panhia Brasileira de Distribuicao(CBD) - 2021 Q4 - Annual Report

Capital Structure and Shareholder Rights - As of December 31, 2021, the company's subscribed and paid-up capital was represented by 269,336,551 common shares, with no par value [389]. - The company is authorized to increase its capital stock up to 400,000,000 common shares, subject to board of directors' resolution [390]. - The mandatory minimum dividend is set at 25% of the adjusted net profit, which is defined as net profit after certain adjustments [394]. - The company must appropriate 5% of its net profit to a legal reserve until it reaches 20% of the share capital [396]. - Dividends must be available to shareholders within 60 days after declaration, and shareholders have a three-year period to claim dividends [399]. - Shareholders representing at least 10% of the voting stock have the right to elect one member of the board of directors, promoting minority shareholder representation [405]. - The company’s bylaws include an indemnity provision for board members and management, ensuring protection against civil liabilities under certain conditions [406]. - The quorum for shareholders' meetings requires at least 25% of total shares with voting rights, ensuring adequate representation for decision-making [414]. - The company is permitted to eliminate preemptive rights for capital increases under specific conditions, facilitating strategic financial maneuvers [415]. - Shareholders have the right to participate equally in profit distributions and residual assets in the event of liquidation, safeguarding their investments [405]. - The company’s fiscal council can be called by shareholders holding a predetermined percentage of shares, ensuring accountability in management [410]. - The company must publish notices of shareholders' meetings at least three times, ensuring transparency and compliance with Brazilian corporate law [411]. - The affirmative vote of shareholders representing more than half of the issued shares is required for significant corporate actions, such as mergers and dissolutions, protecting shareholder interests [414]. Financial Transactions and Obligations - The estimated price for the Real Estate Properties Assignment Transaction involving 70 Extra Hiper stores is R$5,173.0 million, with R$3,973.0 million to be paid by Sendas in installments between December 2021 and January 2024 [427]. - As of December 31, 2021, the company had received R$1.0 billion from Sendas under the Real Estate Properties Assignment Transaction [427]. - The company is required to launch a public tender offer to purchase all minority voting shares at a price equal to at least 80% of the control price upon a sale of control [420]. - Any person acquiring more than 25% of the company's equity interest must commence a public tender offer to purchase all outstanding shares within 30 days [423]. - The purchase price in a tender offer must be at least the greater of the economic value of the company, the highest price paid during the last 12 months, or 125% of the weighted average unit price over the last 120 trading sessions [423]. - The company has provisions to avoid concentration of shares in a small group of investors, promoting widespread ownership [421]. - The right to withdraw shares lapses 30 days after the publication of the minutes of the relevant shareholders' meeting [417]. - Shareholders exercising withdrawal rights are entitled to receive book value for their shares based on the most recent audited balance sheet [417]. - The company must pay 80% of the book value of shares according to the most recent audited balance sheet immediately upon a withdrawal request [417]. Taxation and Regulatory Compliance - The company is subject to Brazilian corporate law and regulations regarding shareholder rights and disputes, including arbitration for controversies [424]. - Dividends paid by Brazilian corporations to Non-Brazilian Holders are currently not subject to withholding income tax if related to profits generated on or after January 1, 1996 [434]. - Excess Dividends paid to Non-Resident Holders may be subject to withholding tax rates of 15.0% or 25.0% depending on the jurisdiction of the beneficiary [434]. - Interest on shareholders' equity payments to Non-Resident Holders are subject to a withholding tax of 15.0% or 25.0% if the holder is in a Low or Nil Tax Jurisdiction [436]. - Capital gains from the sale of common shares on a Brazilian stock exchange are exempt from income tax for Non-Resident Holders registered under Central Bank rules [442]. - Non-Resident Holders not registered under Central Bank rules may face capital gains tax rates ranging from 15.0% to 25.0% depending on their jurisdiction [442]. - The Brazilian tax authorities have pending legislation discussing the taxation of dividends, which may impact future distributions [436]. - The New Brazilian Tax Regime introduced in 2014 has replaced the Transitory Tax Regime and includes new provisions regarding Excess Dividends [434]. - Payments of interest on shareholders' equity can be included as part of mandatory dividends, ensuring compliance with Brazilian law [436]. - Non-Resident Holders may register their common shares as foreign portfolio investments to benefit from specific tax treatments [441]. - The definition of Low or Nil Tax Jurisdictions may affect the withholding tax rates applicable to Non-Resident Holders [445]. - The Brazilian tax authorities apply a 15.0% withholding tax (WHT) on payments to beneficiaries in privileged