Local Bankr. R. 6004-2 Sales and Sale Procedures Motions.
(a) Applicability of Rule. Except as otherwise provided in these Local Rules or ordered by the Court, this rule applies to motions to sell property of the estate under 11 U.S.C. § 363(b) ("Sale Motions") and motions seeking approval of sale, bid or auction procedures in anticipation of or in conjunction with a Sale Motion ("Sale Procedures Motions").
(b) Sale Motions. In addition to the filing and service of a separate Local Form Notice of Sale of Estate Property (Appendix O) in accordance with Local Bankr. R. 6004-1, Sale Motions shall be scheduled for a hearing in accordance with Appendix N. Except as otherwise provided in these Local Rules, the Bankruptcy Code, the Bankruptcy Rules, or an Order of the Court, all Sale Motions shall attach or include the following:
(1) If applicable, a copy of the proposed purchase agreement, or a form of such agreement substantially similar to the one the Debtor reasonably believes it will execute in connection with the proposed sale.
(2) A copy of a proposed form of sale order.
(3) A request, if necessary, for the appointment of a consumer privacy ombudsman under 11 U.S.C.§ 332.
(4) A description of the means by which the movant determined the fair market value of the property to be sold.
(c) Provisions to be Highlighed. The Sale Motion must highlight material terms, including but not limited to: (a) whether the proposed form of sale order and/or the underlying purchase agreement constitutes a sale or contains any provision of the type set forth below; (b) the location of any such provision in the proposed form of order or purchase agreement; and (c) the justification for the inclusion of the following material provisions:
(1) Sale to Insider. If the proposed sale is to an insider, as defined in 11 U.S.C. § 101(31), the Sale Motion must: (a) identify the insider; (b) describe the insider’s relationship to the Debtor; and (c) set forth any measures taken to ensure the fairness of the sale process and the proposed transaction.
(2) Agreements with Management. If a proposed buyer has discussed or entered into any agreements with management or key employees regarding compensation or future employment, the Sale Motion must disclose: (a) the material terms of any such agreement; and (b) what measures have been taken to ensure the fairness of the sale and the proposed transaction in the light of any such agreements.
(3) Releases. The Sale Motion must highlight any provisions pursuant to which an entity, individual or party is being released or claims against any entity are being waived or otherwise satisfied. The Sale Motion must also describe the consideration, if any, to the estate for any such release.
(4) Private Sale/No Competitive Bidding. The Sale Motion must disclose whether an auction is contemplated, and highlight any provision in which the Debtor has agreed not to solicit competing offers for the property subject to the Sale Motion or to otherwise limit shopping of the property.
(5) Closing and Other Deadlines. The Sale Motion must highlight any deadlines for the closing of the proposed sale or deadlines that are conditions to closing the proposed transaction.
(6) Good Faith Deposit. The Sale Motion must highlight whether the proposed purchaser has submitted or will be required to submit a good faith deposit and, if so, the conditions under which such deposit may be forfeited.
(7) Interim Arrangements with Proposed Buyer. The Sale Motion must highlight any provision pursuant to which a Debtor is entering into any interim agreements or arrangements with the proposed purchaser, such as interim management arrangements (which, if out of the ordinary course, also must be subject to notice and a hearing under 11 U.S.C. § 363(b) of the Bankruptcy Code) and the terms of such agreements.
(8) Use of Proceeds. The Sale Motion must highlight any provision pursuant to which a Debtor proposes to release sale proceeds on or after the closing without further Court order, or to provide for a definitive allocation of sale proceeds between or among various sellers/lenders or collateral.
(9) Tax Exemption. The Sale Motion must highlight any provision seeking to have the sale declared exempt from taxes under 11 U.S.C. § 1146(a) of the Bankruptcy Code, the type of tax (e.g., recording tax, stamp tax, use tax, capital gains tax) for which the exemption is sought. It is not sufficient to refer simply to "transfer" taxes and the state or states in which the affected property is located.
(10) Record Retention. If the Debtor proposes to sell substantially all of its assets, the Sale Motion must highlight whether the Debtor will retain, or have reasonable access to, its books and records to enable it to administer its bankruptcy case.
(11) Sale of Avoidance Actions. The Sale Motion must highlight any provision pursuant to which the Debtor seeks to sell or otherwise limit its rights to pursue avoidance claims under Chapter 5 of the Bankruptcy Code.
(12) Requested Findings and Order as to Successor Liability. The Sale Motion and proposed Order should highlight any provisions relating to the proposed purchaser’s responsibility as a successor.
(13) Sale Free and Clear of Unexpired Leases. The Sale Motion must highlight any provision by which the Debtor seeks to sell property free and clear of a possessory leasehold interest, license, or other right.
