Comments regarding the sale of “Bogdan Motors” property at the auction

In May and June 2022, the media paid considerable attention to the results of auctions for the sale of property of Private Joint Stock Company "Bogdan Motors Automobile Company". As you know, on 6 July - 2021, the Commercial Court of Dnipropetrovsk region declared PJSC "Bogdan Motors Automobile Company" a bankrupt. The court opened liquidation proceedings, and on 20 April - 2021 approved the register of "Bogdan Motors" creditors for a total amount of UAH 6.7 billion.

In May 2022, a number of auctions were held to sell the bankrupt's property. In particular, on 27 May the winner of the auction was the state-owned Joint Stock Company "The State Export-Import Bank of Ukraine" (Ukreximbank). With a starting price of UAH 45 million, the bank offered UAH 51 million. However, on 03 May - 2022 “MISTRAL CENTER” LLC as the sole bidder was also recognized as the winner of the auction with the same lot. And with a larger amount of UAH 60.945 million. However, it was not possible to complete the case (i.e. actually pay the announced amount) for a number of reasons. That is why the second auction was announced.

On 2 June - 2022, the Commercial Court of Dnipropetrovsk region satisfied the application of “MISTRAL CENTER” LLC to apply measures for securing the claim in the case №904\6691\20, among other prohibiting the liquidator to process the results of the second re-auction of "Bogdan Motors" real estate which took place on 27 May - 2022.

Thus, the information in the media that the winner of the auction was the state Joint Stock Company "The State Export-Import Bank of Ukraine" (Ukreximbank) is premature.

Andrii Spektor, the insolvency specialist, bankruptcy and taxation attorney, and senior partner of the “Laboratory of Bankruptcy LLC” law firm, commented on the situation:

As for the results of the auction, according to which Ukreximbank bought its own mortgaged property, it seems to be the first case in Ukraine when a bank may actually receive less money during the liquidation procedure than it could. Usually, financial institutions are "dissatisfied" with the results of auctions because the property of the bankrupt was sold "for too cheap". And in this case the winner of the auction who is ready to pay more already appears. That means that the case is interesting because the winner of the auction must prove in the court seeming to be obvious things: to pay a higher price for the property of the bankrupt is primarily in the interests of the creditor.

In my opinion, the main thing that the court should deal with in this case is the interpretation of Art. 73 of the Bankruptcy Code of Ukraine. According to this article, “transactions for the sale of property committed at an auction conducted in violation of the established procedure for its preparation or conduct that prevented or could prevent the sale of property at the highest price may be declared invalid by a commercial court in bankruptcy proceedings the debtor, the arbitral trustee, the creditor or the person whose interests have been violated." Obviously, if the previous winner of the auction proves

a) the intention to pay the price of UAH 60.945 million (which is clearly higher than the price of the bank at the second auction),

b) the reality of force majeure, which prevented him to pay for property on time,

Joint Stock Company "The State Export-Import Bank of Ukraine" (Ukreximbank) will receive real repayment of the debt at the highest price, which is definitely better than its formal write-off at even a lower price.

From my side I would also like to add that the resumption of the State Register of Real Property Rights is very important in this development, as its blocking did not allow the new owner to register real property rights. In Ukraine, there are still significant risks of property damage due to the war with russia, and in the absence of a registered property right, any new owner would be deprived of the right to compensation for the destroyed property.