Description of the core change(s) brought by this policy instrument
The new law sets out a regulatory framework that provides incentives for the creation, development, growth and expansion of entrepreneurial projects, as a basis for the country's productive development. Key elements include:
- The law recognizes that the State has the obligation to implement policies that encourage entrepreneurial development and growth, streamlining the process of setting up a company by making the paperwork simpler and by assigning public resources.
- It creates a) the National Council for Entrepreneurship & Innovation, which will be responsible for designing a national entrepreneurship and innovation strategy, and b) the National Registry of Enterprises, which will classify enterprises so that they can benefit from the programs called for in the law.
- Education front: The law requires entrepreneurship training to be included in secondary education, and supports initiatives that bring young university students closer to the world of business.
- Access to capital front: The law recognizes alternative sources to the traditional ones: seed capital, venture capital, angel investing, investment risk, crowdfunding platforms. On this latter source of entrepreneurial financing, the law makes Ecuador one of the few Latin American countries where crowdfunding is ready to operate within a set regulatory framework.
- Regulatory front:
- The creates a new form of legal business entity, the Simplified Stock Company (SAS), which is a one-person corporate legal figure, with the possibility of more partners, generally free of cost to register (with few exceptions). It is a friendly and flexible corporate figure, where the amounts of responsibility are limited to the contributions made.
- Another key chapter, taking into account the impact of the COVID-19 pandemic on the economy, is that on the restructuring of enterprises. The regulatory decree for the law determines that a restructuring agreement is possible.
Please list the implementing agencies
The Law calls for the creation of a National Council for Entrepreneurship & Innovation, which will be in charge of articulating policies in favor of entrepreneurship, as well as defining the strategy to be used in the next five years in this matter. This Council will be represented by:
- The Ministry of Production (Chair)
- The Ministry of Labor
- The Ministry of Tourism
- The Ministry of Finance
- The Ministry of Education, Culture and Heritage
- The Secretary of Higher Education, Science, Technology and Innovation
- The National Service of Intellectual Rights
- The Inter-institutional Committee of the Popular and Solidarity Economy
- Representatives from Provincial Governments
- A representative from the Association of Municipalities
- A representative from the Consultative Council on Entrepreneurship
- A representative from the Chambers of Production
- Representatives from public and private universities.
In addition to this Council:
- The Technical Secretariat of the National Council for Entrepreneurship and Innovation will follow up on the issued resolutions issued, and
- An Advisory Council will provide advise and support to the main Council.
If you marked "start-up" and/or "scale-up" firms, please provide the specific definitions used
Article 12 contemplates the creation of a National Registry of Entrepreneurs (RNE) for businesses that:
- have been operative for less than 5 years on the date of entry into force of the Law, and
- have fewer than 49 workers, and
- generate fewer than a million dollars in sales.
The National Registry of Entrepreneurs will open opportunities for entrepreneurs to export, obtain benefits in terms of fees and processes in the different government entities.
Challenges, criticisms and lessons
The Alliance for Entrepreneurship and Innovation (AEI) has expressed reservations about the following components of the new law:
- Entrepreneurial ventures' liquidity: Studies show that forcing companies to pay for purchases made from new and young business within 30 days represents a disincentive for these client companies since their liquidity is also affected.
- Re-structuring: Unfortunately in the regulation of the law, bankruptcy protection measures are not aligned with the purpose of creating a more friendly restructuring avenue for the entrepreneur.
Notes and additional context