tax regimes, which could increase to 25.0% if deemed applicable to Non-Resident Holders [447]. - There are no federal inheritance, gift, or succession taxes on common shares or ADSs for Non-Resident Holders, but state-level taxes may apply for gifts or inheritances [448]. - The current IOF/Exchange rate for foreign currency transactions is 0.38%, with a 0% rate for inflows and outflows related to foreign investments in Brazil [448]. - The IOF/Bonds tax rate for transactions involving common shares is currently 0%, but may increase to 1.5% per day for future transactions [449]. - Dividends paid on ADSs may qualify as "qualified dividend income" if certain conditions are met, including being readily tradable on a U.S. exchange [455]. - U.S. holders may treat capital gains from the sale of common shares or ADSs as long-term if held for more than one year, subject to preferential tax rates [456]. - Brazilian income tax on capital gains may not be creditable for U.S. holders unless sufficient foreign source income is derived [458]. - Distributions from common shares or ADSs are generally subject to U.S. federal income taxation as ordinary income, with potential implications for foreign tax credits [453]. - The Brazilian government reserves the right to increase the IOF/Exchange rate to a maximum of 25.0% for future transactions [448]. - U.S. holders should consult tax advisors regarding the treatment of foreign currency gains or losses related to dividends received in Brazilian currency [453]. - The company does not expect its common shares or ADSs to be considered common shares of a Passive Foreign Investment Company (PFIC) for the current fiscal year [459]. - U.S. holders may face adverse tax consequences if the common shares or ADSs are classified as PFICs, including potential interest charges on gains or excess distributions [459]. - U.S. holders of common shares or ADSs may be required to file IRS Form 8621 if they exceed certain de minimis amounts during any taxable year in which the company is classified as a PFIC [461]. - The company does not intend to provide the necessary information for U.S. holders to make a Qualified Electing Fund (QEF) election, limiting their options for tax treatment [459]. - Backup withholding may apply to certain payments to U.S. holders unless they provide the correct taxpayer identification number and certify their status [462]. Financial Management and Risk Exposure - The company engages in cross-currency interest rate swaps to manage financial market risk related to U.S. dollar-denominated liabilities, effectively converting them to obligations in reais [468]. - Grupo Éxito uses derivatives to hedge against foreign exchange variations on imports and bank loans, specifically targeting U.S. dollars and euros [470]. - The company is exposed to interest rate volatility regarding cash and cash equivalents, with rates based on the CDI rate, which is the benchmark interest rate in Brazil [471]. - The company manages its debt portfolio by periodically retiring, redeeming, and repurchasing debt, as well as using derivative financial instruments to mitigate risks [471]. - Significant interest rate-sensitive instruments are monitored, with variable interest rate debt reflecting a weighted average rate as of December 31, 2021 [471]. - Total cash and cash equivalents amounted to R$8,274 million, with cash equivalents denominated in reais at R$4,693 million, representing 93.51% of CDI [473]. - Total loans and financing reached R$4,451 million, with a significant portion in floating rates, including R$1,095 million in debentures [478]. - The company reported a net foreign currency exposure of R$7 million in U.S. dollar-denominated debt as of December 31, 2021, down from R$12 million in 2020 [476]. - Sales to customers using credit cards accounted for 47.2% of consolidated net operating revenue in 2021, indicating a strong reliance on credit card transactions [480]. - The company has not experienced difficulties in obtaining financing or refinancing existing debt, ensuring liquidity and capital resources [475]. - The average interest rate for loans and financing was reported at 9.15% as of December 31, 2021, compared to 1.90% in 2020 [478]. - The company has cross-currency interest rate swaps in place to mitigate risks associated with U.S. dollar-denominated debt, totaling US$50 million [479]. - Total liabilities were reported at R$9,080 million, with a notable increase in loans and financing compared to previous years [478]. - The company has implemented investment policies to minimize credit risk, particularly regarding cash and cash equivalents [480]. Depositary and ADR Program - The depositary has agreed to reimburse the Company for expenses related to the establishment and maintenance of the ADS program [485]. - The depositary will cover the Company's annual stock exchange listing fees [485]. - Standard out-of-pocket maintenance costs for the ADRs will be paid by the depositary, including expenses for mailing financial reports and distributing dividend checks [485]. - The depositary will reimburse the Company for certain investor relationship programs and promotional activities annually [485]. - Additional payments may be provided to the Company based on performance indicators related to the ADR facility [485]. - There are limits on the amount of expenses for which the depositary will reimburse the Company [485]. - The reimbursement amount is not necessarily tied to the fees collected from investors by the depositary [485].