Issue link: https://mbozikis.ufcontent.com/i/1422521
95 As part of the bidding procedures, there will also typically be a period for the trustee to approach other parties (whether through direct communication or through public notification) who may be interested in purchasing the asset at issue and for such parties to undertake due diligence, which period begins upon the court's approval of the bidding procedures, and a deadline by which any additional bids for the asset must be submitted (the so-called "bid deadline"). If additional bids are received, the trustee will then hold an auction for the asset at which each of the competing bidders can increase their respective bids for the asset. At the conclusion of the auction, a winning bidder is selected and the trustee will seek court approval of the sale to the winning bidder. Most courts agree that, within the context of a Chapter 11 reorganization, a debtor must show sound business judgment prior to engaging in a 363 Sale. 47 See Comm. of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1071 (2d Cir. 1983). In determining whether a 363 Sale is permitted, a court may consider: (i) the proportionate value of the asset to the estate as a whole; (ii) the amount of elapsed time since the filing; (iii) the likelihood that a plan of reorganization will be proposed and confirmed in the near future; (iv) the effect of the proposed disposition on future plans of reorganization; (v) the proceeds to be obtained from the disposition vis-à-vis any appraisals of the property; (vi) which of the alternatives of use, sale or lease the proposal envisions; and (vii) whether the asset is increasing or decreasing in value. See id. Although, as noted above, the Bankruptcy Code does not limit the size or scope of a sale of the debtor's assets, under Section 363, where the sale is for all or substantially all of the debtor's assets, some courts have demonstrated hesitancy in approving the sale because of the view that such sale has the effect of a plan of reorganization, but without the procedural protections associated with the plan confirmation process. These so-called "sub rosa" plans are sometimes rejected by bankruptcy courts as mere 47 For a discussion of the business judgment rule, see Chapter VI.C.2.