Chapter 9: Buying a business from a bankruptcy estate

When a business goes bankrupt, the bankruptcy court appoints a trustee (kurator), usually a lawyer, who must sell the business’s assets and distribute the money among the creditors. This can give a buyer the chance to take over customers, equipment, stock, the name and staff at a lower price than in an ordinary purchase. In return, things move fast, you rarely get warranties, and you must be able to judge for yourself why it went wrong. This chapter is a general introduction; bankruptcy rules are complex, so always involve a lawyer.

How the trustee sells

The trustee must secure the best possible price for the creditors. When the business has value as a going concern, the trustee often tries to sell it quickly, before the customers, staff and suppliers disappear. The sale can take place through direct negotiation, by the trustee inviting offers from several interested parties, or through an auction of individual assets. The bankruptcy order and the trustee’s name are published in Statstidende, the Danish official gazette, and new bankruptcies can be followed in public data and on The market today.

1. Find the trustee: contact the trustee as soon as you see a relevant bankruptcy, and say that you are interested.
2. Get the material: ask for an overview of the assets, the latest accounts and information about the lease, staff and customers.
3. Inspect: look at the assets and premises, and talk to the staff the trustee gives you access to.
4. Make a written offer: often within a short deadline and stating which assets the offer covers.
5. Sign and pay: the trustee often needs fast payment, and the handover can take place shortly afterwards.

You buy assets, not the company

From a bankruptcy estate you generally buy assets: fixtures, machinery, stock, the name, domains, customer lists and other intangible rights. The company and its debt stay in the estate. This also means that agreements such as the lease and supplier and customer agreements do not automatically come with the purchase; they must be negotiated with the other party, and some can be transferred by the trustee under special rules.

• Security and retention of title: some assets may be pledged or leased and therefore not freely owned by the estate. Clarify what the trustee can actually sell.
• Staff: the rules on employees’ rights in a transfer from a bankruptcy estate are special. Ask your lawyer what applies in your case.
• Lease: the premises can be crucial. Talk to the landlord early.
• Licences and registrations: usually have to be applied for again in your name.
• Customers with prepayments or warranty claims: they have claims against the estate, not against you, but may expect you to help. Consider how you will handle them.

As is and without warranties

Assets from a bankruptcy estate are usually sold as is. The trustee often does not know the business from the inside and cannot give warranties on condition, earnings or customers. Your due diligence must therefore be quick and focus on what matters most: what the assets are worth, whether the business can be restarted, and why it went wrong.

Risks and opportunities

Understand why it went wrong

The most important question is why the business went bankrupt. Were costs too high, was a major customer lost, was management poor, was there too much debt, or has the market disappeared? If you can fix the cause, buying from the estate can be good business. If the cause is that there are no longer customers for the product, a low price will not help. Go through the latest accounts, talk to staff and customers if possible, and make a budget based on your own plan, not on the old figures.

• I know why the business went bankrupt and how I will fix it.
• I know exactly which assets my offer covers and which are pledged or leased.
• I have talked to the landlord and the key customers and suppliers, or know when I can.
• My lawyer has assessed the position of the staff and the agreement with the trustee.
• The financing is in place, so I can pay within the trustee’s deadline.
• I have a budget for the restart, including working capital for the first months.

Financing a purchase from a bankruptcy estate

The short deadline makes financing a challenge. The bank must be able to decide quickly, and it will want to see a plan for how you will get the business back on its feet. If you already have a relationship with the bank and an overview of your equity, you are in a stronger position. See Financing the purchase for the overview.