to proceed simultaneously with the sale of several properties, even if they are located in the jurisdictions of different judicial courts. He decides whether the sale will be pursued before the enforcement court of the judicial district in which each property is located, or before the court in which the address of the business or activity declared by the individual debtor, or the head office of the corporate debtor, is located.

The impossibility of selling a property by mutual agreement is not a condition for the legality of the order authorizing its sale by auction . Similarly, the existence of an offer to purchase by mutual agreement is not sufficient to exclude the sale of the property by auction when this offer proves to be significantly lower than the value retained by the expert and the upset price set by the bankruptcy judge, which, for the sale to be attractive, is already lower than the market value of the property .

Within two months of publication of the bankruptcy judge's ordinance , the liquidator must file the schedule of conditions of sale with the court registry of the enforcement judge of the court having jurisdiction. He then notifies the registered creditors at their elected domicile and, if the sale concerns community property, the debtor's spouse, of the date of the auction hearing. The date is set, at his discretion, within two to four months of the date of the notice . The notice must contain, under penalty of invalidity, an indication of the place, day and time of the auction hearing by the enforcement judge, a summons to acquaint oneself with the conditions of sale booklet, and an indication, in very conspicuous characters, that under penalty of inadmissibility, only disputes relating to a procedural act subsequent to the order of the bankruptcy judge may be raised, within fifteen days of the act or, as the case may be, of its notification, by lawyer's submissions filed with the court registry of the bankruptcy judge . Where the time-limits for filing or notification have been exceeded, the enforcement judge declares the order of the bankruptcy judge null and void, unless a legitimate reason is shown .

The property is sold by public auction at the court's hearing . The seized debtor, legal auxiliaries who have intervened in any capacity whatsoever in the procedure or magistrates of the court before which the sale is being pursued  may not concern themselves with the bidding. The court reiterates that bids are to be based on the starting price set out in the terms and conditions of sale . The auction process is governed by the provisions of the Code of Civil Procedure . Article R. 322-48 of this code provides that these provisions are prescribed on pain of nullity of the bid raised ex officio, but any new bid duly concerned covers the nullity of the previous bids. Nullity of the last bid automatically entails nullity of the auction.

Furthermore, the court ruling must include the ordinance of the bankruptcy judge having ordered the sale, any judgments ruling on disputes and the conditions of sale book . Article R. 322-59 of the Code of Civil Enforcement Procedures also requires that all publicity formalities be indicated, together with their dates, the description of the property sold, the date and place of the forced sale, the identity of the successful bidder, the auction price and the amount of taxed costs. The court ruling must be notified to the debtor, the registered creditors and the successful bidder, as well as to any person who has raised a challenge to the ruling .

Lastly, unless the terms and conditions of sale stipulate that the distrainee debtor is to remain on the premises, the successful bidder may enforce the eviction order against the distrainee and any occupant of the property who does not have a right against him or her, once the price has been paid or deposited and the taxed costs have been paid .

C. com., art. L. 642-18, para. 1: “[t]he sale of real estate takes place in accordance with Articles L. 322-5 to L. 322-12, with the exception of Articles L. 322-6 and L. 322-9, provided that these provisions are not contrary to those of the present code” and art. R. 642-27.

C. com., art. R. 642-29-2, al. 2 ; CPC exéc., art. R. 322-39.

C. com., art. R. 642-29-2, al. 2 ; CPC exéc., art. R. 322-43.

C. com., art. R. 642-29-2, al. 2 ; CPC exéc., Livre III, Titre II, Chap. II, section 4, sous-section 3.

CA Grenoble, 29 January 2015, LawLex202300005384JBJ (LJ).

CA Bourges, 20 March 2014, LawLex202300005392JBJ (LJ).

Bankruptcy Law

912. Sale by judicial auction

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912. Sale by judicial auction

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Les notions juridiques connexes

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