Stalking Horse Purchase Agreement

The sale of assets under Section 363 of the Bankruptcy Act or a turnaround plan offers a number of benefits to the purchaser, but it also poses a number of potential barriers, particularly for buyers who are unaware of the bankruptcy process. Benefits include: (i) obtaining assets without any pledge; (ii) protection against fraudulent transfer rights; (iii) protection against certain debts and guarantee of the applicability of transaction documents in accordance with the bankruptcy court order; (iv) exemption from the need to obtain authorization to surrender certain contracts, v) an expedited waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, (vi) exemption from certain state laws, including bulk sales and shareholder authorization, and (vii) for sales pursuant to a confirmed recovery plan, exemption from transfer tax. An offer, agreement or stalking-horse offer is an offer for an insolvent company or its assets, which is agreed as an effective reserve offer before the auction. [1] [2] The objective is to maximize the value of its assets or to avoid small bids as part (or before) a court auction. [3] There is no form required for a sales contract under Section 363 of the Bankruptcy Act for good reason. After all, every asset is different. Would you expect the sale of a dolphin pool to have the same stumbling blocks as selling a tractor? Of course not. That is why the parties have a fairly rough margin for negotiation. In addition to negotiating the sale price and other asset-specific issues, the parties generally repair certain incentives that favour the bidder. The process of compiling an offer and the necessary diligence can be costly. It is not fair for the bidder to withdraw empty-handed after helping the debtor by starting with a strong bid to be outbid at the auction. To remedy this possibility, there are some general advantages that are often enshrined in these sales contracts: compensation and/or demerger costs are often paid to a stalking-horse supplier – if not the successful bidder – at the time of the closing of the sale transaction. This is an important bargaining rule, as the supplier of stalking horses may otherwise risk that the bankruptcy mass does not have sufficient resources to make payments.

As a general rule, the original bidder wants to set the amount of the demerger tax as high as possible. High spin-off fees not only discourage other bidders, but also help ensure that the original bidder receives compensation when a subsequent bidder finally acquires the debtor`s assets at the auction. In most cases, a bankruptcy court will approve an appropriate allocation royalty regime as long as the court considers that the tax will not cool the tendering process and is necessary to induce the original bidder to make a binding bid. The court may also, in determining the adequacy of a duplication tax, take into account the costs incurred or incurred by a stalking-horse bidder. Break-up fees. The indicative stop or pricing fee is also a common safeguard that is offered to suppliers of stalking horses. However, such taxes can be controversial in many legal systems and it is important to be familiar with a jurisdiction`s position on these taxes before claiming them. The demerger fees are more controversial than fee reimbursements because they make payments to the harassment horse that have nothing to do with the expenses incurred in negotiating the agreement or, in some cases, in addition to a negotiated refund. The split tax is essentially an additional compensation for the harassment horse, in order to make it become the original candidate and lay the groundwork for other potential bidders at an auction.

Please direct requests and inquiries to Guarachi Wine Partners, 22837 Ventura Blvd, 3rd Floor, Woodland Hills, CA 91364 or call 818-225-5100