Brazil has a new legal framework for startups

startups legal framework

You’re reading The Brazilian Report’s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: Brazil’s new legal framework for startups; news from data protection regulators, and the electric car market in Brazil.

What changes with Brazil’s new legal framework for startups

President Jair Bolsonaro submitted the federal government’s

project for a <a href="">legal framework for startups</a>, tacking provisions on to a bill currently pending Congress. Now, the sector expects an improved business environment and more legal safeguards for entrepreneurs and investors.</p> <p><strong>What are the main changes? </strong>The bill defines startups as “newly created or newly operational companies with annual revenues of up to BRL 16 million [USD 2.85 million], with their operations focused on innovative business models, products or services.”</p> <ul><li>The bill creates a new kind of company, the “Simplified Corporation.” This societary structure would be more comprehensive than limited-liability companies, but cheaper than forming a corporation;</li><li>Startups will have to comply with fewer requirements to join simplified tax regimes;</li></ul> <ul><li>Government entities can create exclusive public bidding processes for innovation-focused companies, in order to foster the sector;</li><li>The bill introduces the possibility of companies offering stock options to employees.</li></ul> <p><strong>New investment rules. </strong>The government&#8217;s bill drafts new rules for investing in startups. For instance, it will be up to the Brazilian Securities Commission (CVM) to establish easier requirements to go public for companies whose yearly gross revenues are lower than BRL 500 million.</p> <ul><li>The CVM would also be responsible for defining rules on angel investments. Under the new law, the contracts could be extended from five to seven years and would allow both parties to define a periodic payout for investors or the conversion of the investment into a stake in the company.&nbsp;</li><li>There will be changes in startup investors’ tax rules, as well as protecting their net worth from startups’ debts.&nbsp;</li></ul> <p><strong>Reaction.</strong> Sector representatives see the proposal as progress toward a better business environment. In an emailed statement to <strong>The Brazilian Report,</strong> José Muritiba, an executive director at the Brazilian Association of Startups, praised the bill as a “welcome first step.”</p> <ul><li>In his view, defining the innovative business model was important and changes in investments may attract new investors to the sector. However, the bill does not “meet the sector’s demands with regard to taxation and working relationships. There are singularities in the startup market that need to be addressed.”</li></ul> <hr class="wp-block-separator"/> <h2>Brazil’s Data Protection Authority: the day after</h2> <p>This week, the Brazilian Senate approved President Jair Bolsonaro&#8217;s picks for the board of the newly-created <a href="">National Data Protection Authority (ANPD)</a>. While this is a key development toward having a fully-functioning regulator that will lay the grounds for the enforcement of data protection laws, experts warn this step is just the beginning of a long adequation process.</p> <p><strong>Where to begin?</strong> According to Ana Frazão, a professor of Commercial Law at the University of Brasília, the country&#8217;s data protection regulations were built over several pillars that work together, which means it is hard to find a single starting point. However, “regulating users’ rights such as access to data, data portability, and security is a priority.”</p> <ul><li>The ANPD also needs to set the parameters for companies to purchase the tech solutions they will need in order to provide services such as data anonymization or portability, says Ms. Frazão. “ANDP does not need to choose a technology, but has to provide the criteria so companies can make their choice.”</li></ul> <p><strong>Different standards. </strong>Recently, IT sector associations have <a href=";infoid=55194&amp;sid=9">expressed</a> the desire for different standards for small and medium enterprises to comply with Brazil&#8217;s data legislation, as they have fewer resources and often deal with less data than corporations. In Ms. Frazão’s view, it is important for the ANPD to address the obligations of each kind of organization and how they should comply with the rules. </p> <ul><li>One of the most controversial points is the requirement of a data protection impact report, seen as a difficult and costly effort for most companies. The document should include all the processes through which an organization handles personal data, the possible risks involved, and measures taken to mitigate them. </li><li>During his confirmation hearing in the Senate, ANPD board member Joacil Rael mentioned the need for guidelines or standardization on the development of these impact reports. Ms. Frazão believes that the ANPD must offer “general coordinates and goals the reports must fulfill. However, the reports will vary a lot from one organization to another, so I fear establishing a standard report may just become a ‘copy and paste’ process.”