14 Jan The Ecuadorian Entrepreneurship has a new tool

From this month the Organic Law of Entrepreneurship and Innovation came into force. The National Assembly approved the text that includes some tax benefits for those who want to make their dreams of entrepreneurship come true.

Establish the regulatory framework that encourages and encourages entrepreneurship, innovation and technological development, promoting an entrepreneurial culture and implementing new corporate and financing modalities to strengthen the entrepreneurial ecosystem. In this way, Ecuador has an Entrepreneurship Law that seeks to meet six main objectives:

1. Create an inter-institutional framework that allows defining a State policy that encourages the development of entrepreneurship and innovation.
2. Facilitate the creation, operation and liquidation of enterprises.
3. Promote the efficiency and competitiveness of entrepreneurs.
4. Promote public policies for the development of technical, financial and administrative support programs for entrepreneurs.
5. Strengthen the interaction and synergy between the educational system and public, private, mixed economy, popular and solidarity, cooperative, associative, community and artisanal actors of the national productive system.
6. Promote innovation in productive development

 The promotion to undertake

The main aspect that must be taken into account is that any natural or legal person, with less than five years seniority, who has less than 49 workers and sales of less than USD 1 million, may be recorded in the National Entrepreneurship Registry (RNE) for benefit from incentives.

 Financing sources

The Law makes the rules clearer regarding how an enterprise can be financed. These are:

Seed capital. In the event that the investor is the Ecuadorian State, it will proceed in accordance with article 620 of the Organic Code of the Social Economy of Knowledge, Creativity and Innovation.

If the investor comes from the private sector, the seed capital may be delivered through non-reimbursable resources, capital contribution, notes convertible into shares, purchase of shares or participations and other rights according to the entrepreneur’s corporate and legal scheme. Seed capital will be awarded to entrepreneurial projects that have not yet exceeded 24 months of life.

Risk capital. In the event that the investor is the Ecuadorian State, it will proceed in accordance with article 621 of the Organic Code of the Social Economy of Knowledge, Creativity and Innovation.

When the investor comes from the private sector, the risk capital will be made up of resources that are mainly capital investments, loans may also be made under freely agreed conditions, with or without interest, and repayable based on conditions of balance or profitability.

Angel investment. Contribution of capital and / or technical knowledge by natural persons, legal entities or trusts, to entrepreneurs who want to start a business project (seed capital), to companies that are at the beginning of their activity (start-up capital), to researchers who are in the process of developing a prototype of a product or service with commercial benefit (development capital), to companies that must face a stage of growth and / or internationalization, in exchange for convertible debt or equity capital. This type of investment can be made in all stages of entrepreneurship projects.

For angel investment, whatever the capital injection, the investment made may not exceed 49% of the corporate capital in favor of the investor and control of the company must remain in the hands of the founding entrepreneur.

 Labor

To encourage the generation of employment and the formalization of work in the entrepreneurial processes, the Ministry of Labor will develop the contractual modality or modalities to be implemented in entrepreneurial work, which will include part-time work, as well as the duration of the contracts, payment of legal benefits, remuneration and its calculation method, and other requirements and conditions that the worker must comply with, in accordance with the relevant laws.