BRAZIL: NEW LEGAL FRAMEWORK FOR STARTUPS

July 2021 – Brazil – Rossetti Advogados

Last June 2, the President of Brazil sanctioned Supplementary Law No. 182/2021, which institutes the Legal Framework for Startups and Innovative Entrepreneurship. The purpose of this law is to establish, in Brazil, a facilitated regulatory environment for innovative companies to be able to engage in their activities.

Pursuant to the new law, Startups are understood as companies and cooperatives that act in innovation applied to products, services or business models, which are registered with the Corporate Taxpayer’s Register (CNPJ) for at most ten years and which had a gross revenue of up to R$ 16 million in the previous fiscal year.

Among the innovations of the legal framework, article 2 thereof establishes an experimental regulatory environment, named “regulatory sandbox”, which permits that government bodies and entities with powers to regulate industries (such as: the National Sanitary Surveillance Agency (ANVISA), the Brazilian Telecommunications Agency (ANATEL)) temporarily suspend, for the Startups, certain rules required from the companies that operate in the industry, streamlining the launch of their products and services.

The regulatory body or entity will individually determine the criteria for selection and qualification of the company, the duration and the reach of the suspension of the applicability of the rules and the rules actually affected.

Startup Investor 

The Law provides on the existence of Angel investors, which may be individuals or legal entities, and which may contribute their investments to Startups without necessarily holding equity interest therein or participating in the companies’ management or decision-making process. 

The investments may be made by means of any of the instruments for capital contribution described in art. 5 of the Law, such as the future purchase of shares of the startup or redemption of securities issued by the beneficiary.

In order to grant legal certainty to the investment, item II of art. 8 of the Law provides that the investors shall not be liable for the company’s debts, including in court-supervised reorganization, labor and tax debts, and they are also not liable with their own assets (in the event of piercing of the corporate veil), except in the event of intent, fraud or investment simulation.

The Law grants priority in the analysis of patent or trademark applications with the National Institute of Industrial Property (INPI), by means of the registration simplification portal (REDESIM).

Funds

The startups may also receive funds by means of property funds (Law 13.800 of 2019) or private equity funds (FIP) in the categories seed capital, emerging companies and R&D- and innovation-intensive economic production companies.

The entity of the industry responsible for inspecting the use of the money for this purpose will define the guidelines, and the Federal Executive Branch will regulate the form of accounting of these funds.

Bidding Processes

Finally, another solution defined by the legal framework is the creation of a competitive bid modality for the Startup to participate in bidding processes for the execution of contracts with the government. Due to the excessive requirements and bureaucracy, the current laws prevent the execution of contracts for the provision of innovative solutions developed by Startups.

The Law permits the execution of contracts with more than one Startup, provided this is set forth in the invitation for bids. After the result of the bidding process, the government shall execute the so-called Public Contract for Innovative Solutions. The term of duration of these contracts will be one year, and they may be extended for another year. The maximum amount the government may pay to the Startups is R$1.6 million per contract.

For more information on the above or in other matters, please contact Maristela SA Rossetti (mar@rraa.com.br) or Gilberto Rossetti (gmr@rraa.com.br).

This article is based on publicly available information and given for informational purposes only. It is not intended as legal advice or as a comprehensive analysis of the matters referred to herein.

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