(14) Credit Bid. The Sale Motion must highlight any provision by which the Debtor seeks to allow, disallow, or affect in any manner, credit bidding pursuant to 11 U.S.C. § 363(k).
(15) Relief from Bankruptcy Rule 6004(h). The Sale Motion must highlight any provision whereby the Debtor seeks relief from the fourteen-day stay imposed by FRBP 6004(h).
(16) Carve-Outs and/or "Gifts". The Sale Motion must highlight any provision by which the lender(s) or party-in-interest is allowing the distribution of its collateral for the benefit of others.
(17) Residual Assets. The Sale Motion must describe what residual assets, if any, will exist following the Sale Closing.
(d) Sale Procedures Motions. A Sale Procedures Motion may be scheduled for a hearing in accordance with Appendix M. A party-in-interest may file a Sale Procedures Motion seeking approval of an order (a “Sale Procedures Order”) approving bidding and auction procedures either as part of the Sale Motion or by a separate motion filed in anticipation of an auction and a proposed sale. The Sale Procedures Motion should highlight the following provisions in any Sale Procedures Order:
(1) Provisions Governing Qualification of Bidders. Any provision governing an entity becoming a qualified bidder, including but not limited to, an entity’s obligation to:
(A) Deliver financial information by a stated deadline to the Debtor and other key parties (ordinarily excluding other bidders);
(B) Demonstrate its financial wherewithal to consummate a sale;
(C) Maintain the confidentiality of information obtained from the Debtor or other parties or execute a non-disclosure agreement; and
(D) Make a non-binding expression of interest or execute a binding agreement.
(2) Provisions Governing Qualified Bids. Any provision governing a bid being a qualified bid, including, but not limited to:
(A) Any deadlines for submitting a bid and the ability of a bidder to modify a bid not deemed a qualified bid;
(B) Any requirements regarding the form of a bid, including whether a qualified bid must be (a) marked against the form of a "stalking horse" agreement or a template of the Debtor’s preferred sale terms, showing amendments and other modifications (including price and other terms), (b) for all of the same assets or may be for less than all of the assets proposed to be acquired by an initial or "stalking horse" bidder, or (c) remain open for a specified period of time;
(C) Any requirement that a bid include a good faith deposit, the amount of that deposit, and under what conditions the good faith deposit is not refundable; and
(D) Any other conditions a Debtor requires for a bid to be considered a qualified bid or to permit a qualified bidder to bid at an auction.
(3) Provisions Providing Bid Protections to "Stalking Horse" or Initial Bidder. Any provisions providing an initial or "stalking horse" bidder a form of bid protection, including, but not limited to the following:
(A) No-Shop or No-Solicitation Provisions. Any limitations on a Debtor’s ability or right to solicit higher or otherwise better bids;
(B) Break-Up/Topping Fees and Expense Reimbursement. Any agreement to provide or seek an order authorizing break-up or topping fees and/or expense reimbursement, and the terms and conditions under which any such fees or expense reimbursement would be paid;
(C) Bidding Increments. Any requirement regarding the amount of the initial overbid and any successive bidding increments; and
(D) Treatment of Break-Up and Topping Fees and Expense Reimbursement at Auction. Any requirement that the "stalking horse" bidder receive a "credit" equal to the break-up or topping fee and or expense reimbursement when bidding at the auction and in such case whether the "stalking horse" is deemed to have waived any such fee and expense upon submitting a higher or otherwise better bid than its initial bid at the auction.
(4) Modification of Bidding and Auction Procedures. Any provision that would authorize a Debtor, without further order of the Court, to modify any procedures regarding bidding or conducting an auction.
(5) Closing with Alternative Backup Bidders. Any provision that would authorize the Debtor to accept and close on alternative qualified bids received at an auction in the event that the bidder selected as the "successful bidder" at the conclusion of the auction fails to close the transaction within a specified period.
(6) Request for Prior Approval of Sale Terms and Conditions; Notice and Service. In connection with any Sales Procedures Motion, any party may seek prior approval from the Court of the form and content of any notice of the terms and conditions of the sale to be served on parties, including but not limited to, the scope or limitation of the parties to be served with such notice, the requisite platforms for advertising of the sale, a description of the property to be sold, the sale process, the terms of sale, the necessity of subsequent Court approval, and opportunities for inspection of the property.
(e) Provisions Governing the Auction. Unless otherwise ordered by the Court, the Sale Procedures Order shall:
(1) Specify the date, time, and place at which the auction will be conducted, and the method for providing notice to parties of any changes thereto; and
(2) Provide that each bidder participating at the auction will be required to certify in writing that it has not engaged and will not engage in any collusion with respect to the bidding or the sale.
