Bookstore undergoing bankruptcy protection must return some of its book inventory.

In making his decision, the judge considered that the pandemic drastically reduced projected sales.

Judge Paulo Furtado de Oliveira Filho, of the 2nd Bankruptcy and Judicial Reorganization Court of São Paulo, partially accepted a request from publishers for a bookstore, which is undergoing judicial reorganization, to return 50% of each consigned book title stored in its distribution center and physical stores in São Paulo and Rio de Janeiro by May 10th, under penalty of a daily fine of R$ 500 per copy.

The court records indicate that a group of publishers requested that the bookstore return 60% of the consigned books stored in the distribution center in Cajamar/SP and 50% of the stock in physical stores in the cities of Rio de Janeiro and São Paulo, since the company admitted a drastic reduction in sales due to the crisis caused by COVID-19 and the closure of physical stores. With the return, the publishers intend to try to sell the books through other channels.

In the judge's understanding, the bookstore should be given the opportunity to rebuild its recovery plan, but at the same time, it is imperative that publishers also be able to mitigate the effects of the crisis associated with the drop in sales.

“It’s not about violating the contract, but rather adapting it to the times of the pandemic. If the bookstore can’t sell through its physical stores, which represent 90% of its revenue, then clearly there’s no longer any economic sense in maintaining the current stock of books to the detriment of the publishers. It’s a violation of the very reason for the contract’s existence. Even if the company undergoing restructuring shows better numbers in online sales, there’s no demonstration that this sales channel can quickly reach 90% of its revenue, replacing the income from physical stores.”

According to the judge, "the bookstore is not being driven into bankruptcy, but rather the publishing houses are being prevented from also being dragged into bankruptcy, which would lead to an even greater crisis."

In the same decision, the judge accepted the debtor's request to submit an addendum to the recovery plan within 60 days, as provided for in Law 11.101/05, with a 30-day period for creditors to object.

"The collapse of all economic projections due to an absolutely insurmountable event, as well as the inability to meet the obligations foreseen in the plan and the current operating expenses, constitute just cause for the intended revision of the plan."

Case 1119642-14.2018.8.26.0100 (TJ/SP)

Source: Migalhas