PARAGUAY Law and Practice Contributed by: Mauro Mascareño, Carlos Vargas and Rodrigo Gómez Sánchez, Mascareño Vargas – Asesores
week or two. However, everything must be done under such a system. Another advantage of this kind of vehicle is that it is the only one that allows one shareholder. All other vehicles require at least two, even if the second shareholder has a minimum stake. An SA requires a notary public and registration before the Public Records Division. Since this type of company has existed for decades, it is the most widely recommended vehicle for inves- tors with various shareholders, and for those who plan a local IPO locally (EAS shares or bonds cannot be traded in the local stock market). 2.3 Early-Stage Financing Seed investment for start-ups in Paraguay typi- cally comes from individuals or companies who are the founders. If a start-up is deemed to have potential, local or foreign investors often acquire a majority stake in it. Meanwhile, the previous owners may continue as managers or consult- ants for a few years. The process usually involves private investment agreements that outline the terms and condi- tions of the investment. Additionally, depending on the bank’s risk appe- tite, some local bank funding can be obtained. Recently, some digital – ie, less traditional – banks have been established, and this type of loan is becoming more common. 2.4 Venture Capital Venture capital in Paraguay is still in the early stages of development, with limited local fund- ing sources and minimal government-sponsored support. However, there is a growing trend of foreign investors providing funding for promis- ing start-ups. International venture capital firms, particularly those from neighbouring countries,
have begun to express interest in Paraguay’s expanding tech sector. 2.5 Venture Capital Documentation While venture capital regulation and documen- tation guidance or statutes in Paraguay are almost non-existent and less standardised than in other jurisdictions, international best practices are often followed, especially for deals involving foreign investors. 2.6 Change of Corporate Form or Migration As start-ups grow, they may be advised to change their corporate structure, move to anoth- er location to access better financing options or enter new markets. However, many tech start- ups remain in Paraguay due to favourable tax laws and government incentives. In this scenario, the parent company, particularly if it is a venture capital investor, plays a crucial role in seeking capital or a foreign IPO to fund the local entity. Only a few Paraguayan companies issue bonds abroad, usually on the New York Stock Exchange, while maintaining their local legal structure. 3. Initial Public Offering (IPO) as a Liquidity Event 3.1 IPO v Sale In Paraguay, start-up investors are more inclined to pursue a sale process rather than an IPO due to the limited depth of the local stock exchange. Dual-track processes are uncommon in the local market, and an exit through a sale is generally the preferred option.
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