On November 16, 2016, the Argentine Congress passed the Support for Entrepreneurial Activity Law No. 27,349, which creates a Fiduciary Fund for Entrepreneurial Capital Development and regulates Crowdfunding Systems.
By means of the approval of Law No. 27,349 (the "Law") , which was published in the Official Gazette on April 12, 2017, the Argentine Congress established a special regime to promote and support entrepreneurial capital industry and its international expansion to encourage the local development of production activities. In line with these objectives, the Law aims to remove the two main obstacles when starting up an enterprise: incorporating a company and business funding.
For an overview of the new corporate structure created by the Law, please see " Law to Encourage Entrepreneurship" in this edition of Marval News.
With regard to the financial aspects, the Law creates two instruments that will provide access to capital to carry out an enterprise, either with state or general public investments:
1. Fiduciary Fund for Entrepreneurial Capital Development ("FONDCE" after its Spanish acronym)
The FONDCE, constituted as an administrative and financial trust with the scope provided by the Law and its future regulation, is governed and enforced by the Secretary of Entrepreneurial and Small and Medium-Sized Enterprises of the Ministry of Production.
The FONDCE's purpose is to provide financing for entrepreneurs and/or entrepreneurial capital institutions and for that purpose, it will be funded by a variety of resources (both public and private) that will be destined to the granting of loans, non-reimbursable contributions and capital contributions to support entrepreneurial projects and entrepreneurial capital institutions.
2. Crowdfunding Systems
The Law implements the well-known system called Crowdfunding, which had not been specifically regulated before, with the intention of promoting financing for entrepreneurs and entrepreneurial capital institutions through the capital markets.
This system allows entrepreneurs to file a Crowdfunding Project by means of a Crowdfunding Platform online link to obtain funds from investors who aim to finance the project, provided that the legal requirements are fulfilled. The Crowdfunding Platform must be a company ("sociedad anónima") duly authorized by the Argentine Securities Commission.
The Law excludes from the Crowdfunding System projects with charity purposes, donations, direct sales of goods and services or loans that cannot be converted into corporate shares or simplified corporate shares.
Although it is difficult to predict the impact of this system in the capital markets, regulation by the Argentine Securities Commission as regulatory authority will be a key feature to determine the success of such implementation.
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