EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera, Daniel Leiva and Raquel Santos, Torres Legal
1. Market Trends 1.1 Technology M&A Market
• regulatory changes – evolving regulations and government policies, including the adoption of Bitcoin as legal tender, are shaping the M&A landscape and encouraging new invest- ment opportunities; • collaborative ventures – investors are seeking new business opportunities with local actors to take advantage of the emerging market; and • tokenisation – as a financial instrument in El Salvador, tokenisation offers innovative opportunities for enhancing liquidity and ena- bling fractional ownership of assets; convert- ing physical assets into digital tokens on a blockchain facilitates secure transactions and broadens access to investment opportunities for a wider range of investors. 2. Establishing a New Company, Early-Stage Financing and Venture Capital Financing of a New Technology Company 2.1 Establishing a New Company New regulations offer a series of tax incentives for companies looking to operate in the tech- nology market in El Salvador, allowing them to maintain some of their operations and profits tax-free. Therefore, this has served as an attrac- tive option for investors looking to establish an entity in El Salvador. The time it takes to incorporate a new company varies depending on the industry and the opera- tions to be carried out, but it is approximately two to four weeks. The initial capital will vary depending on the busi- ness model, but for a limited liability company (LLC) the amount is USD2,000. Furthermore, a new business model has been created for small
In El Salvador, the technology M&A market has been growing exponentially over the past year. This is due to the current commitment to mod- ernisation and the implementation of new tech- nologies in El Salvador’s financial market. Sever- al factors have contributed to this boom, among which new technology adoption and favourable regulations can be highlighted, which in turn has led to foreign investment and an expanding start-up market. In comparison to the global market, El Salva- dor still has a very small technology M&A mar- ket; however, new regulations have sparked new interest, which has accelerated the pace of growth. Even though it is considered imma- ture, the technology M&A market in El Salva- dor is leading all the indicators of growth in the region, and it is becoming increasingly relevant at the global level, emerging as a pioneer in the region. Of course, compared to the global level, M&A transactions in El Salvador are still very lim- ited in scope and size; however, if the situation is compared to that two years ago, or to other reference points in the region, growth has been considerable. 1.2 Key Trends The key trends in El Salvador in the last 12 months are as follows: • increased foreign investment – new business models have led to an increase in interest in El Salvador’s technology M&A market from foreign investors; • focus on technology – there is growing demand for tech-driven solutions and ser- vices;
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