Romanian companies that have opened insolvency proceedings need liquidity to continue their business. One of the methods to obtain the necessary amounts is to capitalize the assets through sale by direct negotiation method, regulated by Romanian insolvency law nr. 85/2014. A Romanian lawyer specialized in restructuring and insolvency can help a company maximize the income from the sale of the assets through sale by negotiation procedure in an optimal timeframe, say the lawyers from the Restructuring and Insolvency Department of Pavel, Margarit & Associates Romanian Law Firm.
In Romania, the insolvency procedure is a collective, public enforcement, since all announcements for selling the assets are published in the Romanian Insolvency Procedures Bulletin.
The assets owned by a company in insolvency can be sold by direct negotiation if the company receives an offer from a potential buyer. The offer specifies the price and the methods through which the buyer wants to buy the asset. The liquidator presents the offer to the meeting of the creditors, which must approve it.
If the offer is approved by the creditors, then a notice will be published in a national newspaper. Any other potential buyer may appear until the day of sell by direct negotiation. The asset will be sold to the highest bidder. The debtor has the obligation to pay all the amounts of money thus obtained to the creditors, on the order of priority.
Advantages of the sale by direct negotiation procedure
As a rule, companies that use the sell by direct negotiation method capitalize the good at a higher price than if they are organizing an auction. “Companies can sell an asset through direct negotiation procedure when they already have an identified buyer. Through this method, the buyer offers a price and then a sale announcement is published to look for other buyers who can offer more. So the price can only grow. If the insolvent company wants to sell the asset through public auction, the procedure goes exactly the opposite. If there is no buyer after the initial public auction, the price decreases,” explained Radu Pavel, Managing Partner at Pavel, Margarit & Associates Romanian Law Firm.
The Romanian law firm advised a lot of Romanian companies in insolvency to capitalize on the assets. “There were several situations in which a buyer interested of some asset negotiated, the debtor agreed to sell his asset at that price, the notice was published, and then another buyer made an offer and bought the asset. Therefore, the sell by direct negotiation procedure does not guarantee to the buyer it will get the desired property, because other buyers may come. The law allows this because the insolvency procedure seeks to maximize the value that may be obtained by the seller, Radu Pavel explained.
What can be sold by direct negotiation procedure
Through sale by direct negotiation, various assets, including those needed for the core business, can be capitalized, explains attorney Radu Pavel. “For example, one of our customers, a retail company, selling construction materials, had a warehouse with a hall, handling lifts and all the necessary equipment. He decided to sell this warehouse and then rent another warehouse at a lower price. The Romanian insolvent company used the money to pay the debts and to finance its current activity”, he says.
There are various assets that may be sold by an insolvent company. If a factory owns land for investment, it can sell it to obtain cash-flow, while a construction company can sell special equipment that it does not use anymore. Also, a developer can sell the land he has bought for future real estate complexes. Buyers may be business partners of the insolvent company or various investors.
Annually, about 10,000 companies open the insolvency proceedings in Romania. The total number of Romanian companies in insolvency is about 30,000. In 2018, insolvency practitioners in Romania valued assets worth EUR 530 million for the creditors. At present, on the website of the Union of Insolvency Practitioners in Romania, which also publishes announcements on the sale of assets of companies in insolvency, there are nearly 1,400 announcements with real estate assets, especially land or buildings, 680 announcements regarding industrial equipment and about 650 announcement regarding vehicles.
In addition to companies in insolvency, Pavel, Margarit & Associates Romanian Law Firm advised international investors who wanted to take over from Romanian insolvent companies various assets through sale by direct negotiation procedure or by public auction. These assets were real estate complexes or land. By hiring a Romanian lawyer specialized in restructuring and insolvency, the creditors and debtors may find the best solution in the shortest possible time, say specialized lawyers from Restructuring and Insolvency Department of Pavel, Margarit & Associates Romanian Law Firm.
Pavel, Margarit & Associates Romanian Law Firm is one of the top law firms in Romania, which offers legal services at the highest quality, beyond clients expectations. The Law Firm approaches the cases with maximum professionalism and dedication. Its ultimate goal is obtaining exceptional results and achieving the clients objectives, in a time efficient manner. Among Pavel, Margarit & Associates clients are top multinationals and local companies. In 2019, the success stories of the Romanian Law Firm have brought recognition of the most prestigious international guides and publications. Thus, Pavel, Margarit & Associates Romanian Law Firm ranked second place in Romania in the rankings of business law firms with the most relevant expertise this year, realised by the Legal 500 publication, the most prestigious guide for law firms in the world, based in London, UK. The law firm is also recognized internationally by IFLR 1000 Financial and Corporate Guide 2019. Pavel, Margarit & Associates Romanian Law Firm is also the only law firm in Romania recommended by the Global Law Experts Director in London in the Dispute Resolution area of Practice. All the relevant information regarding Pavel, Margarit & Associates Romanian Law Firm including areas of practice and the most important deals can be found on the website www.avocatpavel.com, which is one of the most complex law firm websites in Romania.