The Auction Process in the National Enforcement Bureau
The realization of seized property is the decisive stage of enforcement proceedings. Under the current legislation this process runs entirely within the system of the National Enforcement Bureau: by Article 3 of the Law on Enforcement Proceedings the Bureau is the exclusive organ of compulsory enforcement, and a private-bailiff auction service as a separate institution no longer exists. This page describes the Bureau's rules of valuation and realization (auction) and the parties' rights in this process.
Valuation of Seized Property
Article 47 governs valuation: at the time of inventory, where the market value can be determined, it is recorded in the inventory and seizure act; if pricing is impossible at inventory, the property is valued after registration of the seizure by the Bureau or, on its assignment, by another competent person. A party to the proceedings may submit an expert conclusion under which the property was valued within 6 months before the initiation of the proceedings; the Bureau may rely on that conclusion, and where both parties have submitted conclusions — on one of them.
The moment of submitting the conclusion is also defined by the norm: a party submits the expert conclusion at the initiation of the enforcement proceedings or before the Bureau's valuation of the property, and the Bureau itself decides the question of the expediency of admitting the conclusion. At the same time, where at the time of inventory the market value can be determined, that value is recorded directly in the inventory and seizure act — this entry becomes the support of the subsequent realization, and the parties should verify it without delay.
A special rule exists for securing tax debts: a valuation performed under a contract between the Bureau and the tax authority need not be repeated in enforcement proceedings if it was carried out within 1 year before the initiation of the proceedings.
Realization and Auction of Property
Under Article 49, the Bureau transfers the seized amount, or the amount paid by the debtor, to the creditor after deducting the fee and enforcement costs, while other seized items it sells publicly at auction. Before the public announcement the Bureau may give the debtor the opportunity to realize the property himself under the Bureau's control — but only if the fee, enforcement costs and the creditor's claims are thereby covered. Before or after the realization of movable items the Bureau has the right to remove the seized item from the debtor's possession.
In insolvency proceedings the Bureau carries out the auction service under the rules of the Law on Rehabilitation and Collective Satisfaction of Creditors; the fee for this service is determined by an order of the Minister of Justice.
The Bureau's Auction Service in Insolvency Proceedings
In insolvency proceedings the National Enforcement Bureau carries out the auction service under the rules established by the Law of Georgia on Rehabilitation and Collective Satisfaction of Creditors. This means that the organization of the sale of an insolvent debtor's property also fits into the same system, and the parties interact with the Bureau. The fee for this service, like that of the valuation service, is determined by an order of the Minister of Justice, so a lawyer consults the current subordinate act to establish the specific tariffs.
At the auction stage attention is also given to the rule that before or after the realization of movable items the Bureau has the right to remove the seized item from the debtor's possession — a safeguard against concealment or deliberate deterioration of the property before the sale.
The Parties' Strategy in the Auction Process
For the creditor it is essential to challenge valuation inaccuracies in time — improperly valued property goes at auction for a low price. For the debtor, the important levers are the right to an expert conclusion, the possibility of self-realization before the auction, and the rule that the creditor is paid only after the deduction of the fee and costs.
Frequently Asked Questions
Who conducts the auction in enforcement proceedings?
The National Enforcement Bureau — under Article 3 it is the only organ of compulsory enforcement; it sells seized items publicly at auction.
Can an expert conclusion be submitted?
Yes — a party may submit a conclusion of the property's market value made within 6 months before the initiation of the proceedings; the Bureau may rely on it.
When may the debtor sell the property himself?
Before the public announcement of the auction, under the Bureau's control, if the fee, enforcement costs and the creditor's claims are covered by the realization.
How is the sale amount distributed?
The seized or paid amount is transferred by the Bureau to the creditor after deducting the fee and enforcement costs.
How is the competition of conclusions submitted by both parties resolved?
Under Article 47 the Bureau may rely on a party's conclusion, and where conclusions were submitted by both parties — on one of them; the Bureau itself determines the expediency of admitting a conclusion, and this decision may become the subject of a dispute.
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