BRAZIL Law and Practice Contributed by: Fernanda Levy, Aline Bauermeister, Rodrigo Menezes and Fabiana Fagundes, FM/Derraik
4. Government Inducements 4.1 Subsidy Programmes
• intellectual property – attesting that the com - pany owns or has the right to use all intellec - tual property necessary for its business, free of liens or encumbrances; • litigation – information confirming that there is no litigation pending or threatened that could materially affect the company and/or the investment; and • labour and tax compliance – confirming that the start-up is in good standing from a labour and tax point of view. The content of the statements varies in each case, depending on the characteristics of the start-up and on the result of the due diligence carried out by the investor. Indemnification In the case of breach of any representations, warranties, covenants or undertakings, the recourses available to the investor typically include the following: • indemnification – the defaulting party may be required to indemnify the indemnified party for losses resulting from the breach; • right to cure – some agreements may allow the breaching party a certain period to rectify the breach before further legal actions can be taken; • termination of the agreement – for severe breaches, the non-breaching party may have the right to terminate the agreement; and • specific performance or injunction – in cases where monetary compensation is inadequate, a court order may be sought to compel the breaching party to perform its obligations or to refrain from certain actions.
Several types of incentives or programmes are provided by the government, to incentivise the development of start-ups and entrepreneurship in Brazil, including: • differentiated tax regimes ( simples nacional , a tax regime devised to simplify computation and compliance for small entrepreneurs); • tax incentives for certain research and devel - opment activities; • tax incentives focused on specific industries or regions of Brazil; and • initiatives of national or regional development agencies and entities, such as the creation of Criatec’s investment funds by the Brazilian National Development Fund (BNDES), effec - tively deploying capital in the VC environ - ment. It is also worth mentioning the 2021 New Legal Framework for Start-Ups ( Marco Legal das Start- ups ), which presents various measures for stim - ulating the creation of innovative companies and establishes incentives for investments through the improvement of the business environment in Brazil. These initiatives aim to: • create a favourable environment for the emer - gence and growth of start-ups; • improve the competitiveness and innovation rates of companies; • increase the number of enterprises; • promote income and employment generation; and • expand the supply of innovative goods and services in Brazil.
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