Livraria Cultura may have stores sealed after a court decision

Once Livraria Cultura is declared bankrupt, the sealing of the company’s stores is authorized immediately. Lawyers in the area say that trustees usually do this within a few days.

Then, the company’s assets are collected and sold to pay off creditors. This process can take up to a year, but it depends on the complexity of what the court administrators encounter.

The funds raised are first used to cover the costs of the bankruptcy process itself. Afterwards, creditors begin to be paid, based on a list of priorities, which includes debts with the government, labor debts, etc.

The bankruptcy of Cultura was decreed this Thursday (9) by Judge Ralpho Waldo De Barros Monteiro Filho, of the 2nd Bankruptcy and Judicial Recovery Court of São Paulo.

In the decision, the judge determined that in the next 48 hours the assets, documents and books are identified, as well as the evaluation of these assets. Financial assets and accounts in the name of the bookstore and 3H Participações (the holding company that controlled the company) must be blocked.

The request for judicial recovery had been filed in 2018.

High production costs, drop in demand for books, lack of interest in reading and the deep economic crisis that Brazil has been going through since mid-2014 were pointed out by the bookshop’s management as the main reasons for the financial collapse.

According to the judge, the court-supervised reorganization plan had been breached and the provision of information in the process had been incomplete.

In the decision, the magistrate says that the judicial administrator appointed in the recovery reported evidence of fraud in financial transactions carried out by the company’s partners. If the trustee confirms fraud, the partners’ equity can, at least in theory, be used to pay creditors.

In the sentence, Monteiro Filho states that despite recognizing the importance of Livraria Cultura, the group was unable to overcome its economic crisis. According to the judge, the court-supervised reorganization plan had been breached and the provision of information in the process had been incomplete.

Livraria Cultura was already at risk of having the judicial recovery turned into bankruptcy since 2020, when creditors rejected the final version of the plan in which the company demonstrated how it would pay off debts and become solvent again. At the time, the company managed to maintain the plan thanks to a decision by the São Paulo Court of Justice.

According to the judge of the 2nd Bankruptcy and Judicial Recovery Court, labor claims that should have been fully paid by June 2021 were still open. The monthly activity reports, which are made by the judicial administrators, were hampered by the failure to send documents and the lack of payment of fees that should have been fully paid in April 2021.

When it filed for bankruptcy protection, Livraria Cultura declared it had BRL 285.4 million in debt.

Alvarez & Marsal, the trustee who had handled the case until then, asked to leave it. Now, the bankruptcy process will be handled by Laspro Consultores (the same one that manages the recovery of the Maksoud group).