Distressed investors require protection when acquiring assets through a bankruptcy sale process. For that reason, the bankruptcy code protects such sales through an express statutory mootness provision found in section 363(m). While this provision protects buyers from appeal, understanding the scope of such protection is critical. Section 363 authorizes sales by debtors. At times, it authorizes sales free and clear from all liens, claims and encumbrances.

As a predicate for statutory mootness protection, however, the buyer must have acted in good faith. The prime objective of such section’s statutory mootness is finality to protect the debtor, its estate and creditors, often with the added opportunity to protect buyers of distressed assets in order to secure the ‘highest and best’ offer. The finality of the sale should be unequivocal, such that a subsequent challenge or lawsuit cannot unwind the disposition of the assets, risking loss to all parties involved. Indeed, the entry of a final sale order will not be overturned lightly.