This Saturday, January 11th, marks two years since the billion-dollar scandal broke (). When he reported the accounting inconsistencies to the Securities and Exchange Commission (CVM), the story of one of the largest retailers in the country went downhill.
The revelation of the biggest accounting fraud in Brazilian history caused share prices to melt, accumulating a drop of 99.52% from the beginning of 2023 until now, according to calculations by consultancy Elos Ayta. The case left creditors, suppliers and shareholders in disbelief and opened space for a series of discussions about capital market rules, especially on the part of minority shareholders.
The situation was so unusual that, on the day of the announcement, the executives who had just arrived to lead the company, as CEO, and André Covre, as CFO, gave up and jumped ship.
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And there was no other way. The following day, , going from R$12 to R$2.72, causing the company to lose R$8.34 billion in market value. The general perception was that the company would face many difficulties due to the loss. To stem the bleeding, on January 19th, the retailer filed for judicial recovery, being excluded from 14 B3 indices. On the 20th, the share reached R$0.79, becoming a penny stock.
Investor rights
Two years after the announcement of this fraud, minority shareholders are demanding solutions and say that so far no measures have been taken to effectively punish those responsible, much less to compensate for the losses of those who invested in the company.
Affected, they complain about the lack of transparency in the investigation process and effective measures so that practices of this type are curbed in the future and the culprits are convicted.
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“Despite investigations by several agencies, no one was punished. During this entire time, the company continued to say that it was also a victim. Even those who had the power to command position themselves as victims. But today, looking from more distance, we see that it would be difficult for them to have been victims”, said Eduardo Silva, president of Instituto Empresa, an association created in 2007 to defend investors, promote governance, coordinate minority shareholders, and responsible for the process arbitration against Americanas.
For him, in addition to not being punished, the controllers increased their power by diluting shares and expanding share capital. “With this, they increased their equity and voting power, which previously was 44% of the capital to the current 50%. The banks complained, but settled and received shares in exchange. The only ones who lost were the minority shareholders and suppliers, who already had an absurd payment deadline”, he adds.
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At the last meeting, at the end of last year, after the dilution, the company managed to approve the process against some of the former directors, exempting Americanas and its controllers. “Even though the fraud was systemic and developed for around a decade, it was not noticed by Internal Control, the Supervisory Board, the Board of Directors and External Auditors”, adds Silva.
Given this, he only hopes that the ongoing arbitrations can lead to some punishment for those who caused everything. “The management of other people’s resources imposes fiduciary duties on the controllers in relation to other shareholders who must protect these values, which did not happen in this case”, states Silva.
How is the case?
The decisions of the CVM, B3, the Federal Public Ministry and even the Assembly of the Americans to prosecute some of the former directors, will not affect the minority shareholders’ claim, according to the president of Instituto Empresa, who, due to a clause in the Statute, can only seek compensation through arbitration.
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“The minority shareholders’ request does not refer to the devaluation of shares, as those who invest know the risks involved, but aim to clarify the information that the company sent to the market, manipulated and distorted, generating purchasing decisions that need to be recognized as invalid. This delay in responses from everyone involved is the big problem”, explains Silva, adding that even if the CVM reaches a severe judgment it will be ‘merely administrative’.
Since November 2023, , a segment dedicated to trading shares of companies that voluntarily adopt corporate governance practices in addition to those set out in legislation. The company failed to comply with several of the requirements imposed by B3but the exchange has not yet determined a date to correct the irregularities.
“B3 did not set a deadline for Americanas to comply with the determinations. However, article 59 of the Regulation provides that, in the event of non-compliance with regulatory obligations for a period exceeding nine months, a sanction of compulsory exit from the Novo Mercado must be imposed, through the carrying out of a public offer for the acquisition of shares”, explains the lawyer Luís Fernando Guerrero, from the Lobo de Rizzo Office, who represents the Institute.
B3 decided to hold several members of the Americanas Council responsible, including partners and family members of the 3G Group. But the final decisions, after appeal, have not yet been made public. The CVM has just announced that Sergio Rial has faced charges related to the disclosure of information after the discovery of an accounting error and that it has condemned João Guerra, who took over as interim CEO shortly after Rial’s resignation.
The authority also concluded the Administrative Inquiry, related to the use of privileged information in the negotiation of issued assets by directors and employees of Americanas before the disclosure of the “accounting inconsistencies” through the Relevant Fact on 1/11/2023. The decision was considered important for the Federal Public Ministry (MPF) to subsequently initiate criminal proceedings for the crime of insider trading, according to the lawyer.
