The Legal Framework of Startups (Complementary Law No. 182/2021) was published on June 2, 2021, and shall become effective 90 days thereafter. It is intended to attract investment and pursue economic development through innovation and technology in Brazil.
For purposes of the new law, a startup is a business or corporate organization (such as individual entrepreneurs, limited liability companies, cooperatives or corporations) recently incorporated or that has been enrolled with the Federal Taxpayer Registry (CNPJ) for no more than 10 years, with a gross income of no more than R$ 16,000,000 in the previous calendar year and that (a) represents in its corporate documents that it is a startup for purposes of the law and uses innovative business models to generate products and services; or (b) is included in the Inova Simples special regime (special tax regime applicable to innovative companies with a limited income of no more than R$ 81,000 per year).
In the definition of the legal standards applicable to startups, the Legal Framework of Startups established the following new concepts:
- Angel Investor. Establishes protection standards for the angel investor, who is not considered a shareholder for legal purposes, does not manage the invested company and cannot be held liable for any company’s obligation. The angel investor may be entitled to the return on its investment for a maximum period of 7 years, as provided in the agreement between the angel investor and the invested company. The provisions of the Civil Code, Consolidation of Labor Laws (CLT) and National Tax Code regarding the disregard of legal entity do not apply to angel investors, except in willful misconduct, fraud or simulation involving the investor.
- Regulatory Sandbox. Regulatory agencies and government authorities (for instance, CVM, ANVISA, SUSEP and Brazilian Central Bank) shall create an experimental regulatory environment for startups operating in regulated markets, such as fintechs, health techs and energy techs, removing or simplifying some of the existing legal standards and requirements.
- Government Investment. The government may enter into agreements with startups to test innovative solutions intended to solve problems faced by public administration through bidding processes under special conditions. For example, the bidding invitation does not have to describe the solution to be contracted, but only the problem to be solved, and the bidders will propose applicable solutions.
In addition to all these new regulations applicable exclusively to startups, the new law simplified some provisions of the Corporations Law, affecting other companies, whether they are startups or not:
- A corporation may now have only one officer – the previous regulation required at least 2 officers.
- Companies with an annual gross income of no more than R$ 78 million are now allowed to:
- Publish their corporate documents and financial statements electronically – previously, such publications had to be made in a newspaper and in the Official Gazette;
- Replace their corporate books by mechanized or electronic records; and
- Unless otherwise provided in the company bylaws, there is no longer an obligation to pay minimum dividends.
- CVM shall create a new set of rules to facilitate access of small companies to capital markets.
Despite the clear intention to attract investment and foster innovation and technology, some aspects of the Legal Framework for startups need to be clarified and improved. For example, the law does not define the situation of the angel investor or the bidding after the company no longer fits the definition of a startup when it exceeds the annual gross income of R$ 16,000,000. Besides, the practical application of some provisions depends on the action of regulatory and other governmental authorities.