Brazil’s Legal Framework for Startups comes into effect and creates a positive environment for innovative entrepreneurship

Today, September 1, 2021, Complementary Law No. 182, published on June 2, 2021, enters into force, establishing the Legal Framework for Startups which, among other attributions:

  • recognizes innovative entrepreneurship as a vector of economic, social and environmental development;
  • encourages the creation of legally safer environments;
  • grants greater contractual freedom and favors investments;
  • modernizes the Brazilian business environment in light of emerging business models; and
  • incentivizes the hiring of startups by the government that offer innovative solutions to public problems, taking advantage of potential economic opportunities.

The Legal Framework for Startups establishes a legal concept for startups, according to which newly constituted companies or companies in recent operation, whose business model is characterized by innovation, will be considered startups.

Under the Law, companies (as well as individual entrepreneurs) will be considered startups:

  1. with annual gross sales of up to BRL 16 million in the previous calendar year or BRL 1.3 million multiplied by the number of months of activity in the previous calendar year (when less than twelve months), regardless of the corporate form adopted;
  2. with up to 10 years of registration in the National Register of Legal Entities (CNPJ); and
  1. that have expressly declared, in their corporate documents, the use of innovative business models or that are framed in the special regime ‘Inova Simples’ provided for in the Statute of Micro and Small-sized Companies (Complementary Law No. 123/2006).

In addition to other measures, the Legal Framework also creates experimental regulatory environment programs, under which the government may establish special simplified conditions so that participating startups can receive temporary authorization to develop innovative business models and test experimental techniques and technologies, through a facilitated procedure.

Demarest’s Corporate Law team, together with the firm’s bespoke team focused on startup solutions through its Disrupt initiative, is available to provide further information or clarification on the new Legal Framework for Startups.