Distressed Sales Out of Court - Buyer Considerations
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Suzzanne Uhland is an accomplished attorney with over 20 years of experience who currently works as a partner at O'Melveny & Myers. She specializes in bankruptcy and insolvency law and chairs the firm's U.S. Restructuring Practice. During periods of economic turmoil, financially distressed businesses may liquidate assets to raise capital or restructure debt. These sales often occur after a company files for bankruptcy and provide buyers protections from the bankruptcy court process. However, sales outside this process require lender and shareholder consent and may be "as is" with no warranties or protections, carrying the risk of litigation for fraudulent conveyance. Both parties should adequately document asset values to avoid this.
Distressed Sales Out of Court - Buyer Considerations
- 2. Featured as one of Profiles in Diversity Journal’s Women Worth Watching in 2010, Suzzanne Uhland has amassed more than two decades of experience in the legal sector. An accomplished attorney, she currently practices out of the Newport Beach and San Francisco offices of O’Melveny & Myers, LLP, as a partner with the international law firm. Suzzanne Uhland also serves as chair of O’Melveny’s U.S. Restructuring Practice, applying extensive knowledge of bankruptcy and insolvency law. During periods of economic turmoil, a financially distressed business may choose to liquidate its assets in an attempt to limit unnecessary holdings, raise capital, or restructure its debt.
- 3. These sales often take place after a company has filed for bankruptcy or has legally stated its intentions to do so. For this reason, buyers typically receive protections from the bankruptcy court process during distressed sales. While buyers and companies may decide to complete a transaction outside of the bankruptcy court process for a number of reasons, such as avoiding court-sanctioned auctions, buyers should consider a few potential complications. During a sales outside of the bankruptcy process, parties may be required to obtain lender consent to transfer asset titles. In many cases, they must also obtain shareholder consent.
- 4. Additionally, many distressed sales may be “as is” sales, offering buyers no protections regarding representations or warranties. Distressed sales also present the risk of litigation for fraudulent conveyance, which is an illegal monetary transfer for the sole purpose of avoiding debt. To avoid this, both parties should aim to adequately document and prove the value of the assets in question.