Small businesses, which encourage a culture of entrepreneurship and create jobs, are hugely important to economic growth of Brazil. In total, the 6. At least part of that can be attributed to the difficulty of raising startup capital, especially among young entrepreneurs. One emerging tool that can aid the entrepreneurs is crowdfunding.
We also noted the popularization of the so-called Equity Crowdfunding by way of a funding platform, which has been structured by the aforementioned legal alternatives. However, due to the particularities of the Brazilian legal system, it is worth clarifying a few aspects of the Equity Crowdfunding platform, the Convertible Loans and the Convertible Debentures. Crowdfunding platforms are independent tools used by startups to raise capital with scalability. Therefore, in order to quality for an offering registration release, the transaction must meet the following criteria:. The Loan Agreement is a contract established by law, specifically on Section of the Brazilian Civil Code, defined as lending of fungible goods, in other words the debtor is obliged to refund the creditor with a good of the same kind or nature.
In an environment where IPOs are rarified, but taxes and interest rates are abundant, Brazilian companies are presented with the possibility of raising capital publicly without going through the hurdles of registration and excessive bureaucracy. Crowdfunding is the gathering of capital via online platforms of collective investment, websites where the investor will find money-seeking projects showcased. According to the text, companies with a gross annual revenue of up to BRL 10 million are allowed to raise up to BRL 5 million per calendar year, regardless of previous registration with the CVM. Entities controlled by other companies or by investment funds must comply with a combined BRL 10 million gross revenue. Each round of funding may remain open as long as days and a minimum cap may be distributed if the project does not attain its full amount.
It should come as no surprise that Brazil, one of the largest economies in the world, has a rapidly growing crowdfunding ecosystem. Brazilians are entrepreneurial and social media savvy. At the same time, the entrepreneurs see numerous obstacles to funding — especially those under What is less known, however, is that Brazil also has a budding equity crowdfunding scene. In the Brazilian context, the development makes sense; but until recently, equity crowdfunding was not something that was given much attention in emerging markets. To be clear, the equity crowdfunding scene in Brazil is still small. There are several exemptions within that rule, allowing SMEs defined as firms with annual turnover of 3.