What Is 363 Bankruptcy?

A "363" sale is a type of sale of company assets executed during a corporate bankruptcy. A 363 sale benefits both the owner and creditors most effectively than any other type of sale, according to the American Bar Association. However, a judge's approval must be obtained prior to a 363 sale.

Function

A 363 sale is used to liquidate a company's assets during Chapter 11 bankruptcy. It is designed to help a business move forward with bankruptcy proceedings while providing money to creditors as a form of compensation.

Benefits

The American Bar Association reports that a 363 sale in bankruptcy is less expensive than restructuring a company's goods, as the assets go to auction. Also, a 363 sale is conducted relatively quickly and can be completed within a few days or months.

Requirements

According to Ohio Practical Business Law, a judge first must determine whether a company qualifies for a 363 sale during bankruptcy. He will consider whether such a sale will gain the most profit for the company's creditors.

Process

Typically, an initial buyer, called a "stalking horse," will purchase the company's items and sell them at a public auction. The buyer ensures that the creditors receive the profits of the sales, while it also keeps a percentage for itself as compensation.

References

• Ohio Practical Business Law: 363 Bankruptcy Sale FAQ
• American Bar Association: Business Law Today