This article aims to draw attention to the possibilities of buying real estate in the framework of insolvency proceedings. Purchase is possible through participation in specific procurements, and after the amendments to the Commerce Act (CA) in the State Gazette, No. 66 of 2023, the so-called electronic public procurement is provided for.
Electronic public procurement
The newly introduced possibility of conducting an electronic public procurement provides more transparency and more means to protect citizens’ rights. The e-public procurement is implemented through the following online platform: https://zapori.mjs.bg/#/.
This platform includes the following information and guarantees:
- a register of public procurements; a system for the conduct of public procurement;
- confidentiality of the data of candidates and bidders, including their number, is guaranteed until the announcement of the buyer, as well as publicity of information on: the property sold and the starting price; the current price reached in the bidding and the final price reached in the procurement.
During the bidding, including the receiver has access only to the publicly available information, and the receiver has no knowledge of which bidder’s bid.
Subject of the procurement
Both immovable and movable property may be purchased by electronic public procurement.
How does the electronic public procurement work?
Initiating the procurement
The electronic public procurement is initiated at the request of the receiver, at their discretion or pursuant to a decision of a creditors’ meeting according to which the sale of a specific asset from the insolvency estate is to proceed at a specific price. Court authorization is also required.
Determination of the starting price of the asset to be procured:
Before an asset in the insolvency estate is put up for sale, an initial procurement price must be set, from which the bidding itself starts.
The Commerce Act provides for specific rules for the determination of the starting price so that, on the one hand, the interests of the public are safeguarded, and, on the other hand, the price is not too low in order to protect the interests of the creditors of the insolvent debtor. The starting price shall be determined by an appraisal by an appraiser chosen by the creditors’ meeting or appointed by the receiver in cases where the creditors’ meeting is unable to decide. Following the amendments to the Commerce Act, an explicit rule was provided that, in the case of a first sale, the initial sale price may not be lower than the tax assessment or the insurance value of the property concerned.
Preparation of a notice of sale
After obtaining the court’s authorization and preparing an appraisal, the receiver prepares a notice of sale.The notice shall contain: details of the debtor; a description of the property, the order and manner of sale; the place and day of the sale; the deadline for the receipt of offers within the day and the starting price.
Publication of the sale
In order to ensure transparency and equality, the receiver in bankruptcy is required to publicize the relevant sale by explicitly stating the registration period, the start and end of the bidding. The disclosure is made on the online platform for electronic public procurement of the Ministry of Justice.
Deposit
For participation in the procurement, each bidder shall pay a deposit of 10 % of the valuation. The deposit shall be paid no later than the date and time specified in the notice of sale.
Registration of bidders
A bidder may participate in person or by proxy and registration may be effected by submitting a written application to the office of the receiver or electronically by electronic signature. The period for registration shall be one month, ending at 17.00 on the day specified in the notice.
Opening of the bidding
All registered bidders will receive automated messages when the bidding starts, 24 hours and 1 hour before the start of the bidding and 2 hours before the expiry of the bidding period. The bidding itself lasts 7 days and ends on the day specified in the notice.
How are bids increased when the bidding is held?
The bids are increased by a so-called ‘bidding step’, where the bids are always increased by one step.
Article 501e of the Civil Procedure Code (CPC) stipulates that the increment in an electronic public procurement is a percentage of the starting price and is as follows: for a starting price of up to BGN 10 000, the increment is a percentage of the starting price. – 10 per cent of the initial price; for an initial price of BGN 10 000 to BGN 100 000 – 5 per cent of the initial price; for an initial price above BGN 100 000 – 2 per cent of the starting price.
When the bidding takes place, the bidding increment is generated by the electronic system itself and the next price one increment higher is automatically displayed by the system. The electronic system also makes available to each bidder the information on the time remaining until the end of the procurement and what the last advertised price is.
Determination of buyer
The highest bidder is declared the buyer. After the end of the e-public procurement, the e-public procurement platform sends an automatic message to all authorized bidders about the price reached for the property. The sale ends with the receiver drawing up a report declaring the highest bidder the buyer.
Deadline for payment of the price
The person declared the buyer shall have 14 days from the end of the sale to deposit the price they have offered in the bank account declared by the receiver.
If the bidder fails to pay the price, the money deposited by the bidder shall be used to satisfy the creditors and the receiver shall invite the bidder who has offered the next highest price if they have not withdrawn the deposited money. If that bidder agrees, they are declared the purchaser. If they do not agree, or if they do not pay the price within seven days of being declared the buyer, the deposited money paid by them shall be forfeited to the satisfaction of creditors and the receiver shall offer the property to the next bidder in order of price and shall do so if necessary until all the bidders who have offered a valid sale price have been exhausted.
The award order
In the event that the price is paid in time, a decree of award shall be issued by the bankruptcy court.
