Foreclosure on the Property of a Legal Entity

In modern civil circulation, foreclosure on the property of debtor legal entities plays a crucial role. The effectiveness of this institution determines the protection of creditors’ property interests, the stability of the business climate, and the functioning of the legal system. In the Republic of Uzbekistan, this procedure is regulated by the Law “On the Enforcement of Judicial Acts and Acts of Other Bodies” dated August 29, 2001, No. 258-II, as well as by procedural legislation and acts in the field of obligations law.

Enforcement documents serve as the basis for initiating foreclosure, including:

• Judicial decisions and rulings of courts of general jurisdiction and economic courts;
• Arbitral and commercial arbitration awards;
• Notarial executive inscriptions;
• Acts of state bodies (tax, administrative, etc.).

Enforcement proceedings are initiated by the Bureau of Compulsory Enforcement (BPI) under the Prosecutor General’s Office.

Seizure of Property of a Legal Entity

The seizure of a legal entity’s property is a precautionary measure aimed at preventing its disposal and preserving assets for subsequent enforcement.

Features of Seizure

• The seizure applies to movable and immovable property, as well as property rights;
• An inventory act is drawn up describing the characteristics and condition of the property;
• Property essential for core production activities is seized last;
• When seizing pledged property, the rights of the pledgee must be considered;
• The seizure may include blocking bank accounts, receivables, and securities.

Sale of the Property of a Legal Entity

The sale procedure aims to convert seized assets into cash to satisfy the creditor’s claims.

Stages of Sale

1. Valuation of Property — conducted by independent experts or enforcement officers.
2. Conducting Auctions — via electronic trading platforms.
3. Sale of Property — with the possibility of reducing the starting price.
4. Distribution of Proceeds — priority is given to employee wage claims, mandatory tax payments, alimony, followed by other creditors’ claims.

Restrictions and Exclusions

Legislation establishes property that cannot be subject to foreclosure:

• Property withdrawn from circulation (weapons, strategic reserves);
• Property necessary for the performance of state functions;
• Assets belonging to third parties but held by the debtor.

Comparative Analysis: Legal Entities vs. Individuals

To identify the specifics, let us consider comparative features of foreclosure on the property of individuals and legal entities.

Table 1. Comparison of Foreclosure Procedures

Criterion	Individual	Legal Entity
Grounds for Foreclosure	Court decisions, notarial inscriptions, administrative acts	Court decisions, arbitration awards, acts of tax and other authorities
Object of Foreclosure	Income (wages, pension), movable and immovable property, bank accounts	Real estate, vehicles, equipment, accounts, property rights (shares, stocks)
Restrictions	Minimum subsistence income, essential household items	Property necessary for production, strategic assets
Seizure of Property	Limited to household assets	May include receivables, corporate rights
Sale of Property	Auctions, direct sale, transfer to creditor	Auctions, electronic bidding, mandatory valuation of major assets
Payment Priority	Alimony, damages, wages	Employee wages, taxes, alimony, then other obligations

Table 2. Stages of Seizure and Sale of Legal Entity’s Property

Stage	Description	Features
1. Initiation of Proceedings	Receipt of enforcement document	Filed with BPI
2. Seizure of Property	Inventory, account blocking, transaction restrictions	Includes seizure of shares and participatory rights
3. Valuation	Determination of market value	Independent valuation required for real estate and equipment
4. Sale	Electronic auctions	Price reduction permitted, transfer to creditor possible
5. Distribution of Proceeds	Debt repayment and mandatory payments	Priority: wages, taxes, alimony

Analysis and Practical Issues

Current practice of enforcing decisions against legal entities reveals several issues:

• Asset withdrawal through sham transactions;
• Undervaluation of property during sale;
• Delays in valuation and auction procedures;
• Insufficient transparency in fund distribution.

Prospects for Improvement

• Development of electronic and transparent auction systems;
• Creation of a national registry of seized property;
• Increased liability of managers for asset concealment;
• Harmonization of national legislation with international standards.

Table 3. Types of Legal Entity Property and Foreclosure Features

Type of Property	Examples	Seizure Features	Sale Features
Movable Property	Vehicles, equipment, machinery, raw materials, finished goods, warehouse items	Seizure with inventory; possible placement under custodial storage; vehicle seizures involve police	Sale via electronic auctions; price reduction possible; goods sold under simplified procedure
Real Estate	Office buildings, production facilities, warehouses, land plots	Seizure with mandatory encumbrance registration in cadastral authorities; priority for pledge holders	Sale through auction with state registration of title transfer; requires independent valuation
Financial Assets	Bank account funds, deposits, securities	Seizure through account blocking or collection orders; securities frozen via depositories	Funds transferred directly to creditor; securities sold on the stock exchange or transferred to creditor
Property Rights	Shares in charter capital, stocks, receivables	Seizure through registration restriction; debtor’s counterparty notified of rights transfer	Sold via auctions; shares subject to corporate restrictions; receivables may be assigned to creditor
Intellectual Property	Trademarks, patents, licenses	Seizure recorded in relevant registries	Sale of exclusive rights allowed; subject to coordination with IP authorities
Encumbered Property	Real estate, equipment, vehicles pledged as collateral	Seizure considering pledgeholder’s rights; priority satisfaction of their claims	Sale coordinated with the creditor-pledgee; remaining funds distributed among other creditors

Foreclosure on the property of a debtor legal entity is a complex process involving stages of seizure and sale. Its specificity lies in the wide scope of assets involved, the need to consider the interests of employees and the state, and the strict valuation and sale procedures. Improvement of this institution requires digitalization, enhanced transparency, and stronger legal protection of creditors.