Legal Updates: The Innovative Startup Act
by Patricia C. Tuason
The thriving local startup community in the Philippines must be in high spirits upon the signing into law of Republic Act No. 11337, more relevantly known as the “Innovative Startup Act (ISA).” The ISA took effect on August 6, 2019, and its Implementing Rules and Regulations were signed on November 22, 2019.
The ISA aims to strengthen, promote and develop the Philippine startup ecosystem through its Host Agencies–the Department of Science and Technology (DOST), Department of Trade and Industry (DTI) and Department of Information and Communications Technology (DICT).
Here are the key terms as used in the ISA:
- Innovation – the creation of new ideas that results to the development of new or improved products, processes, or services which are then spread or transferred across the market;
- Innovative product – a good or service that is new or significantly improved, such as improvements in technical specifications, component materials, software in the product, user friendliness or other functional characteristics;
- Innovative business model – a new organizational method in business practices, workplace organization or external relations;
- Startup – any person or registered entity in the Philippines which aims to develop an innovative product, process or business model; and
- Startup enabler – any person or registered entity in the Philippines registered under the Philippine Startup Development Program that provides goods, services, or capital identified to be crucial in supporting the operation and growth of startups by the DTI in consultation with DOST, DICT, and pertinent government and nongovernment organizations (NGOs).
Some of the salient features of the ISA include:
- It created the Philippine Startup Development Program which aims to support and promote the participation of startups in international competitions and conferences integral to the promotion of the Philippine startup ecosystem and to support the development and growth of enterprises whose innovative product, service, or business model is integral to creating a competitive startup community in the Philippines, among many others.
- It authorized the Philippine Economic Zone Authority (PEZA) to pursue and promote the creation of Philippine Startup Ecozones or Special Economic Zones.
- It authorized the Investment Promotion Agencies (IPAs) to extend the applicable benefits to startups and/or startup enablers.
- It created the Startup Grant Fund which shall provide initial and supplemental grants-in-aid for startups and startup enablers that have passed the selection and application process of the Host Agencies.
- It created the Startup Venture Fund which shall be used to match investments by selected investors in startups based in the Philippines.
- It authorized the Department of Foreign Affairs (DFA) to create the following visas:
- Startup owner visa – for prospective or current foreign owner of startup or startup enabler registered in the Philippines;
- Startup employee visa – for foreign employee of a startup or startup enabler registered in the Philippines;
- Startup investor visa – for prospective or current foreign investor of a startup or startup enabler registered in the Philippines.
Bearers of the visa shall be exempt from securing an Alien Employment Permit (AEP).
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