New Brazilian Securities and Exchange Commission Rules on Equity Crowdfunding become effective

In July 1, 2022, the Brazilian Securities and Exchange Commission ("CVM") Resolution No. 88/2022 ("RCVM 88"), entered into force, revoking CVM Instruction No. 588/17 ("ICVM 588") and regulating the public offering of securities issued by small companies, carried out with exemption from registration, through electronic platforms for equity investment.

Equity Crowdfunding has emerged as a new and simplified way of raising public funds for the financing of companies, projects and new ventures in the digital environment. Fundraising is enabled through digital platforms that advertise the offerings and intermediate investments between the offering company and the general public.

This type of investment became popular especially in the startup and innovation ecosystem, providing broad access to capital, project financing, and the development of businesses in the early stages of maturity in a simple and fast way, avoiding the bureaucracy and costs related to traditional public offerings of securities. 

Despite all the difficulties in recent years, the Brazilian Equity Crowdfunding market has shown an exponential growth. According to the latest statistics released by CVM, in the year 2021 the total volume of investments raised through Equity Crowdfunding increased by 123% (one hundred and twenty-three percent) with the fundraising of R$ 188 million in 144 offerings, with an average amount of funds raised per offering of R$ 1,651,411.29 (45% increase). 

Result of the SDM Public Hearing No. 02/20 (CVM SEI File No. 19957.010197/2019-32), RCVM 88 was created to accompany the growth of this type of investment, promoting changes and innovations that were long awaited by market players. We highlight below the main changes promoted by RCVM 88: 

(i) expansion of the annual gross revenue limit eligibility criteria from R$10,000,000.00 (ten million Brazilian Reais) to R$40,000,000.00 (forty million Brazilian Reais) allowing a greater number of companies to access the equity crowdfunding mechanism;

(ii) increase in the maximum aggregate amount that a small company can raise through equity crowdfunding offerings from R$5,000,000.00 (five million Brazilian reais) to R$15,000,000.00 (fifteen million Brazilian Reais);

(iii) the increase of the investment cap that individual non-accredited investors can invest in crowdfunding offerings over a 12-month period from R$ 10,000.00 (ten thousand Brazilian Reais) to R$ 20,000.00 (twenty thousand Brazilian Reais); and

(iv) possibility for platforms to create secondary markets of securities of the invested companies after the crowdfunding offer, with the intermediation of peer-to-peer transactions in the digital environment of the platform, giving liquidity to the participation acquired by investors.

Besides the changes described above, other relevant changes have been made to the rules for the advertising of offerings, the operation of electronic investment platforms, and investor protection.

It is important to mention that on June 28, 2022, CVM edited the CVM Resolution 158/2022 ("RCVM 158"), which promoted changes in specific provisions of RCVM 88, even before it became effective. The changes refer to the possibility of limiting subsequent transactions in the secondary markets only to current investors of the issuing companies and the establishment of a longer period for platforms to adapt to the mandatory institution of the system for the “control of shareholding and ownership” or shares bookkeeping system (90 days after RCVM 88 came into effect).

Our team is available for further clarifications, as well as to assist with procedures for compliance with regulatory obligations. 

Gustavo Flausino Coelho –

Matheus Chagas Lamarca –

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