BELGIUM Law and Practice Contributed by: Steven De Schrijver, Allegiance Law
Nonetheless, any choice of business structure should be considered from a tax perspective. It is advisable to consult a legal and tax adviser for more detailed advice on which company struc- ture is best suited to specific needs. 2.3 Early-Stage Financing Early-stage financing, also known as seed invest- ment, for start-ups can be sourced from various channels – each with its own unique characteris- tics. Here are some of the key providers and their respective documentation processes. • Using own funds – the providers and their documentation processes are as follows. (a) Providers – entrepreneurs themselves provide the early-stage financing. (b) Documentation – no formal documenta- tion is required, but keeping clear records of personal investments is advisable. • Involving family, friends and fans – the provid- ers and their documentation processes are as follows. (a) Providers – individuals in the entrepre- neur’s personal network provide the early- stage financing. (b) Documentation – the respective docu- mentation requirements are: (i) co-shareholders – formal agreements outlining the terms of co-ownership; (ii) borrowing – clear loan agreements specifying terms and conditions; and (iii) win-win loans – documented loan agreements with specific conditions (government support involves annual tax discounts). • Crowdfunding – the providers and their docu- mentation processes are as follows. (a) Providers – early-stage financing is provided by the general public or private investors through online platforms. (b) Documentation – the process varies by
platform but typically involves detailed project descriptions, financial plans, and rewards or equity distribution. Regula- tion (EU) 2020/1503, effective from 10 November 2021, establishes a unified framework for crowdfunding service pro- viders (CSPs) operating digital platforms, facilitating connections between investors and businesses seeking funding by way of loans (lending-based crowdfunding) or acquisition of transferable securities (investment-based crowdfunding). To operate under Regulation (EU) 2020/1503, CSPs must be authorised by their national competent authority and can then extend their services across EU member states. Additionally, Regulation (EU) 2020/1503 imposes operational requirements, including restrictions on inducements, credit risk assessments, due diligence on project owners, and investor protection measures such as fair marketing, entry knowledge tests, a reflection period, and the involvement of a licensed payment service provider. • Venture capital – the providers and their documentation processes are as follows. (a) Providers – early stage-funding is provid- ed by public and private venture capital- ists (business angels). (b) Documentation – comprehensive invest- ment agreements outlining terms, condi- tions and expected returns are required. • Corporate loans – the providers and their documentation processes are as follows. (a) Providers – early-stage funding is pro- vided by regional public institutions that support economic investment initiatives in Flanders, Brussels and Wallonia and provide corporate loans that are tailored to SMEs and large companies and do not involve bank loans.
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