</li></ul> <p><strong>Jurisprudence.</strong> As users are already suing companies based on the provisions of Brazil&#8217;s new data protection laws, companies have pushed for increased regulation to avoid unnecessary litigation. Ms. Frazão warns that ANPD’s regulations will be pivotal for judges to decide whether a company breached the law or not, but it is unlikely to stop users suing companies and demanding compensation.&nbsp;</p> <ul><li>In fact, she says, as administrative and civil law are different subjects, an organization could realistically be found innocent by the ANPD but convicted in a civil lawsuit.&nbsp;</li></ul> <hr class="wp-block-separator"/> <h2>Electric cars gain ground among car rental companies</h2> <p>Brazilian car rental company Unidas struck a deal with energy group EDP Brasil to make <a href="">electric cars</a> available in their fleet. As of October, 100 such vehicles will be available for individual and corporate rental, while EDP will provide electric accessories such as chargers, as well as maintenance, and even the energy itself, by way of solar panels.&nbsp;</p> <p><strong>Just the beginning.</strong> While the initial number of electric vehicles pales in comparison to Unidas’ 164,000-strong fleet, demand for these cars is growing. For 2021, the company expects to have 600 electric vehicles available and, as <a href="">reported</a> by Valor Econômico, it aims to invest BRL 120 million in electric vehicles.&nbsp;</p> <ul><li>Meanwhile, EDP has been working on a project to provide electric vehicle charging stations. The company will invest BRL 32.9 million to build 64 stations to connect São Paulo to the cities of Rio de Janeiro, Vitória, Curitiba, and Florianópolis.</li></ul> <p><strong>Environmental impact. </strong>The conversion of Unidas&#8217;s fleet could also have a major green effect, as the 100 news vehicles represent a 574-ton reduction in yearly CO<sub>2 </sub>emissions — the equivalent of planting 3,518 trees in Brazil&#8217;s Atlantic Forest, <a href="">says</a> EDP Brasil.</p> <p><strong>Why it matters. </strong>The lack of charging infrastructure is pointed as one of the main bottlenecks for the adoption of electric vehicles in Brazil. By presenting a solution for the rent-a-car segment, it may also help boost demand.&nbsp;</p> <ul><li>Due to the rise of ride-hailing apps, car rental companies are the main buyers of new cars in Brazil, amounting to nearly 23 percent of the light vehicles sold in the country. Therefore, a green push from companies such as Unidas could impact the entire industry.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/4109724"><script src=""></script></div> <hr class="wp-block-separator"/> <h2>Take note</h2> <ul><li><strong>Wi-Fi 6. </strong>GRU Airport, the company that manages the Guarulhos International Airport in São Paulo, is now <a href="">offering</a> the next generation of Wi-Fi connections on its premises. The new Wi-Fi 6, provided by Boingo, is expected to improve user experience with streaming and also support features such as flight and weather updates, as well as health protocols. </li><li><strong>Marketplace.</strong> Telecom provider Oi launched a new marketplace this week. Oi Place offers products for segments such as video games, electronics, smartphones, drones, and smart home devices. Oi also announced a new streaming platform for its pay-TV service, Oi Play. Analysts at brokerage Guide Investimentos <a href="">said</a> the moves are positive, as they provide the company with new revenue streams that will be useful while the company struggles with its court-supervised reorganization process.</li><li><strong>Open to business. </strong><a href="">Brazil’s synchrotron particle accelerator</a> Sirius is now calling for research proposals in various fields. Earlier this year, Sirius was <a href="">enlisted in the Covid-19 effort</a>, and only accepted research proposals related to Sars-CoV-2. As we reported in our <a href="">July 13 Daily Briefing</a>, one of Sirius’ first tasks was to create 3D images of essential Sars-CoV-2 proteins. Now, Sirius may be pivotal to discoveries in several fields, such as industrial biotechnology, biofuels, and agriculture. </li><li><strong>Cloud. </strong>Microsoft <a href=";infoid=55211&amp;sid=97">launched</a> a new data center for its Azure Cloud in Rio de Janeiro. It is the 65th in the world and the second in Brazil. The new structure addresses the market’s needs for more cloud services, as well as the need to host data in the country — which is especially important for customers that need extra protection, such as when dealing with financial data. </li><li><strong>Smart cities. </strong>The Regional Development Ministry opened <a href="">public hearings</a> to discuss the strategic goals and recommendations that will be part of the Brazilian Smart Cities Plan. Citizens may submit suggestions until November 7 to be included in the document, which will serve as the base for the government’s policies on connected cities.

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Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

Renato Alves

Renato Alves is a Brazilian journalist who has worked for Correio Braziliense and Crusoé.

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