363 Sale

Business, Legal & Accounting Glossary

Definition: 363 Sale

363 Sale

Full Definition of 363 Sale

A 363 sale is the liquidation of an organization’s assets pursuant to Section 363 of the United States Bankruptcy Code. The assets included by this section might range from the sale of office furniture under Chapter 7 to the sale of all substantial assets under Chapter 11; nevertheless, in the majority of situations, the 363 sale relates to the latter.

This asset sale is only important in the event that an organisation declares bankruptcy due to its inability to repay its creditors.

The Great Recession sent numerous businesses into bankruptcy, and as a result, a distinct pattern about the 363 sales has been found. The debtor begins by entering into an asset purchase agreement with one or more prospective buyers acting as a stalking horse bidder. The rationale for selecting this stalking horse bidder is that because these buyers’ opening bids are high, the debtor organisation has a greater chance of obtaining a better purchase price for its assets. In exchange, the stalking horse bidder may receive specific concessions and discounts on the asset in question.

After identifying the stalking horse bidder, the organisation initiates a standard auction process in which bids are solicited for the assets. If more bidders express interest in the assets, they are all invited to the auction. The auction will proceed in accordance with applicable laws, and at the conclusion of the auction, it will be referred to bankruptcy court. This court will examine the validity of the auction and will then approve or deny the sale of the asset to the highest bidder.

While a 363 sale may appear beneficial to distressed businesses, it has a number of disadvantages. Primarily, the court may deny the transaction, which would be a significant setback for the group. In general, courts examine the validity of a transaction using a “horizontal test” and a “business judgement” test. Additionally, extensive inquiries may result in disapproval if the sale does not explain the need for a separate 363 sale. Finally, the court’s decision may be influenced by the sale’s beneficiaries.

Related Phrases

Asset Sale
Equity Sale
U.S. Bankruptcy Code
Stalking Horse Bidder

Cite Term

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Page URL
Modern Language Association (MLA):
363 Sale. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
June 27, 2022 https://payrollheaven.com/define/363-sale/.
Chicago Manual of Style (CMS):
363 Sale. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
https://payrollheaven.com/define/363-sale/ (accessed: June 27, 2022).
American Psychological Association (APA):
363 Sale. PayrollHeaven.com. Retrieved June 27, 2022
, from PayrollHeaven.com website: https://payrollheaven.com/define/363-sale/

Definition Sources

Definitions for 363 Sale are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 24th January, 2022 | 0 Views.