Nowadays, many readers are likely familiar with asset auctions. Each auction may serve different purposes, such as charity auctions or asset auctions for the enforcement of judgments. So, how are asset auctions currently regulated by law? What forms of asset auctions are there? NPLAW will provide answers to these questions through the following article.
I. What is an asset auction?
An asset auction is a public sale of assets with the participation of two or more people, conducted according to established principles, processes, and procedures. In certain cases, an auction may involve only one registered participant, one bidder, one person making an offer, and one person accepting a price.
When participating in the asset auction, bidders are required to pay a deposit as stipulated by law. Such a deposit serves to bind the registered participant to the auction. If a bidder does not win the auction, the deposit will be refunded after the auction.
During the asset auction, a person who offers the highest bid, provided it is not lower than the starting price, will have the right to purchase an auctioned asset. The auction process ensures the best possible protection of the asset owner's rights, while purchasers can acquire assets at fair prices.
Legal basis: Clause 2, Article 5, and Article 39 of the Law on Asset Auctions 2016.
II. Forms of asset auctions
The asset auction organization will agree with the asset owner to select one of the following methods to conduct the auction:
- Direct verbal auction at the auction event;
- Direct ballot auction at the auction event;
- Indirect ballot auction;
- Online auction.
Legal basis: Clause 1, Article 40 of the Law on Asset Auctions 2016 .
III. Legal provisions on parties involved in asset auctions
Parties involved in asset auctions include: an asset auction organization, an asset owner, and bidders.
- An asset auction organization: includes an Asset Auction Service Center and an asset auction enterprise.
- Asset owner refers to individuals or organizations that own assets, individuals authorized by owners to auction their assets, or those with the legal right to put assets up for auction under agreements or legal regulations.
- Bidders refers to individuals or organizations meeting the conditions to participate in the auction to purchase auctioned assets, as stipulated by this Law and other relevant legal provisions.
Legal basis: Clauses 5, 7, and 12 of Article 5 of the Law on Asset Auctions 2016.
IV. How is the listing of asset auctions conducted?
Pursuant to Article 35 of the Law on Asset Auctions 2016, the listing of asset auctions is conducted as follows:
- For movable assets, the auction organization must list (post) an auction notice at its headquarters, a location where assets are displayed (if applicable), and an auction venue at least 7 working days before the auction date.
- For immovable assets, the auction organization must list (post) an auction notice at its headquarters, an auction venue, and the People's Committee of the commune where immovable assets are located at least 15 days before the auction date.
- Main information to be listed includes:
+ Name and address of an asset auction organization and an asset owner;
+ Name, type, quantity, and quality of auctioned assets; name and address of a location obtaining auctioned assets; documents proving ownership and use rights of auctioned assets;
+ Time and location for viewing auctioned assets;
+ Time and location for purchasing auction participation documents;
+ Starting price of auctioned assets if it is disclosed;
+ Cost of purchasing participation documents and a deposit amount;
+ Time, location, conditions, and procedures for registering to participate in an auction;
+ Time and location of an auction;
+ Auction formats and methods.
- The asset auction organization must keep records and images related to the listing in an auction file. In the case of listing at the People's Committee of the commune where an immovable asset is located, the auction organization must retain records or images of the listing or set up a document confirming the listing at the People's Committee of the commune.
- In addition to the required listing, the asset auction organization must publicly announce such asset auction at the asset owner’s request.
V. Questions about asset auctions
1. Can a bank directly auction off collateral assets to resolve bad debts?
Pursuant to Clause 2, Article 52 of Decree 21/2021/ND-CP, if the parties agree to handle pledged or mortgaged assets through auction and have a separate agreement on auction procedures and asset auction organizations, the handling will proceed according to such an agreement. If there is no separate agreement, it must be implemented according to the legal provisions on asset auctions.
Thus, the bank does not need a written authorization or consent from the guarantor. The bank can directly auction collateral assets, provided it follows a guarantee contract if both parties have agreed to the handling of collateral assets to resolve debts of delinquent customers who do not cooperate in repaying their loans to the bank.
2. What is the supervision for asset auctions regulated when only one person participates in the auction and one makes a bid for assets under enforcement?
In cases where only one person registers to participate in the auction, one makes a bid, one makes an offer or one accepts asset prices under enforcement that only are conducted the auction when a previous auction was performed without completion, the supervision is stated and implemented as follows:
- If the auction is conducted through an ascending bid process, after the registration deadline has passed and only one person has registered or participated, or if there are multiple bidders but only one bidder makes a bid, or if there are multiple bids but only one bidder offers the highest bid, which is at least equal to the starting price, then the asset will be sold to such a person if the asset owner agrees in writing.
- In the case of an auction conducted by descending bid, where only one person registers to participate in the auction, or multiple people register but only one person participates and accepts the starting price or a reduced price, the asset will be sold to such a person if the asset owner agrees in writing.
- The asset auction can only proceed after all procedures and processes required by the Law on Asset Auctions 2016 have been fully implemented, with no complaints related to the procedures up until the day of the auction.
- The auction minutes not only state the auction process where only one person participates in the auction or one makes a bid and accepts the valid price, but it also presents the asset owner’s written consent.
3. Can a company organize an asset auction by itself?
Pursuant to Clause 1, Article 185 of the Commercial Law 2005, an auction of goods is a commercial activity, where a seller either conducts the auction themselves or hires an organization to conduct the auction in order to select the highest bidder.
Thus, a company can organize its own asset auction without needing to sign a contract for auction services with an auction organization.
4. Which state assets in the Ministry of Defense can be auctioned?
State assets in the Ministry of Defense that can be auctioned include:
- Items, raw materials, and scrap recovered after processing that cannot be used for repairs, ammunition productions, or training models, or those that have been completely rendered ineffective in terms of explosive functions and cannot be restored to their original forms for recycling, may be publicly auctioned to military factories with the technology to smelt and use them as raw material ingots for national defense purposes.
- Assets such as technical equipment, devices and goods that, after deactivating their military functions, can be publicly auctioned to legally qualified units within or outside the military.
Legal basis: Article 17 of Circular No. 126/2020/TT-BQP.
5. In what cases can assets sold by a bankrupt enterprise be recovered?
The recovery of assets sold by a bankrupt enterprise can be conducted if the enterprise has engaged in invalid civil transactions. Civil transactions are considered invalid in the following cases:
- A transaction involves the transfer of assets without complying with market prices;
- Unsecured debt is converted into secured debt, or partially secured by assets of an enterprise or cooperative;
- Payments or offsets that benefit a creditor in relation to a debt not yet due, or in amounts exceeding the debt due;
- Donating assets;
- Transactions unrelated to enterprise or cooperative’s business purposes;
- Transactions aimed at dispersing assets of the enterprise or cooperative.
Thus, the recovery of assets sold can occur if the transaction falls into any of the above cases.
Legal basis: Clause 1, Article 125 and Clause 1, Article 59 of the Bankruptcy Law 2014.
