Abstract
This study sets out to analyse the discipline of the various modalities of crowdfunding used in Brazil. As below, the main difficulty comes from the fact that there are only two specific regulations: one edited in July 2017 which concerns investment-based crowdfunding, and another one edited in October 2017 which regulates donations from natural persons to politicians and political-parties through crowdfunding. That is why, as regards the other types of crowdfunding, it is necessary to search, the sparse legislation—especially in the Civil Code—for rules applicable to the contracts signed between investors, platforms and project developers, which has led to a series of controversies and practical problems.
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Notes
- 1.
In Brazil the site Vakinha (https://www.vakinha.com.br/) introduced the virtual phenomenon in 2009 with projects meant to promote cultural events and even personal needs. However, the first electronic address to use a crowdfunding platform directed exclusively to cultural projects was Catarse (https://www.catarse.me), created in early 2011 (Cocate and Persina Junior 2012). Today there are several other electronic addresses, such as Kickante (http://www.kickante.com.br), Queremos! (http://www.queremos.com.br/home), Benfeitoria (available at: https://benfeitoria.com/), to mention just a few.
- 2.
“CVM” is the abbreviation of “Comissão de Valores Mobiliários”, which means Securities Commission of Brazil.
- 3.
Available at: http://www.cvm.gov.br/legislacao/inst/inst588.html. Accessed on: 17.7.2017.
- 4.
- 5.
Available at http://www.planalto.gov.br/ccivil_03/Leis/l9504.htm.
- 6.
“TSE” is the abbreviation of “Tribunal Superior Eleitoral”, which means Supreme Electoral Court.
- 7.
- 8.
- 9.
“Article 2: The collective-investment organizations which operate in the modality of supporting profit-making enterprises are those that promote virtual encounters on their own site on the internet, where entrepreneurs present their business plans or projects to attract pecuniary support, and at the same time offer private or corporate investors the opportunity to become familiar with such plans or projects in order to decide on the amount of profit-making capital”.
- 10.
“Article 3: The companies specialized in organizing collective investment and act in the modality of social-interest enterprises are those that offer the opportunity of gathering resources to finance projects with a social content, generating income and jobs in local productive activities whose return to the investor will be in the form of promotional or symbolic retribution”.
- 11.
Available at: https://cristoredentoroficial.com.br/curiosidades.
- 12.
“For over 30 years Criança Esperança has been creating development opportunities for children, adolescents and the young. (…) The resources gathered are deposited directly in the UNESCO account which is responsible for selecting projects on an annual basis by means of public legal notices. Following selection, UNESCO monitors and carries out technical and financial follow-up of the projects it supports”. (Available at: http://redeglobo.globo.com/criancaesperanca/noticia/sobre-a-campanha.ghtml).
- 13.
“The first Teleton in Brazil dates from 16 May 1998 in the SBT for the purpose of raising funds for the treatment and rehabilitation of patients attended in the sectors of the AACD (Association of Assistance to Handicapped Children)” (Available at: http://www.sbt.com.br/teleton/sobre/).
- 14.
Available at: http://www.planalto.gov.br/ccivil_03/leis/2002/L10406.htm.
- 15.
Article 538 states that: “A donation is considered to be a contract in which a person freely transfers to another person assets or advantages of his property”.
- 16.
In Brazil, a charge involves a collateral element of juridical transaction and is characterized by limiting the advantage created by same, imposing an onus on the donee: “The name modal donation or donation with obligation is given to that modality which, without any jeopardy to the animus donandi, contains the imposition of a duty on the donee, who has to fulfill it in the hands of the donor himself, or a certain or some undetermined person. Since the assignment (modus) restricts the beneficiary of the juridical transaction (…), it can never be confused with a counterpart of liberality” (Pereira 2017b, p. 230).
- 17.
Article 562 states that: “Onerous donations may be revoked because of non-execution of the charge if there is any delay on the part of the donee. If there is no deadline for fulfillment, the donor can notify the donee judicially, giving him a reasonable time-frame to comply with his assumed responsibility”.
- 18.
“Delay in fulfilling the charge authorizes the donor to claim restitution of the donated asset (…). But this does not make the donee responsible for losses and damage, since the charge does not correspond to liberality, it is only an accessory which modifies it” (Bevilaqua 1958, pp. 281–282).
- 19.