For Silva, the big problem in the case of Americanas is that when the balance sheet is published it has already gone through so many people, directors, internal controls, administration, external consultants, that it is practically certain and attested by many instances that it is reliable. “If there were improprieties, the entire control and governance system comes under suspicion. And the market needs satisfaction, so that no more cases like those of Americanas and IRB occur,” he said.
The arbitration request, a process considered expensive and complicated, involves amounts of R$32 billion. In this type of process, it takes an average of 36 months, that is, much less than through legal channels.
In total, 500 minority shareholders are involved in this action. In total, the effective value of Americanas’ debt reached R$40 billion and was reduced to around R$10 billion after negotiations within the judicial recovery.
“If there is a conviction by arbitration, the decision will be sanctioned by the judiciary,” said Silva, adding that the group will also work in instances in the United States, where the company had issued debt papers, known as Bonds.
What the company says
In response to InfoMoneyAmericanas stated in a statement that it continues to comply with the Judicial Recovery Plan (PRJ). With the capitalization and payments from most of PRJ’s creditors, the company eliminated almost all of its debts from bankruptcy, addressing the capital structure and reverting net equity to a positive level of R$5.7 billion.
In 2025, Americanas says it intends to continue strengthening commercial, operational and financial efficiency. To this end, it already has store modulation, pricing and logistics restructuring projects.
Another front that the company wants to advance is digital, based on a new design for the marketplace, with the anchoring of large industrial stores on the platform and the expansion of O2O (Online to Offline), a strategy that integrates virtual and physical channels to provide a more complete shopping experience.
Regarding the developments in the investigations, Americanas explains that “it will continue its responsible and diligent conduct in disclosing information and following the determinations of the Court and the authorities handling the case. The company is most interested in clarifying the facts and holding civil and criminal liability for all those involved.”
The company also recalls that negotiations for the construction of the Judicial Recovery Plan were carried out to reach the best possible solution for all parties, which was successfully approved at the end of 2023 with more than 97% approval from creditors.
Shake of confidence in the market
Specialized in business law and partner of NHM Advogados partner, Mário Nogueira, he states that Brazilian law guarantees minority shareholders, to the extent that they feel harmed, to seek compensation for their losses, either through court or through arbitration. By joining together, the costs of an arbitration would be divided among all authors.
“In addition, investigations carried out by the CVM, B3, Federal Public Ministry or any other may be used by minority shareholders in their eventual arbitration proceedings, which could make them cheaper and faster, as part of the evidence will already be ready”, states.
But, in Nogueira’s opinion, it is time to create in Brazil a mentality of controllers’ responsibility for issues relating to abuse and other misuses of power.
“This is already a common practice in countries with a more consolidated market. Perhaps it would be appropriate to introduce into Brazilian legislation the concept of class actions North American, that is, a collective action by all parties who have been harmed by a certain fact or action of a third party. This would reduce individual costs for those potentially harmed, as well as speed up the compensation process for such parties”, he states.
For Eduardo Brasil, corporate lawyer and partner at Fonseca Brasil, this case only highlighted that there is a significant failure in the governance and corporate control mechanisms in Brazil. “Without immediate punitive and compensatory actions, confidence in the capital markets could be undermined. The lack of accountability can lead to a business environment where fraudulent practices are not properly suppressed”, he states.
In his opinion, minority shareholders are in a disadvantageous position, because, with the dilution of their shares after the increase in share capital, their influence and voting power decreased, further limiting their ability to influence the company. “The situation is worsened by the statutory clause requiring arbitration for compensation claims, which is often a barrier due to the high costs and complexities involved,” he explains.
The case, according to him, is a warning about the need for reforms in the Brazilian capital market. The lawyer suggests that proactive measures should be implemented to prevent similar situations from recurring. “The protection of minority shareholders should not only be seen as a legal obligation, but also as an essential pillar for the health and efficiency of the market”, adds Eduardo Brasil.
Lawyer cites the points necessary for progress to be made:
– Transparency and Communication: Authorities must improve communication about the progress of investigations and any action taken.
– Regulatory Review: It is crucial to review corporate governance practices to prevent future fraud and protect minority shareholders.
– Accessible Arbitration: Make the arbitration process more accessible and less costly, ensuring that minority shareholders have a realistic way to seek compensation.
