Although parties are generally free to negotiate their sale price, in the case of a sale by a bankrupt, the price must reflect the market value of the assets in order to be able to withstand an objection by a Trustee in Bankruptcy.
Trump International Golf Club Puerto Rico filed for bankruptcy. It also filed motions to approve an asset purchase agreement with OHorizons and bid procedures for the sale of substantially all of the debtor’s assets. The Trustee in Bankruptcy objected to the proposed sale of the golf course, on grounds that the $2.04 million purchase price could be too low.
The property, originally valued at $16.6 million, allegedly had a value of $1 million. Stalking-horse bidder OHorizons Global LLC offered to buy the assets for $2.04 million. However, property such as golf carts, furniture and fixtures, maintenance and kitchen equipment, and other items valued at more than $6 million, were included in the purchased assets.
- To avoid undervaluing their assets, parties entering into an asset purchase agreement should ensure that the purchase price reflects the value of basic assets, including equipment and fixtures.
– – –
This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.