Article 22-A, paragraph 3°: “From May 15 of the electoral year, pre-candidates are entitled to pre-raise money in the modality provided for in item IV of paragraph 4 of article 23 of this Law, but the release of funds by the collecting entities is dependent on the registration of the candidacy, and the campaign expenses must observe the electoral calendar”.
- 20.
On 29 September 2015, Law n° 13.165 (known as “electoral reform law”) was edited, and expressly prohibited donations made by companies.
- 21.
Article 481 states: “In a buy-and-sell contract, one of the parties commits to transfer the dominion of something, while the other commits to pay him a certain price in money”.
- 22.
Article 593 states: “Rendering a service that is not subject to labor laws or a special law will be ruled according to the provisions of this Chapter”.
- 23.
Article 610 states: “The contractor of a work may contribute to it only with his work, or with it and the materials”.
- 24.
Other authors, distancing themselves from this perspective, claim that it is a unilateral business of promise of reward (Correia and Pompeu 2016, p. 91).
- 25.
Article 483 states: “The objective of buy-and-sell can be something present or future. In this case the contract will become without effect if this something eventually does not exist, except if the parties intended to conclude an aleatory contract”.
- 26.
Article 458 states: “If the contract is random, concerning things or facts that one of the parties assumes risk not becoming real, the other will be entitled to receive in full what he was promised, provided that on his part there has been no fraud or tort, even though nothing agreed upon comes to exist”.
- 27.
Available at: http://www.planalto.gov.br/ccivil_03/leis/L8078.htm.
- 28.
The Biva platform is submitted to Resolution 3954 of Brazil’s Central Bank, which provides for financial institutions and other institutions authorized by the Central Bank of Brazil to contract correspondents, the purpose being for the contracted person to render services attending to clients and users of the contracting institution (available at: https://www.bcb.gov.br/pre/normativos/busca/downloadNormativo.asp?arquivo=/Lists/Normativos/Attachments/49450/Res_3954_v9_P.pdf).
- 29.
Article 586 states: “The loan of fungible things. The receiver is under the obligation to return to the lender what he received from him in something of the same type, quality and quantity”. “Article 587. This loan transfers the dominion of the thing lent to the receiver, who is responsible for running all the risks ever since the thing was delivered”.
- 30.
As pointed out by Pontes de Miranda, “the destination does not change the contractual feature. The finality of the application is only presupposed to have the agreement of the parties, so that (…) disrespecting the scope clause implies rescission of the contract for reasons of non-compliance” (Pontes de miranda 1984, p. 16).
- 31.
Article 591 states: “Since the loan has economic objectives, due interest is presumed, which, under penalty of reduction, cannot exceed the rate referred to in article 406 concerning the permitted reduction in annual capitalization”.
- 32.
The first Brazilian company to comply with the rules of CVM Instruction 588 was EqSeed, which obtained its registration from the CVM in January 2018.
- 33.
The Brazilian legislation considers a public offering to be “the sale, promise of sale, offer of sale or subscription, as well as acceptance of a request for sale or subscription of securities”, when offered to the public (article 19, paragraph 1 of Law 6.385/1976). On the other hand, CVM Instruction 588, article 2, paragraph 1, sets out that “financing captured by means of pages in the electronic world platform of computers, programs, applications or electronic means is not considered to be a public offering of securities when it is a matter of donation or when return of the capital received is in the form of: I – gifts and rewards; or II – goods and services”.
- 34.
“Among these typical rights of partners are (i) veto in some statutory deliberations, (ii) right of preference in subscribing to new quotas or acquiring quotas from partners who intend to sell them, (iii) right of joint sale (tag along), (iv) right of obliging a joint sale (drag along), and (v) right of preference in cases of liquidity events” (Marques 2015, p. 79).
- 35.
Law 9.069/95, article 1: “As of July 1, 1994, the unit of the National Monetary System becomes the Real, which will have legal status throughout the national territory”.
- 36.
Decree-Law 857/69 Article 2 states: “The provisions of the preceding article do not apply: I – to contracts and securities referring to importing and exporting merchandise; II – to contracts of financing or rendering guarantees relating to operations of exporting goods and services sold on credit overseas; III – to contracts of buying and selling exchange in general; IV – to loans and any obligations whose creditor or debtor is a person residing and domiciled abroad, with the exception of contracts for renting property situated in the national territory; V – to contracts aimed at ceding, transferring, delegating, assuming or modifying obligations referred to in the preceding clause, even if both parties are persons residing or domiciled in the country.”
