BUSINESS SPONSORSHIP: The problem of Finding Sponsors for the Company in the UAEAugust 24, 2020
BUSINESS SPONSORSHIP: The United Arab Emirates is known for its brimming with exciting opportunities for many businesses and startups worldwide. Famously known for their favorable tax structure, business-oriented environment, and an uncomplicated legal framework, they provide a wide scope of outreach to many local and multinational companies through their Gulf port. Even though the region is flooded with immense prospects of progression, for Non-Gulf Cooperation Council (GCC) nationals, there is an obligation to have a national shareholder for their business registration.
According to the company’s ordinance act, non-Emirati are required to have a national shareholder holding 51% of the share for starting a business in the land of UAE. In some cases, a foreign company can have a 100% share of their company, but then they require a local agent to become a sponsor for them. With this comes the responsibility of finding a reliable agent in the UAE, and sometimes this is considered a difficult task, especially when you are new in the market without any evident research. For this reason, many business sponsorships services have opened up for serving young entrepreneurs and establishing their venture in the Emirate.
Finding the credibility of Local Sponsorship
It is advisable to investigate the marketplace efficiently before making a deal with any sponsor. As the national will be obtaining 51% of the company’s share, hence, it would be wiser to know your investor before signing any contract. This will save you from any kind of possible deceptive scams and will aid you to get approval from the government as well. The classification of a company also matters while looking for sponsorship. For example, if a free zone company is being set up or the business is protected by corporate sponsorship services, then a local agent/sponsor is not required.
Charges for sponsorship consultancy firms
In the UAE, the demand for corporate sponsorship among companies has become quite popular these days. Through business sponsorship services, now companies can find investment for their certain projects. Many small-medium enterprises are looking for sponsorship services these days, and it has effectively increased their profits. Another reason for being favorable in the UAE market is the difficulty of getting a bank loan from these small corporations.
This is because the bank requires heaving paperwork with three-year auditing and other asset information. Meanwhile, corporate investments, on the other hand, seem much easier to attain. However, these corporate sponsorships are charging hidden costs in their fee structure as well. Even though the paperwork may seem transparent, there are also costs hidden in the contract which should be inquired precisely before signing any contract.
Common problems found with business sponsorship
The UAE holds a great emphasis on legal documentation of contracts, but verbal agreements are also common in business selling. However, while compiling an agreement with a sponsor, it is smart to adopt the paperwork approach before going into any agreement. Moreover, a clear clause should be mentioned by both parties, especially highlighting the next heir of the business in case of unexpected death or retirement of a local sponsor. The government protects the rights of the sponsor, but sometimes local sponsors try to claim for the entire business as well. To avoid such situations, the corporations should make the agreement signed by both parties for proper understanding.
Good local business sponsorships, which can be corporate or individual does not only help startups avoid such intense hassle, but also helps them to expand in the market by encouraging their creative ideas. One major benefit of corporate sponsorship is helping out entrepreneurs to have their complete share of the business and their right to ownership.
Silent partners or business sponsors do not get involved in the day-to-day operations and allow the company to take important decisions on imperative occasions with full liberty. Moreover, the authorized documentation is made by such firms, thus the companies are given the right to have lawful counsel’s advice from their legal representatives before sealing any deal.
Lastly, even if the individual sponsor becomes the major shareholder of the company, but for mainland companies, the financial benefits are purely handed over to the business operating party.