*by Eduardo Felipe Matias and Cassio Spina
This June, Complementary Law 182/2021, known as “Marco Legal das Startups”, completes one year of its enactment. It is worth, therefore, to take stock of the mistakes and successes of this legislation created with the objective of promoting innovative entrepreneurship in Brazil.
Unlike other laws with the same purpose found in other countries and even in Brazil for other sectors, the Brazilian Startups Legal Framework did not adopt any type of fiscal stimulus, which is probably its biggest defect, especially in a country where the burden and excessive tax obligations suffocate business and even worse: maintaining a situation of distortion in the tax treatment for attracting investment by startups.
The only measure of this type that had survived the period of discussion of the bill that gave rise to the Legal Framework was the one provided for in its article 7, which made it possible to compensate for losses and eventual gains verified by the investor in startups, as is the case, including, with investments in shares of companies listed on the stock exchange, with lower risk and greater liquidity. This provision, however, was vetoed when the Legal Framework for Startups was approved, a veto that could have recently been overturned in the National Congress, an opportunity that was lost, maintaining a situation of imbalance in tax treatment.
To this distortion is added another one, of the same kind, which, although it was the subject of discussion during the process of building LC 182, was also not resolved. This consists in the fact that investments in startups receive the same tax treatment as fixed income funds — not to mention other applications, such as real estate and agribusiness letters of credit, which are exempt. Once again, in this case, the tendency for investors to end up choosing, instead of allocating their resources in a nascent and higher risk business, to do so in safer applications or with lower taxation is evident. The result, therefore, is the opposite of increasing the supply of capital for innovative entrepreneurship, which Marco Legal das Startups itself lists as one of the reasons for its existence.
The proposal that startups could opt for the Simples Nacional regime without having to submit to some of the prohibitions that affect other companies did not go ahead, either — such as being incorporated in the form of corporations, which would allow startups to adopt a corporate type that is considered by investors to be more attractive and, even so, they could adhere to this tax regime more suited to their size.
In the labor area, the attempt to regulate stock option plans failed, which would give greater legal certainty to a practice that is very important for the sector, even more so at a time when the dissemination of work to the distance and the low supply and high demand for specialized labor can lead Brazilian companies to lose talent to foreign competitors that offer the same benefit.
This does not mean, of course, that the new law has not brought some positives. This is the case of provisions aimed at simplifying the rules applicable to corporations, or those that aim to promote the creation of so-called “regulatory sandboxes”, experimental environments with simplified special conditions in which the competent bodies can temporarily authorize the testing of business models and innovative technologies. Also noteworthy is the new special regime for contracting innovative solutions by the administration, which has already been adopted in some cases and which has the potential to provide scale gains for startups that have products and services capable of providing answers to challenges in the Public sector.
Therefore, the Startups Legal Framework has brought some victories, but there is still a long way to go if we want to ensure a business environment for these companies in the country that makes them globally competitive, remembering that Brazil is the only BRICS country that has not yet adopted the OECD-recommended stimulus policies to attract investment to startups. To achieve this goal, it is necessary to rescue, through new projects, important points that were left out of LC 182/21. Otherwise, we will eat dust in this race that, based on technology and innovation, is getting faster and faster. We need to hurry.
*Eduardo Felipe Matias and Cassio Spina lead the Startups Committee of the Brazilian Association of Software Companies (ABES)
About the authors
Cassio Spina is an Electronic Engineer graduated from Escola Politécnica da USP, was an entrepreneur for 25 years in the technology area, currently working as an advisor in innovation, mergers and acquisitions (M&A) and Corporate Venture; He also works as an angel investor in startups and a counselor for companies. He is the founder and President (pro-bono) of angels of Brazil, a non-profit organization promoting angel investment and Senior Director of ACE Cortex, an innovation consultancy, Corporate Venture and M&A. He is also a columnist/collaborator for several publications, mentor Endeavor, author of the books “Dicas e Segredos para Empreendedores” and “Angel Investor – How to Get Investment for your Business”, member of the Committees: CEICS-VC of ABVCAP, of the Council of Digital Economy and Innovation (CEDI) of FECOMERCIO/SP and of the Startups Commission of IBGC, being Professor in Governance for Startups of IBGC and Leading Coordinator of the Startups Committee of ABES – Brazilian Association of Software Companies and Creator of the “Board Advisor for Startups” course. Cassio Spina website
Eduardo Felipe Matias is a partner in the business area of the office Elias, Matias Advogados, which covers the area of Innovation and Startups and a visiting scholar at Stanford University, California. book coordinator “Legal Framework for Startups: Complementary Law 182/2021 and the promotion of innovative entrepreneurship in Brazil”, was appointed by the Ministry of Science, Technology and Innovations and the European Union to conduct the study “Sharing Good Practices on Innovation”. Two-time winner of the Jabuti Prize in the Economics, Business and Law categories, for the books “Humanity and its Borders: from the sovereign State to global society” and “Humanity against the Ropes: the struggle of global society for sustainability”, and author of more than 100 articles published in various media in the country. Doctor in International Law from USP, where he also graduated. Postdoctoral fellow at IESE Business School, in Spain, DEA in International Law at the University of Paris II Panthéon-Assas, he was visiting scholar at Columbia University in New York and at the University of California — Berkeley. He is Vice-President of the Startups Commission of OAB/SP and Leader of the Startups Committee of the Brazilian Association of Software Companies (ABES). LinkedIn: Eduardo Felipe Matias
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