Stock Options Marco Legal Das Startups

In December 2020, the House of Representatives approved the MLS`s core text, consolidated both versions, and included guidance on stock option (how to attract and retain employees in the startup world), primarily with respect to its labor law and tax aspects. Indeed, the unavailability of this profit becomes even more obvious at the time of the exercise when we think of stock option plans created by private legal entities, or even when there is a blocking forecast. Despite the good news, the proposal to regulate stock options within the legal framework is a fragile point. If the text is adopted without amendments, it will lead to profound and costly changes from a fiscal point of view and could even make this instrument unworkable. The bill was approved by Congress and can now be approved by Bolsonaro in June. Today, there are more than 13,000 start-ups in Brazil, according to Startupbase data. Second, the bill is wrong if it vaguely defines the fact that the principal tax, specifically income tax, occurs when the purchase option is exercised, which leads to unconstitutionality and illegality. d) what «grace period» should be observed by the beneficiary of the plan before the start of the parameter analysis (which is especially necessary for startups at a very early stage and is usually referred to as the cliff period); and Jotaflash Innovation Tags Senate Startups Stock Options In recent years, Brazil has discovered important unicorns in the domestic and international market whose investors, including those with stock option investments, have achieved significant financial returns. Sometimes these startups are a minority on the market and these extraordinary cases and exponential profits cannot guide the analysis of the legal nature of the operation.

The hardware doesn`t change the way startups already operate in Brazil, but regulates them. The text provides certainty for newly established contractual relations, as well as for foreign and domestic investors, and ensures a warming of the market in the coming months. «We believe this change should be a big incentive for angel investors and reduce legal uncertainty,» said Roberto Panucci, associate lawyer and head of insurance and startups at Souza, Mello and Torres. «A major concern of angel investors, whether natural or legal, when investing in startups is not to be held accountable for their responsibilities.» They argue that tax reconciliation has no tax implications and does not undermine the Fiscal Accountability Act. The classification of stock options in a market transaction, and not labour, gives this instrument greater legal certainty. Having N/O companies outside of the Simple makes it impossible to use due to the high cost. In the digital age and even more so with the pandemic, maintaining archaic means for paper records and publications is surreal, but also excessively expensive, given that many startups have more than 30 investor partners, so it is important that restrictions on digital publications are lifted. Today, there are 13,700 startups in Brazil, according to data from StartupBase, the official database of this Brazilian ecosystem of abstartups (Brazilian Association of Startups). With regulation, changes are expected both in reducing process bureaucracy and in the legal certainty environment for the performance of these companies in the country. In practice, stock option plans are operated with at least the following characteristics in mind: Stock options allow start-ups to attract and retain talent by offering them the opportunity to acquire the company`s shares at a predetermined price.

This gives impetus to promote the growth of the company with regard to the expectation of future profits. SOPs are fundamental to ensure the competitiveness of the startup market in the search for talent and to help build a mindset of co-creation and chain value creation for the company. By offering part of the company`s involvement, the overall objective is to sustainably retain employees/directors, align incentives, create the culture of long-term thinking, and thus create a virtuous chain that adds value to the company and, consequently, to the beneficiaries of the UCIs who become owners. together, of the company. Clear applicability of the win-win concept. «It will be like a `target against` for us when we know that after its adoption, it will hardly be possible in the short and medium term to adopt these 4 points in a new bill!» reads the letter, which was drafted by organizations such as the Brazilian Association of Lawtechs and Legaltechs (AB2L), the Brazilian Association of Software Companies (Abes), the Brazilian Fintech Association (Abfintechs), the Brazilian Association of Startups (Abstartups), the Brazilian Private Equity and Venture Capital Association (Abvcap), Dinamo and investor networks such as Anjos do Brasil and BR Angels. In addition to investment funds, it may also be available in start-ups of natural and legal persons. As regards funds, the rules are laid down by the CVM in the Regulation. In general, Marco Legal will bring facilities to the startup market in Brazil, as well as the creation and entry of this type of companies into the country`s business scenario through objective rules that do not prevent free negotiations. In a statement sent to this publication, Portinho – the journalist who was Marco Legal who was Startups – mentioned the possibility of retaining the professionals that this mechanism can bring. According to him, «it is crucial for startups to retain the best professionals in the country» because the technology sector «knows no borders» and the brain drain to other countries is a reality. The purpose translates the intention of the parties with the conclusion of legal transactions.

If stock options are used as a tool for a particular beneficiary to become a shareholder of the company and stock charges and bonuses, they cannot be attributed to the type of remuneration for the provision of services. We must take up the proposal of stock options for start-ups, with the risk of creating another obstacle to the emergence of innovation in the country. Although this is a market trend – it is practically mandatory for a startup to have a PCOS – and we have been involved in specific discussions on this topic during the process of the law that has become the legal framework for startups, the regulation of stock option plans has been left out in the legislation. The truth is that LC 182/21 sometimes seemed to be just a timid nod to the ecosystem – it refused to discuss sensitive and fundamental issues for the effective development of the innovative ecosystem in the country, such as tax incentives to invest in startups and for angel investors and stock option plans themselves – both in relation to the expectations of the Brazilian market and given the fact that, what has been discussed and practiced at the level. international. The tax and labor aspects of SOPs, for example, have been a constant topic of discussion in the courts in recent years, hence the importance of improving the institute, which, when used in all the opportunities used, is not only able to attract and retain great professionals, but also to mature the business and business structure of startups and the ecosystem as a whole. The burden is characterised by the financial costs incurred by the beneficiary in acquiring the shares. In addition, stock options may be granted without financial consideration, while the underlying shares may only be acquired against payment in accordance with the criteria previously defined in the stock option plan.

Regardless of the format, the stock option is a bet of those who get future success from the business and take the risk of the deal, as it may be worthless if the business fails. Its value at the time of option issuance is practically zero, because the startup starts at the initial stage, wants to prove itself and has a high risk of failure. Only if the person receiving the option actually exercises it, at a later date, assuming that there has been success and growth of the business, will that employee actually have received something of market value, in this case shares of the company whose market value is greater than the option price. Unfortunately, the amendments were sent to the Senate, which, lacking the political strength to amend the text transmitted by the House, decided to completely delete the article on stock options from the text. Stock options help attract and retain talent, engage people and help build team spirit. In addition, they are an effective corporate governance tool as they aim to align long-term interests. It is an instrument widely used and used by the national and international market, which is used by the main players (e.g. accelerators and venture capital funds) and is not limited exclusively to the startup ecosystem. In simplified form, stock option plans guarantee employees/strategic managers of the company the possibility of acquiring stakes within a certain period of time and at a predetermined price (exercise price) and under certain conditions (the so-called acquisition clauses).