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Advertising Section 363 Sales in the Digital Age
One objective of the §363 sale process is to maximize the sale proceeds payable to creditors of the bankruptcy estate. The trick is finding the buyer willing to pay the highest price. Casting a wide net to haul in the high bidder would seem to make sense in most circumstances. The best case scenario is a large pool of competitive bidders driving up the price. Yet, in many cases, little or no real effort is made to advertise the sale. Marketing is limited to sending notice to parties who already appeared in the bankruptcy case, or publication in the legal notices section of a local newspaper, where the odds of being seen by an interested bidder are low to zero.
Limiting notice may have a strategic purpose (more on this later), though more often budget and time constraints have been the limiting factor in promoting a §363 sale. Costs are increasingly less of a factor now with the expansion of internet-based options, and with on-line resources just a click away, bankruptcy professionals should always consider expanding their horizons when advertising assets for sale.
The last section of this article provides an overview of the types of Internet-based resources available to potential asset sellers. First, however, is an overview of the legal landscape governing §363 sales.
What Does the Bankruptcy Code Require for Advertising §363 Sales?
As it turns out, very little. The Bankruptcy Code and case law interpreting it are bereft of concrete standards for advertising §363 sales. Bankruptcy judges have broad discretion to approve proposals to conduct sales outside of the ordinary course of a debtor's business under §363 of the Bankruptcy Code and Bankruptcy Rule 6004. A sale may be public or private, and a trustee's business judgment in managing the procedural details of the sale process is entitled to great judicial deference. In re Phillips, 2013 WL 1899611, at 10 (M.D. Fla. May 7, 2013). Nonetheless, the bankruptcy court will scrutinize whether the trustee has fulfilled his duty to maximize the value obtained from a sale, particularly in liquidation cases. In re Childers, 526 B.R. 608, 612 (Bankr. D.S.C. 2015). A trustee's failure to adequately promote a §363 sale may give rise to doubts about whether a higher price could have been achieved with better marketing, and provide cause for a bankruptcy court to vacate the sale.
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