Scheduled to come into force in January 2025, the Ordinance regulating the investment in equity investment funds (FIP) to capitalize technology-based companies in the Western Amazon or in the state of Amapá brings greater legal certainty, but is born out of date. This is what Ricardo Vieira, a specialist in corporate law at Barcellos Tucunduva Advogados, points out.
Drawn up jointly by the Ministry of Development, Industry, Trade and Services (MDIC) and the Superintendence of the Manaus Free Trade Zone (Suframa), the new Ordinance repeals and replaces MDIC Ordinance No. 1,753 of 16/10/2018, bringing substantial changes.
Technology-based company
One of the first changes observed by Vieira is in the concept of "technology-based company", which currently takes into account the observance of two or more characteristics such as the development of technologically new goods, services or processes, the commercialization of Intellectual Property Rights (patents), research and development expenses greater than 5% of gross revenue, software development, among others.
According to Vieira, the new definition refers to "entrepreneurial or corporate organizations, whether new or in recent operation, that use scientific knowledge or technologies as basic inputs and whose activities are characterized by innovation applied to business models, production processes, products or services offered".
"There is an apparent simplification of the concept, but the framework has become more restricted. Companies that currently fall under the concept of Ordinance 1.753 may no longer be able to receive incentive funds from next year," the expert points out. "What's more, the requirement that the company be a start-up or in recent operation, with up to 10 years of registration with the CNPJ, is an innovation," he adds.
Main activity
Ordinance 1.753 already requires the invested company to have its headquarters or main activity in the Western Amazon or in the state of Amapá, but there was no objective definition of what would characterize this main activity.
For 2025, in addition to requiring a "formalized establishment with an address" in the region, the new ordinance defines main activity as "research, development, production or innovation activity with the potential to generate revenue for the invested technology-based company" and requires that it be compatible with one of the concepts dealt with in Decree 10.521/20: Basic research; applied research; experimental development; technological innovation; professional training or qualification; scientific and technological consultancy services.
"It has become clear that the company's establishment in the region must carry out these activities, and it is not enough, for example, to maintain a sales team in the region while research and development is carried out elsewhere," Vieira points out. "Despite bringing clarity to the concept, the ordinance disregards the dynamics of remote work and the potential shortage of research and development professionals in the region."
Backwards and outdated
For the specialist atBarcellos Tucunduva Advogados, one of the major setbacks of the new ordinance is the gross revenue limit, which has been reduced from R$50 million to R$16 million or proportional to the number of months in business, although there is no longer a limit for the previous three years.
"It's a step backwards that will considerably limit the number of companies able to receive funds," says Vieira. "The value adopted is outdated, since it corresponds to the limit for companies targeted by FIP Capital Semente under the previous regulation, CVM Instruction 578 of 2016. This instruction was revoked in 2022 by CVM resolution 175, which raised the gross revenue limit for 'seed capital' to R$20 million," he explains.
Another decision highlighted as a "loss of opportunity" by the lawyer was the maintenance of the ban on investing in companies that are controlled, directly or indirectly, by a company or group of companies that have total assets of more than R$80 million or annual gross revenue of more than R$100 million in the financial year immediately preceding the FIP's first contribution.
"Once again, the regulator missed the opportunity to update the amounts in line with CVM resolution 175, which increased them to R$100 million and R$150 million respectively for 'seed capital' operations," says Vieira.
One of the most welcome innovations of CVM Resolution 175 was the possibility for the FIP's regulations to establish a deadline for investing the funds received from its shareholders, which also facilitated investments made under Ordinance 1,753.
The new ordinance limits this advantage, establishing a period of up to 6 months for the investment of FIP funds after each payment of quotas. For Vieira, "this was a step backwards in relation to Resolution 175, but it is already a longer period than that previously provided for by Instruction 578".
Positive points
However, the expert points out that the new ordinance also has some positive points. Investment in foreign assets, for example, remains prohibited, but according to the definition in CVM resolution 175: "As this definition is a little broader than the previous one, we have a gain in this respect."
Another significant change, according to the lawyer, is the rule prohibiting technology-based companies from distributing more than 25% of their profits during the period in which they receive funding from FIPs.
"This wording left room for different interpretations and could compromise the company's attractiveness to new investors. With the new ordinance, the prohibition is clearer and will apply during the so-called 'investment execution period', defined as 'the period in which the technology-based company executes and spends the funds received from the FIP'. Once this period has expired, which cannot exceed 5 years, there will no longer be any limitation".
Vieira also points to what he considers to be an innovation in the ordinance: the provision for settling debts and investing the residual balance of investment obligations in RD&I - Research, Development and Innovation - by investing in FIPs. "This point is in line with the provisions of Article 2 of Law 8.387, which deals with the investment of residual balances in the event that investments in RD&I activities do not reach the minimums set out in the law in a given year."
In a final assessment, Ricardo Vieira believes that "the new regulation is more restrictive, but it is also clearer and should bring a greater level of legal certainty, a long-standing demand of the sector."
Source: Migalhas
