One of the major challenges faced by companies in general is access to appropriate funding that ensures the achievement of their social object. From small family businesses to multinational conglomerates, it is almost certain that organizations will need access to external resources for the continuity and competitiveness of the business.
Such resources may be allocated not only to the occasional discharge of debts, but also to the implementation of projects whose purpose would not be attainable with the mere use of own funds. We therefore believe that accessibility to different modes of financing is – or should be – a constant concern of managers of the business society. In this path, venture capital has become a very fashionable alternative in recent years in Portugal, especially with the economic recovery and the accelerated emergence of local startups.
In general, venturecapitalcan be referred to as the limited-time acquisition of capital instruments in companies with high development potential as a means of benefiting from the respective Appreciation. From theventure-backed company’spoint of view, it represents a source of financing and liquidity alternative to traditional bank loans. On the investors’ side, it is an investment in the equity of a particular company, and the lender investor is responsible for contributing to the improvement of corporate management and to maximizing the value of the company – thereby increasing the gains that will be made in the future divestment.
Thus, the dynamics of relationships boil down to a system in which the investor receives a certain shareholding in the financed company, and must, in return, provide for the transfer of the resources with which he committed, in due time. Such resources may include, in addition to financing, the reputational valuation of the company to third parties; access to a more extensive network of contacts(networking); and the transfer of knowledge about the product or service (know-how).
In Portugal, the legal regime of venture capital is established by Law No. 18/2015 of March 4. Under the diploma in question, the performance in investment in venture capital can be made by individual venture capital investors; venture capital companies, to include here the venture capital fund management companies and venture capital investment companies; venture capital funds; and other entities provided for by law.
The establishment of venture capital funds, as well as the start of activity of venture capital investors and venture capital companies, depends on prior registration at the CMVM – Securities Market Commission. We note that, for the establishment of venture capital companies, there is considerably greater rigorosity with regard to the rules of authorisation, operation, transparency and supervision when compared to the other figures.
To cite a few examples, for the authorisation to set up a venture capital company in general, the CMVM requires: information on the people who will effectively direct the activities and on the members who will integrate the social bodies; information on the identity of future shareholders (natural or legal persons) who will hold, directly or indirectly, qualifying holdings in the entity, as well as on the number of shares held, voting rights and the percentage of the capital corresponding; the complete description of the program of activities with the organization structure of the entity, including with the description of resources (human, technical, material and computer science), in which the entity intends to comply with Law No. 18/2015, and other policies and procedures that prove relevant to demonstrate compliance with the obligations under the entity; and indication of future close relations between the entity and other natural and collective persons. It is true that Portugal is experiencing an interesting moment for investors and entrepreneurs, with various policies to encourage innovation. Despite this attractive scenario and the advantages available to the investor, the legal aspects of investment operations in general can be extremely complex. In view of the high degree of risk of the modality treated here, a specialized legal advisory of trust is undoubtedly fundamental to mitigate adversity and increase the chances of business success.