By: André Jerusalmy and Fernanda Lazzarini

Although approved by the Chamber of Deputies on December 14, 2020, Complementary Bill No. 249/2020 (“PLP 249/20”), also known as the “Legal Framework for Startups”, was considered impaired due to the approval of the Plenary’s Global Substitute Amendment to Complementary Bill No. 146/2019 (“PLP 146/2019”), adopted by the Special Committee’s Rapporteur, since they dealt with the same subject. In view of this, after the Senate approved seven of ten amendments in February 2021, PLP 146/2019 had its vote concluded by the Chamber of Deputies on May 11 of this year, and will now be sent for presidential sanction.

As established in PLP 249/2020 and maintained by PLP 146/2019, as mentioned in a note published on 12/17/2020 (“Chamber Approves Basic Text of the Legal Framework for Startups”), for a company to be considered as startup, she must:

• have been registered with the National Registry of Legal Entities (“CNPJ”) for a maximum of 10 years;
• Have gross revenue of up to R$16 million per year (or, if the company is less than 1 year old, revenue of R$1.3 million multiplied by the number of months of activity); and
• Have as their objective the exploration of some innovative business model in the products or services sector, or that is included in the special Inova Simples regime, a program created to stimulate startups.

Therefore, as long as it meets the requirements above, a startup may adopt any form of business framework, such as individual entrepreneur, limited liability individual company (“EIRELI”), business corporations or even simple companies.

The amendments to PLP 146/2019 that were voted on are intended to attract investment, and they only removed the text that provided for the possibility of a stock option, which is when a person chooses to work with a lower effective salary in order to receive a supplement to the agreed amount in shares in the future, if they wish to buy them. As a result of the exclusion of this provision, the counting as remuneration of only the cost value of the share at the time the employee exercises the purchase option was also removed for social security contribution purposes. However, this modality only applies to the purchase option granted by a company domiciled in Brazil or abroad to employees and similar employees of another company linked to it.

In any case, PLP 146/2019 opens up investment advantages to investors, whether individuals or legal entities, as they will be able to invest money only for the investment, without committing to participate in the company's share capital or management, unless they choose to actually purchase shares. Given this possibility, investors will not be liable for any debts of the company. Additionally, in the case of individual investors, there is provision for offsetting losses accumulated in the investment phase with the profit obtained from the sale of shares obtained later. Thus, taxation on capital gains will only apply to net profit, and the investor will have to forgive the startup's debt.

Another approved way of receiving investments is through equity funds or equity investment funds (“FIP”) in the categories of seed capital, emerging companies and companies with intensive economic production in research, development and innovation linked to concession grants, such as for the telecommunications or oil sectors. In such cases, the Executive Branch must regulate the way in which these funds are accountable, and the startups invested in by them may also participate in programs, competitions or public notices managed by public institutions.

Already regulated by the Brazilian Securities and Exchange Commission (“CVM”) in its CVM Resolution 29, PLP 146/2019 also provides for investments through the so-called “regulatory sandbox”, which is an experimental regulatory environment, which, in short, is where participating legal entities can receive temporary authorizations to test innovative business models in activities in the securities market regulated by the CVM.

Furthermore, PLP 146/2019 gives angel investors who do not have control over startups the possibility to participate in deliberations in a consultative manner and have access to accounts, inventory, balance sheet, accounting books and cash situation, even if their invested resources exceed the startup's share capital.

Finally, outside the area of investments, PLP 146/2019 granted priority analysis for patent or trademark registration applications before the National Institute of Industrial Property (“INPI”), when these are made through the registration simplification portal (“Redesim”).