Post by account_disabled on Feb 24, 2024 23:27:32 GMT -5
Access to private capital in general, and to venture capital in specific, has become more expensive and difficult in recent years — which has already been repeated exhaustively — with no signs of greater availability of resources in the near future. Brazilian and Latin American entrepreneurs should not, in this scenario, restrict their search for investments to national capital in the face of discrepant availability compared to the international market, especially with regard to the greater sophistication and availability of resources in the North American market regarding investments in venture capital in the ecosystem of technology companies.
Although certain venture capital funds accept to invest in foreign Latin American entities, usually in the form of Safes ( Simple Agreement for Future Equity ), the majority of more sophisticated investors prefer to invest in structures aligned with international practice through a holding company in Delaware, Florida, or even the Cayman Islands, staying away from the legal, economic and bureaucratic insecurities of markets considered emerging. Ultimately, when deciding to carry out investment rounds, the company (could be partnerships or companies) must keep in mind where its key investors are, and these will dictate where its corporate structure should be formed, based on internal practices, situation tax or strategy. The entrepreneur follows the capital.
With attracting international investments becoming an imminent reality for the company, especially when referring to startups and emerging companies, a “flip” of shares is the response that is becoming increasingly standard among expanding entrepreneurs. A term that B2B Email List can be translated from English as “turn” or “turn”, in the corporate context, the flip works through the transfer of the entire corporate structure and corporate governance of the national company to a foreign holding company to be established, which becomes , then, to hold the entirety of the first. A flip to Delaware will be followed as our standard example in this text, and is also the most used in this ecosystem — when we could also refer to a flip to Florida, Massachusetts, or Cayman, for example, with the aforementioned need to choose the jurisdiction of the company the first decision to be taken by entrepreneurs aimed at attracting foreign resources.
We ask for permission to describe the flip process in narrative form, when a graph would be more convenient. The partners of the national company, involving both the founders and other initial investors (generally angels), must transfer all of their shares (or quotas, but give us the freedom to refer to both interchangeably) to that foreign holding company , receiving then shares of this holding as consideration for the national ones, and becoming the only direct partners of such holding . The exact structure of this transfer, however, can be carried out in multiple ways, either through a capital contribution to the foreign company or through an exchange of assets, and will depend on the conclusions of a legal and tax analysis of the instruments to be used.
The common choice that investors and entrepreneurs make for Delaware as the company's jurisdiction stems from a list of factors: its robust and flexible corporate legislation, especially with regard to corporate restructuring, the experience of the Court of Chancery , the court responsible for resolving conflicts in the state and producer of considerable jurisprudence in corporate matters, ensuring greater legal certainty for transactions; the speed and simplicity of the process of archiving corporate documents; the confidentiality granted to the partners of the companies incorporated there; in addition to the obvious preference of investors to remain within market practices, which has Delaware as its default choice — and we know how much the market appreciates standards.
A second issue to be faced by entrepreneurs, in addition to the jurisdiction where their entity will be formed, would be the type of entity to be formed. We emphasize the importance of consulting an international lawyer and a tax consultant when making such a choice, which, in general, involves choosing between incorporating a C-Corp (ending “Inc.”, more closely equivalent to corporations) or the formation of a Limited Liability Company (“LLC”, perhaps closer to a limited liability company — but still a flawed comparison).
Although certain venture capital funds accept to invest in foreign Latin American entities, usually in the form of Safes ( Simple Agreement for Future Equity ), the majority of more sophisticated investors prefer to invest in structures aligned with international practice through a holding company in Delaware, Florida, or even the Cayman Islands, staying away from the legal, economic and bureaucratic insecurities of markets considered emerging. Ultimately, when deciding to carry out investment rounds, the company (could be partnerships or companies) must keep in mind where its key investors are, and these will dictate where its corporate structure should be formed, based on internal practices, situation tax or strategy. The entrepreneur follows the capital.
With attracting international investments becoming an imminent reality for the company, especially when referring to startups and emerging companies, a “flip” of shares is the response that is becoming increasingly standard among expanding entrepreneurs. A term that B2B Email List can be translated from English as “turn” or “turn”, in the corporate context, the flip works through the transfer of the entire corporate structure and corporate governance of the national company to a foreign holding company to be established, which becomes , then, to hold the entirety of the first. A flip to Delaware will be followed as our standard example in this text, and is also the most used in this ecosystem — when we could also refer to a flip to Florida, Massachusetts, or Cayman, for example, with the aforementioned need to choose the jurisdiction of the company the first decision to be taken by entrepreneurs aimed at attracting foreign resources.
We ask for permission to describe the flip process in narrative form, when a graph would be more convenient. The partners of the national company, involving both the founders and other initial investors (generally angels), must transfer all of their shares (or quotas, but give us the freedom to refer to both interchangeably) to that foreign holding company , receiving then shares of this holding as consideration for the national ones, and becoming the only direct partners of such holding . The exact structure of this transfer, however, can be carried out in multiple ways, either through a capital contribution to the foreign company or through an exchange of assets, and will depend on the conclusions of a legal and tax analysis of the instruments to be used.
The common choice that investors and entrepreneurs make for Delaware as the company's jurisdiction stems from a list of factors: its robust and flexible corporate legislation, especially with regard to corporate restructuring, the experience of the Court of Chancery , the court responsible for resolving conflicts in the state and producer of considerable jurisprudence in corporate matters, ensuring greater legal certainty for transactions; the speed and simplicity of the process of archiving corporate documents; the confidentiality granted to the partners of the companies incorporated there; in addition to the obvious preference of investors to remain within market practices, which has Delaware as its default choice — and we know how much the market appreciates standards.
A second issue to be faced by entrepreneurs, in addition to the jurisdiction where their entity will be formed, would be the type of entity to be formed. We emphasize the importance of consulting an international lawyer and a tax consultant when making such a choice, which, in general, involves choosing between incorporating a C-Corp (ending “Inc.”, more closely equivalent to corporations) or the formation of a Limited Liability Company (“LLC”, perhaps closer to a limited liability company — but still a flawed comparison).
