The raising of investments by crowdfunding CVM Instruction No. 588, of July 13, 2017, became a norm, which aims to establish rules and benefit both sides of the negotiation: entrepreneurs (startups) and investors. Now, it is possible to raise financial resources from the general public, who will participate in the respective risks and in the potential growth of the business. According to specialist Ricardo Vieira, a partner at BTLAW, regulatory innovation can generate significant growth in new collective businesses. In this interview, the lawyer answered 10 questions on the subject. Check it out below:
1- What does this statement state?
This norm provides for the public offer for the distribution of securities issued by small business companies carried out with the waiver of registration through an electronic participatory investment platform, and amends provisions of CVM Instruction No. 400, of December 29, 2003, CVM Instruction No. 480, of December 7, 2009, CVM Instruction No. 510, of December 5, 2011, and CVM Instruction No. 541, of December 20, 2013.
2- How much can the entrepreneur raise via crowdfunding?
The maximum annual funding amount is R$ 5,000,000.00 (five million reais). If the project requires a greater contribution of resources, the suggestion is to seek other forms of financing.
3- How much can an investor invest via crowdfunding?
The maximum amount applied per investor is R$ 10,000.00 (ten thousand reais) per calendar year. This amount may be higher when: (i) the investor is regarded as a leading investor; (ii) the investor is regarded as a qualified investor and (iii) the investor has more than R$ 100,000.00 (one hundred thousand reais) in annual gross income or in financial investments (in this case, the investment limit will be 10% of this amount) .
4- Can the startup look for investors outside the platform?
According to the norm, the search for interested parties in investing in the project outside the online platform environment is prohibited.
5- What type of compensation can the company seeking funds offer the investor?
Basically, the company that is raising money offers profit sharing (profits / dividends) and gains from the sale of the interest in the future, depending on the company's growth in the period.
6- How should the company that raised funds account for its activities to the investor?
During the offer, it is up to the funding platform (eg Broota, etc.) to disclose company information and inform the form of accountability, performance indicators, financial information that will be made available, etc. After the offer, accountability must occur, as initially informed. Thus, at the time of the contribution, the investor will know what information he will be entitled to after the offer and with what frequency.
7- What type of company is this type of investment intended for?
Only small business companies can receive investments via crowdfunding. A small business company is one that has annual gross revenue of up to R$ 10,000,000.00 calculated in the fiscal year prior to the investment.
8- After confirming the value, can the investor give up?
The regulation provides for the investor's right of withdrawal without fines or penalties up to, at least, seven days from the confirmation of the investment.
9- Can the collected amount be applied to other actions?
The amounts raised must be used in the development of the company's activities. Thus, they cannot be used for corporate reorganizations, acquisition of other companies, granting credit to third parties, etc.
10 – Is there an established percentage for the remuneration of the platform used to raise investments via crownfunding?
The norm gives a lot of freedom, that is, there is no defined percentage. To give you an idea, Annex 8 of the standard, which is disclosed to investors, contains essential information on the remuneration of the electronic participatory investment platform and the criteria used to determine it. The payment can be through a fixed amount, success rate for raising the target amount, remuneration through the receipt of securities from the small business company, distributed or not in the offer, among other possibilities.
1- What does this statement state?
This norm provides for the public offer for the distribution of securities issued by small business companies carried out with the waiver of registration through an electronic participatory investment platform, and amends provisions of CVM Instruction No. 400, of December 29, 2003, CVM Instruction No. 480, of December 7, 2009, CVM Instruction No. 510, of December 5, 2011, and CVM Instruction No. 541, of December 20, 2013.
2- How much can the entrepreneur raise via crowdfunding?
The maximum annual funding amount is R$ 5,000,000.00 (five million reais). If the project requires a greater contribution of resources, the suggestion is to seek other forms of financing.
3- How much can an investor invest via crowdfunding?
The maximum amount applied per investor is R$ 10,000.00 (ten thousand reais) per calendar year. This amount may be higher when: (i) the investor is regarded as a leading investor; (ii) the investor is regarded as a qualified investor and (iii) the investor has more than R$ 100,000.00 (one hundred thousand reais) in annual gross income or in financial investments (in this case, the investment limit will be 10% of this amount) .
4- Can the startup look for investors outside the platform?
According to the norm, the search for interested parties in investing in the project outside the online platform environment is prohibited.
5- What type of compensation can the company seeking funds offer the investor?
Basically, the company that is raising money offers profit sharing (profits / dividends) and gains from the sale of the interest in the future, depending on the company's growth in the period.
6- How should the company that raised funds account for its activities to the investor?
During the offer, it is up to the funding platform (eg Broota, etc.) to disclose company information and inform the form of accountability, performance indicators, financial information that will be made available, etc. After the offer, accountability must occur, as initially informed. Thus, at the time of the contribution, the investor will know what information he will be entitled to after the offer and with what frequency.
7- What type of company is this type of investment intended for?
Only small business companies can receive investments via crowdfunding. A small business company is one that has annual gross revenue of up to R$ 10,000,000.00 calculated in the fiscal year prior to the investment.
8- After confirming the value, can the investor give up?
The regulation provides for the investor's right of withdrawal without fines or penalties up to, at least, seven days from the confirmation of the investment.
9- Can the collected amount be applied to other actions?
The amounts raised must be used in the development of the company's activities. Thus, they cannot be used for corporate reorganizations, acquisition of other companies, granting credit to third parties, etc.
10 – Is there an established percentage for the remuneration of the platform used to raise investments via crownfunding?
The norm gives a lot of freedom, that is, there is no defined percentage. To give you an idea, Annex 8 of the standard, which is disclosed to investors, contains essential information on the remuneration of the electronic participatory investment platform and the criteria used to determine it. The payment can be through a fixed amount, success rate for raising the target amount, remuneration through the receipt of securities from the small business company, distributed or not in the offer, among other possibilities.
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