- 37.
Article 533 states: “The provisions referring to buying and selling apply to exchange, with the following alterations: I – unless otherwise provided, each one of the parties will pay for half of the costs of the exchange instrument; II – exchanging unequal values between ascendants and descendents without the consent of the other descendents and the spouse of the seller, is annullable”.
- 38.
Article 594 states: “All sorts of service or licit work, material or immaterial, may be contracted by means of retribution”.
- 39.
It is important to stress that the Supreme Court of Justice has already decided “it is necessary to recognize the consumer relation between the contractor who aims to meet its own needs and the company that provides in a habitual and professional way the service of brokerage of values and titles” (Supreme Court of Justice, 3ª Truma, Relatora Ministra Nancy Andrighi, Recurso Especial 1.599.535, 2017). Although in the case of investment-based crowdfunding, the platforms do not manage investor’s resources, they render other kinds of service for the investors, which means that it cannot be completely ruled out as a feasible qualification of the relationship between the platform and the investor as a consumer relation. Furthermore, this question is still being discussed in Brazil, and no final position has been decided upon as of yet. Nevertheless, with regard to electoral donations through crowdfunding, the Supreme Electoral Court has already stated that there is no relation at all, let alone a consumer relation, between crowdfunding donors and platforms; the relationship is established between platforms and candidates or political-parties (Available at: http://www.tse.jus.br/eleicoes/eleicoes-2018/prestacao-de-contas-1/financiamento-coletivo).
- 40.
This does not occur in investment-based crowdfunding, since CVM Instruction 588 expressly prohibits the values transferred by investors from circulating through current accounts held in the name of the platform, partners, administrators and persons associated with the platform or companies controlled by the above-mentioned persons, in accordance with articles 5, paragraph 1, I-III, and 28, VIII.
- 41.
Article 627 states: “By the deposit contract the depositary receives a security to keep until the depositor reclaims it”.
- 42.
Article 632 states: “If the thing has been deposited in the interest of a third party and the depositary has been informed of this fact by the depositor, he cannot exonerate himself by restituting the thing to him without the consent of the third party”.
- 43.
Article 722 states: “By the brokerage contract a person not related to another by virtue of mandate, rendering of services or any other relation of dependency, is obliged to obtain for the second party one or more business transactions, in accordance with the instructions received”.
- 44.
Available at: http://www.planalto.gov.br/ccivil_03/constituicao/constituicao.htm. Accessed on 12 June 2017.
- 45.
Article 3 states: “The public offering of distribution of securities emitted by a small-sized company and performed in the terms of this Instruction is automatically exempt from registration in the CVM provided that the following requisites are met: I – existence of a maximum capture value of R$ 5,000,000 (five million Brazilian Reais) and a maximum capture deadline of 180 (one hundred and eighty) days, to be defined before the offering starts; II – the offer must follow the procedures described in article 5 of this Instruction; III – the investor must be ensured a minimum period of desistance of 7 (seven) days counting from confirmation of his investment, while desistance on the part of the investor is exempt from fines or penalties when requested before the closing of this period; IV – the emitting party must be a small-sized company in the terms of this Instruction; and V – the resources gathered by the small-sized company cannot be used for: a) mergers, take-overs, incorporating shares and buying participation in other companies; b) obtaining securities, convertible or not, and securities emitted by other companies; or c) concession of credit to other companies”.
- 46.
- 47.
Article 5 states: “The signing of a correspondent contract with an entity that does not belong of the SFN and whose denomination or commercial name has terms characteristic of the denominations of SFN institutions, or similar expressions in the national or a foreign language, depends on prior authorization of the Central Bank of Brazil”.
- 48.
Available at: http://www.planalto.gov.br/ccivil_03/leis/L9613.htm.
- 49.
- 50.
