On June 2, 2021, Complementary Law No. 182, from June 1, 2021 (‘’LC 182’’), was enacted and published. LC 182 provides for the legal framework for startup companies and innovative entrepreneurship with the purpose of encouraging the creation of startups, aiming the attraction of investments and improving competitiveness on Brazilian business environment. In addition to the provisions regarding startup companies, LC 182 made changes into Law No. 6.404/1976 (‘’Brazilian Corporations Law”), in order to streamline corporations’ daily processes, as well as allow access to the capital markets by smaller companies.
According to LC 182, “Startups” are business or corporate organizations, newly constituted or in recent operation, whose performance is defined by innovation to a business model or to products or services offered.
Moreover, the requirements for qualifying as a Startup are: (i) gross revenue of up to R$16,000,000.00 (sixteen million reais) in the previous calendar year or R$1,333,334.00 (one million, three hundred and thirty-three thousand and three hundred and thirty-four reais) multiplied by the number of months of activity in the previous calendar year, when less than 12 (twelve) months; (ii) up to 10 (ten) years of registration in the National Register of Legal Entities (CNPJ) and (iii) inclusion of a statement in the articles of incorporation that the company uses innovative business models for the manufacturing of products or provision of services; or classification under the Inova Simples regime (special simplified regime, regulated by CGCIM Resolution No. 55, of March 23, 2020, which defines the summary proceedings for opening, changing and closing companies under such regime).
Among the subjects covered by the Startup Companies Act, we highlight that such companies are able to receive investments from individuals or legal entities, as well as from investment funds (under rules to be defined by the Brazilian Securities Commission – CVM), which may or may not result in participation in its share capital (depending on the modality of investment chosen by the parties).
The investor who makes the capital contribution in the modalities provided for by LC 182 will not be considered a partner or shareholder during the period in which its investment has not been converted into an effective and formal equity interest – therefore, as expressly provided for in LC 182, it will not be responsible for Startup’s debts and obligations, including in the case of judicial reorganization or in the scenario of lifting of the corporate veil (except in cases of willful misconduct, fraud or sham mechanism); nor will it have the right to manage or vote in the administration of the Startup, but may, however, participate in the resolutions on a strictly consultative basis.
LC 182 also promotes cooperation and interactions between public and private sectors. For ease of reference, we highlight: (i) the possibility of creating “experimental regulatory environment” programs (regulatory sandbox), in which public bodies or agencies with jurisdiction for sectorial regulation can set aside/remove norms under its jurisdiction so that Startup companies may develop innovative business models and test new techniques and technologies, while being monitoring by the regulatory body; and (ii) the institution of a special public bidding/auctions modality that enables the public administration to hire solutions considered “innovative”, with bidders being responsible for proposing different means to meet the expectations of the administrative entity.
Regarding the amendments to the Brazilian Corporations Law, the board of officers of a corporation may be composed by only one (1) officer, appointed by the board of directors or, in the absence of such board, by the shareholders at a general meeting called for this purpose.
In the same way, closely-held companies with annual gross revenue of up to R$ 78,000,000.00 (seventy-eight million reais) may (i) carry out mandatory publications electronically, being exempt from legal publications in the Official Gazette and widely circulated newspaper; (ii) replace mandatory corporate books for mechanized or electronic records; and (iii) freely establish the distribution of dividends, subject to the mandatory dividends provided for in article 202 of the Brazilian Corporations Law and the rights of preferred shareholders, as well as in accordance with the provisions of the bylaws and the shareholders’ agreement.
We highlight that the regulation of publications and the use of electronic records of corporate books will, in due time, be regulated by the Ministry of Economy.
Furthermore, LC 182 pursues to facilitate access to the capital market by smaller companies, with gross revenue lower than R$ 500,000,000.00 (five hundred million reais), delegating the regulation of such changes to the CVM.
Lastly, we inform that LC 182 will come into force after 90 (ninety) days of its publication.
Costa e Tavares Paes Advogados is at your disposal for further clarification regarding LC 182 and its effects.