The first step in the process is to prepare an accurate description of the asset to be sold. This is handled by the bailiff, a public official acting either for their own account or as a government employee.
The next step is to set an initial reserve price. To this end, the bailiff appoints an expert valuer for the asset. The valuation is notified to the debtor and enforcing creditor, each of whom can dispute it within 7 days of being given notice and does so by application to court.
The initial reserve price is set at 80% of the asset’s valuation but cannot be lower than its rateable tax value. In the case of land, such rateable value is determined by local government from time to time, and it may be determined for other assets in various other ways. E.g., in the case of vehicles, the rateable value is equal to the insurable value which insurers can provide on application.
Within 7 days of the description of the asset, the bailiff sets and publishes the sale start date, the date and time of bid opening (the latter must be 1 month after the sale start date) and the venue for the bid opening. The debtor is part of a class of persons who are not permitted to participate in the sale. However, the debtor remains in possession of the asset for the duration of the sale process, on condition that it takes suitable care of the property at its own expense.
The public sale including bid opening takes place at the offices of the local court in whose jurisdiction the property is located. During the bid filing period, prospective buyers may acquaint themselves with the asset’s documentation and arrange to inspect the asset itself. At the latest at the bid opening date, the buyers file their offers with the bailiff in sealed non-transparent envelopes. The offers may not be validly lower than the initial reserve price and may not be more than 30% higher.
To validly participate in the sale process, each bidder must provide a deposit of 10% of the initial reserve price. This deposit has to have been credited to the bailiff’s account before the bid opening date. It is released after the sale is completed. If the enforcing creditor takes part in the sale and its receivable has a higher value than the deposit required, it is exempted from the requirement to pay a deposit.
On the bid opening date, the bailiff opens the bid envelopes and announces the highest valid written bid, whose bidder wins. If any bidders are physically present at the bid opening, such bidders may verbally make higher bids than any pre-filed ones. The process is then converted into a live public auction under the control of the bailiff and the asset is allocated to the highest bidder. The winning bidder must pay the price within 2 weeks, less its prepaid deposit, if any. The winning bid can be of any level - i.e., it can exceed 30% above the initial reserve price.
Alternatively, the sale may be carried out electronically: either on request by the debtor or enforcing creditor, or on the bailiff’s decision. The standard procedure is applied, save for the following differences:
If the winning bidder does not pay within two weeks, its deposit is forfeited and the asset is allocated to the next highest bidder and so on, until a bidder pays the price offered for the asset.
The price paid is used to first cover the bailiff’s and other expenses and thereafter to satisfy the creditor’s receivables. If any money is left, it is paid over to the debtor.
If no buyers make valid offers or if for any other reason the asset is unsold, within a week of the public sale date the creditor may request from the bailiff to organise a new sale. The new sale takes place at least one month after the first sale and at an initial reserve price set at 90% of the first sale’s. This process can continue ad infinitum except that a new valuation is required after every second attempt. The reserve price for each public sale after the first may drop below the rateable value of the asset.
The process depends on the enforcing creditor’s timely applications to the bailiff for the setting of public sales and, as needed, the preparation of subsequent valuations.
If the enforcing creditor does not request a new initial reserve price, the asset is no longer enforced upon and the charge over it must be lifted by the bailiff. However, this is not absolutely final as the enforcement may be directed at the property again repeatedly, and the asset may be charged again, if such a request is made by the enforcing creditor. Then the above process is repeated. The lifting of the charge may be delayed in practice by the bailiff such that there may be no gap in time when the asset is not charged.
Authors: Yavor Markov and Kamen Shoylev. Download as PDF here.
Assistance in local set-ups to blue chips
We have also been involved in advising a wide range of clients on establishing their business operations in Bulgaria.
© New Balkans Law Office 2020