Article 8 states: “The platform must reserve a page in Portuguese on the world computer network with the following minimum information on the offer, in a section called “ESSENTIAL INFORMATION ON PUBLIC OFFERS”, written in clear, objective, serene, moderate and adequate language for the type of investor in mind, according to the format, order of the sections and content of Annex 8 to this Instruction. Paragraph 1 - The programs, applications or any electronic means used by the platform must emphasize and electronically orientate the investors on the information mentioned in caput. Paragraph 2 – The platform must present the legal documents relating to the offer in a section in a section of the page of the offer on the global computer network called “PACKAGE OF LEGAL DOCUMENTS”, including: I – a contract or bylaws of the small-sized company; II – a copy of the deed of bonds or contract of investment that represents the security offered, depending on the case; III – a copy of the regulation, contract or byelaws of the vehicle of investment that constitutes the participatory investment syndicate, if there is one; and IV – other relevant documents to decision-making on the investment.
Article 9. The address in the global computer network with the essential information on the public offer must remain in operation and available for at least 5 (five) years for those investors who have contributed for offers that reached success.”
- 51.
Among the clauses contained in the “Commitment of the Contributor”, the Kickante site, for example, claims that the platform is not responsible “for non-payment of the rewards offered by the creator users, due to any failure of the project described in the campaign” (Available at: https://www.kickante.com.br/termos/termos-de-compromisso-contribuidor ).
- 52.
Article 104 states: “The validity of a juridical transaction requires: I – a capable agent; II – an object that is legal, possible, determined or determinable; III – form limited or not prohibited by law”.
- 53.
In respect to the form, for example, article 541 of Civil Code states: “donations will be made via public deed or private instrument”.
- 54.
- 55.
Article 138 states: “Juridical transactions is annullable when declarations of will result from a substantial mistake that could have been spotted by a person of normal diligence, given the circumstances of the business”. According to the doctrine, mistake is “the false perception of reality that influences the manifestation of will in a determining fashion. The will would not be formed, or would be formed differently, if the mistake did not exist” (Tepedino et al. 2007, p. 271).
- 56.
Article 145 states: “Business annullable due to fraud, when this is not the cause”. According to the doctrine, “fraud consists in maneuvers or devious behavior performed with the intention of obtaining a declaration of will that would not be emitted if the declarant were not deceived” (Tepedino et al. 2007, p. 281).
- 57.
Article 723 states: “The broker is obliged to carry out mediation with diligence and prudence, and to provide the client spontaneously with all the information on the progress of the business. Single paragraph. Under penalty of answering for losses and damage, the broker will provide the client with all the clarification as regards the security or risk of the business, alterations to values and other factors that might influence the results of the assignment”.
- 58.
Annex 8 of CVM Instruction 588 lists all the “essential information on the public offer of distribution of securities emitted by a small-sized company dispensed from registering in the CVM and carried out by means of an electronic platform for participatory investment” which must be provided to the investor.
- 59.
On the other hand, those persons who see reward crowdfunding as a promise of compensation—the value contributed by the investor—might have to pay the state Tax on Circulation of Merchandise and Inter-state and Inter-municipal Transportation and Communication Services (ICMS), or else the municipal Tax on Services of any kind (ISS), depending on the type of compensation (product or service) (Correia and Pompeu 2016, p. 92).
- 60.
“Article 4. The contributor (whether a natural or corporate person) who buys a quota of plans or projects made available in accordance with article 2 of this law will be entitled to deduce from his income tax the equivalent of 10% of the amount invested, as well as - when the profit is made a concrete fact – to deduct 50% of the net profit”.
- 61.
Article 5 states: “In the case of the social-development modality instituted in article 3, the income-tax deduction enjoyed by natural or corporate persons will be equivalent to 50% of the amount invested. Single paragraph: In the case of investment in projects of a cultural nature, it is permitted to apply the benefits of the Rouanet Law, provided that the projects are previously approved by the Ministry of Culture or enabled by a similar mechanism instituted by a State or Municipal Law”.
- 62.
Rio de Janeiro State Court of Justice, 13th Civil Chamber, Rapporteur Judge Agostinho Teixeira de Almeida Filho, Civil Appeal 0288768-27.2011.8.19.0001, judged on 27.4.2016. Available at: http://www1.tjrj.jus.br/gedcacheweb/default.aspx?UZIP=1&GEDID=00046E0786E0B8577BEB41A03347D3971AA4C5050355615C.
- 63.
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de Miranda Valverde Terra, A. (2021). Crowdfunding in Brazilian Law. In: Kleiner, C. (eds) Legal Aspects of Crowdfunding. Ius Comparatum - Global Studies in Comparative Law, vol 55. Springer, Cham. https://doi.org/10.1007/978-3-030-79264-0_5
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