Can I insist on a vesting order to make sure old claims can't follow the assets I'm buying?
Yes, and doing so is one of the most important protections available in a distressed purchase. A vesting order is a court order approving the sale and vesting the purchased assets in you free and clear of the specified existing claims, liens, and encumbrances it addresses, rather than leaving you to rely only on the seller's often limited or nonexistent representations and warranties.
It isn't automatic just because a receiver or trustee is involved — the buyer, the receiver, or the trustee typically has to specifically ask the court for one, and the order will only clear the claims it actually names, so its exact wording matters a great deal. Making a vesting order a condition of closing is standard practice in significant distressed-asset purchases specifically because of the extra certainty it provides, and it's worth insisting on rather than assuming it comes automatically with any court-supervised sale. Have your lawyer review the draft order closely before it's finalized.
Key takeaways
- A vesting order clears specified prior claims from the assets, unlike a plain as-is sale.
- It must be specifically sought from the court — it doesn't come automatically.
- The order's precise wording determines exactly which claims are actually cleared.
- Making the vesting order a closing condition is standard practice for significant purchases.