(f) Expedited Sale Disclosures. In connection with any hearing to approve the sale of substantially all assets at any time before sixty (60) days after the filing of the petition, a motion for an order authorizing a sale procedure and hearing or the sale motion itself when regularly noticed, should include factual information on the following points:
(1) Creditors’ Committee. If a creditors’ committee existed pre-petition, indicate the date and manner in which the committee was formed, as well as the identity of the members of the committee and the companies with which they are affiliated.
(2) Counsel for Committee. If the pre-petition creditors’ committee retained counsel, indicate the date counsel was engaged and the selection process, as well as the identity of committee counsel.
(3) Sale Contingencies. Statement of all contingencies to the sale agreement, together with a copy of the agreement.
(4) Creditor Contact List. If no committee has been formed, a list of contact persons, together with available contact information for each of the twenty (20) largest unsecured creditors.
(5) Administrative Expenses. Assuming the sale is approved, an itemization and an estimate of administrative expenses relating to the sale to be incurred before closing and the source of payment for those expenses.
(6) Deductions from Proceeds of Sale. Itemize all deductions, including any applicable taxes, that are to be made from gross sale proceeds and include a brief description of the basis for any such deductions. If the amount of a deduction will not be fixed until the date of the closing, an estimate may be provided.
(7) Debt Structure of Debtor. A brief description of the Debtor’s debt structure, including the amount of the Debtor’s secured debt, priority claims, and general unsecured claims.
(8) Need for Quick Sale. An extensive description of why the assets of the estate must be sold on an expedited basis. Include a discussion of alternatives to the sale.
(9) Negotiating Background. A description of the length of time spent in negotiating the sale, and which parties in interest were involved in the negotiation, along with a description of the details of any other offers to purchase, including, without limitation, the potential purchaser’s plans in connection with the retention of the Debtor’s employees.
(10) Marketing of Assets. A description of the manner in which the assets were marketed for sale, including the period of time involved and the results achieved.
(11) Decision to Sell. The date on which the Debtor accepted the offer to purchase the assets.
(12) Relationship of Buyer. A statement identifying the buyer and setting forth all of the buyer’s (including its officers, directors and shareholders) connections with the Debtor, creditors, any other party in interest, their respective attorneys, accountants, the United States Trustee or any person employed in the office of the United States Trustee.
(13) Post Sale Relationship with Debtor. A statement setting forth any relationship or connection the Debtor (including its officers, directors, shareholders, and employees) will have with the buyer after the consummation of the sale, assuming it is approved by the Court.
(14) Relationship with Secured Creditors. If the sale involves the payment of all or a portion of secured debt(s), a statement of all connections between Debtor’s officers, directors, employees, or other insiders and each secured creditor involved (for example, release of insider’s guaranty).
(15) Insider Compensation. Disclosure of current compensation received by officers, directors, key employees, or other insiders pending approval of the sale.
(16) Successor Liability. Any sale requesting findings or the entry of relief regarding successor liability shall delineate the scope and form of notice and the relief requested.
(g) Service of Sale Motions and Sale Procedure Motions.
In addition to compliance with FRBP 2002(a)(2), Motions to Sell must be served by the Movant on all parties indicating interest in the purchase of the property, and, if the trustee was not represented by a broker, at least one trade publication or website organized for the purpose of permitting bankruptcy trustees to advertise the sale of estate property.
(h) Sales Motions by Debtors under Chapter 13.
If a Motion for the sale free and clear of liens under 11 U.S.C. § 363 by a Chapter 13 debtor proposes a sale which will satisfy a lien or liens the Chapter 13 Trustee is paying under the terms of a confirmed Chapter 13 Plan (the “Lien”), the motion shall seek an order:
- (1) Requiring the Chapter 13 Trustee to state on the docket the balance due on the Lien under the confirmed Chapter 13 Plan, with a calculation of the commission due on the portion of the Lien to be paid through the confirmed Chapter 13 Plan, within a reasonable period of time from the date of the order;
- (2) Requiring that the Debtor attach a closing statement to the statement required under FRBP 6004(f)(1);
- (3) Providing that the docketing of the closing statement and the statement under FRBP 6004(f)(1) shall contain a declaration by the Debtor and his or her closing attorney that the Lien was satisfied in full at closing;
- (4) Stating whether the Chapter 13 Trustee’s commission due on the portion of the Lien paid through the confirmed Chapter 13 Plan will be paid at closing; and
- (5) Providing that the docketing of the closing statement and the statement under FRBP 6004(f)(1) shall relieve the Chapter 13 Trustee of any obligation to pay the Lien through the confirmed Chapter 13 Plan.