On June 1, 2021, Supplementary Law no. 182 was sanctioned, instituting the so-called ‘Legal Framework for Startups and Innovative Entrepreneurship’. The novelties brought by the law create more favorable conditions for the development and consolidation of startups in the country, also stimulating initiatives for integration between the public and private sectors.
The new Legal Framework foresees some requirements for the classification of a company as a Startup, among them: (i) have an annual gross revenue of up to R$16,000,000.00 (sixteen million reais); (ii) does not exceed ten (10) years of enrollment in the National Register of Legal Entities (CNPJ); and (iii) that declare, in their articles of incorporation, the use of innovative models or that fit into the special regime Inova Simples – regulated by CGSIM Resolution No. 55, of March 23, 2020.
The Legal Framework has brought investors more possibilities to contribute financial resources, without having a stake in the company’s capital and management. The investments can be made, for example, by means of subscription rights, call options, debentures, and the establishment of a partnership between investor and company. In these cases, the investor will only be considered a partner of the startup after the conversion of the contribution into effective equity participation and, as long as there is no malicious conduct, fraud, or simulation, he will not be liable for any of the company’s debts.
In addition, startups may receive funds from companies that have investment obligations in research, development, and innovation, which may contribute such obligations through equity funds, Equity Investment Funds (FIP), and investment in programs aimed at financing and accelerating startups managed by public institutions.
The text of the Legal Framework also brings changes to the Complementary Law No. 123, of December 14, 2006, with regard to the so-called angel investors, positing legal arrangements that were already widely used in the startup environment. Besides rules related to remuneration conditions and conversion of contributions, the law determines that these investors may expressly, even without actually taking part in the management, participate in a consultative manner in the deliberations, as well as have access to the company’s accounts, balance sheets, and cash.
Another innovative solution was to expressly provide for the creation of the “Regulatory Sandbox,” an experimental regulatory environment where public administration regulatory bodies and agencies can relax or remove regulations from their respective spheres of competence to allow companies to launch products/services with less bureaucracy.
Regarding the participation of startups in tenders, the new law created the possibility of a type of competition among startups for the public administration, with the objective of promoting innovation in the productive sector and of solving demands that require a solution using technology. It was also created a simplified and priority regime for trademark and patent applications at the National Institute of Industrial Property (INPI).
Another very important point brought by the Legal Framework was the simplification for Corporations with annual revenues of less than R$78 million, which will be able to have only one director, make the publications foreseen in the Corporations Law electronically, and replace traditional corporate books with electronic records.
Some tax and labor issues were not addressed by the new law, such as the possibility of using stock options, which will be dealt with in a separate bill.
The new law goes into effect on September 1, 2021.