Realization of company shares — Sale of shares: Public auction of NewCo shares

Sale of shares: public auction of company shares as a legally compliant endgame procedure for collateral enforcement: speed, finality and economic efficiency

Deal Certainty — Price Discovery — Time-to-Close

Insolvency administrators are regularly faced with the decision of how best to realize shares — for example in a NewCo as part of a restructuring. Traditionally, this is often done through a private sale, in certain cases also through a structured M&A process. However, both methods have limitations: Selling by private treaty causes considerable work and liability risks, while a full-scale M&A set-up is regularly disproportionate for smaller proceedings.

The public auction offers an independent and increasingly practical alternative here: a legally compliant, transparent, fast and extremely cost-effective procedure that is particularly useful for smaller and conflict-prone proceedings.

The private sale — freedom of design with liability risk

The private sale initially appears attractive because the insolvency administrator retains full control and no external costs are incurred. In practice, however, it involves considerable effort: Interested parties must be identified and approached, exposés prepared, information provided, offers compared and finally negotiations conducted. Each of these steps is open to attack — especially if creditors later claim that higher proceeds could have been achieved.
Allegations of undervaluation are therefore a constant companion. Renegotiations delay the conclusion and increase the risk of claims being made against the administrator ex post in accordance with section 60 InsO. Added to this is the personal burden: the administrator bears the main burden of marketing and has to justify himself in case of doubt.

M&A — the usual way, but not always proportionate

A structured M&A process can make sense for substantial targets with broad strategic interest. Although the M&A transaction enables the international search for investors within an open timeframe, it requires comprehensive, complex and resource-intensive preparation. At the same time, these processes are time-consuming and cost-intensive: retainers, success fees, data rooms and long due diligence phases are a burden on the masses and often drag out the process for months. High separate costs are incurred for the virtual data room (VDR) and the contract alone, which — depending on the duration and volume — can be in the mid five-figure range. Both the VDR and the contract are fully included in the Deutsche Pfandverwertung process. Legally compliant recycling is therefore manageable in terms of time, transparent and calculable without additional costs right from the start.

Deutsche Pfandverwertung’s public auctions provide access to international investors in the same way as M&A — but in a lean, clearly structured and legally compliant procedure within a short period of time with final acceptance of the bid without renegotiation.

For smaller and medium-sized companies in particular, a comprehensive M&A setup is therefore usually not proportionate. This creates a conflict between effort, costs and the goal of quickly achieving a reliable result for the creditors.

The public auction as an option — legally compliant, fast, open to the market and value-optimizing

The public auction creates an effective balance here. It relieves the administrator because the process is standardized, transparent and legally compliant. The acceptance of the bid in accordance with section 156 of the German Civil Code (BGB) represents the legally final end point: The contract comes into effect when the bid is accepted; renegotiations are excluded.

The complete documentation, the public announcement (§ 1237 BGB) and the open bidder approach create traceability. Allegations of undervaluation are regularly rejected by courts, as the auction is considered an open market and legally permissible method of realization (see BGH, judgment of 11.05.2006 — IX ZR 247/03, ZIP 2006, 1209; Uhlenbruck, InsO, § 159 marginal number 17 ff.).

In addition, Deutsche Pfandverwertung contributes specific marketing know-how and special expertise in generating buyers: from approaching suitable groups of investors to the targeted positioning of the assets on the market. In addition, tax structuring options can also be taken into account as part of the transaction structure so that an economically optimized result can be achieved. An additional advantage: the insolvency administrator benefits indirectly via his remuneration system in accordance with the Insolvency Remuneration Ordinance (InsVV, Sections 1 et seq., in particular Sections 2 and 3) if higher proceeds result in a larger distribution framework.

The time aspect is crucial: in practice, an auction procedure can usually be carried out in a legally compliant manner within just four to six weeks. This short duration prevents progressive loss of value, reduces operational risks in the company and provides a clear, final conclusion. This ensures both legal certainty and economic value retention. The cost structure is transparent and regularly neutral for the administrator, except for internal processing costs, as the premium is borne by the purchaser.

Advantages for insolvency administrators and investors

The public auction is not only legally convincing, but also practical:

It expands the circle of potential buyers through digital reach.
It makes the pricing process transparent and comprehensible.
It prevents accusations of favoritism towards individual investors.
It provides the administrator with a legally documented basis for decision-making.
It minimizes the risk of loss of value due to the short duration.

Especially in conflict-prone creditor constellations, this approach proves to be an effective way of avoiding later disputes. It creates acceptance for insolvency administrators and a clear procedure with fixed deadlines for investors. However, public auctions are not only appropriate in such conflict situations: Especially in smaller or medium-sized proceedings, it offers an advantageous alternative due to lower transaction costs and the finality of the award provided for by law (section 156 et seq. BGB, section 445 BGB).

Conclusion for practice

The public auction is far more than just a fallback option. It is an independent exploitation method recognized by case law and literature that combines legal conformity, transparency, efficiency and speed.

This means for insolvency administrators:

Liability avoidance: You significantly reduce your personal liability in accordance with Section 60 InsO, as accusations of undervaluation are practically excluded.
Speed and value protection: you end the process within 4–6 weeks, prevent loss of value and create clarity.
Remuneration advantage: Higher revenues increase the distribution framework and at the same time increase your remuneration in accordance with InsVV.
Efficiency: You save time and resources because the process is structured and standardized.

The bottom line is this: While M&A remains sensible for substantial targets with international investor interest, a private sale by the insolvency administrator is hardly efficient on closer consideration and rarely optimizes proceeds. The public auction is the more expedient solution, especially for smaller and conflict-prone proceedings: faster, less costly and legally final. Those who consciously integrate it into their liquidation strategy combine compliance with insolvency law with legal conformity — and gain the freedom to focus on the crucial issues of conducting the proceedings.

We are publicly appointed, sworn auctioneers (auctioneers) with over 15 years of experience in the realization of legal and contractual pledges of rights in legally compliant online auctions with live stream.

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