By Innovation-sa on August 5, 2020 in Blog
If you a foreign entrepreneur who seeks to set up a firm here in UAE, it is essential to understand that you will have to source a sponsor for your firm based on your company’s structure. Sure, it’s your decision on who you want to choose as your sponsor, but you should know that they are going to be 51% shareholders of your organization. So, it goes without saying that you should weigh your options accordingly. Now, how do you go about finding the right sponsor? Ideally, the answer to this question begins by listing the benefits and drawbacks of both the sponsors. So, let’s now take a closer look at both points so that you can make an informed decision.
Individual Sponsorship
You would want to find someone who is more trustworthy as they will be holding 51% of your organization’s shares. Whether you seek a single or corporate sponsor, it is mandatory that they are Emiratis and 21 years or above. The gender could be male or female, as there are no restrictions on it. While they shouldn’t necessarily have experience relevant to your field, they should either be entrepreneurs themselves or working in a government firm. It is vital to note that the agreements can differ, and your payment structure will be based on it. Apart from this, those who choose a single sponsor should also prepare a succession planning, as it helps mitigate risks involved in case of their death or early retirement.
Corporate Sponsorship
Just like with a single sponsor, your chosen corporate sponsor will also be a 51% shareholder. Apart from this, they will be given a set amount of fees in order for the foreign investor to operate your company. The major difference here is that you will be assisted by a whole team and not just a single person. Opting for corporate sponsorship is often considered a
less risky option as the structure is made clear from the initial phase until completion.
Moreover, you are provided complete security and are protected legally as all the terms are set on the first day and are reviewed carefully by the first-tier counsel. Unlike dealing with a single sponsor, here you wouldn’t need succession planning, as you are provided comprehensive support by a whole team.
Difference Between Both Business Sponsorships
Now that we’ve understood the basics of what these sponsorships are, below, we discuss the various factors that differentiate them.
Network
When starting your business, especially in unfamiliar surroundings, it is wise to know people with the right connection. There are many renowned Emiratis who sponsor several foreign companies. If you manage to find one with a vast influence, they can open doors to speed up the process and facilitate better opportunities. This can also be applied to corporate sponsors.
Paperwork
While simple, the method can still be quite a challenge when working with a single sponsor, particularly if they travel frequently. In such a scenario, operating with corporate structures tends to be beneficial as they are comparatively more organized. With a single sponsor, you are solely responsible for ensuring everything stated on the agreement is correct and per the law. Though there is an additional document involved in the case of corporate sponsorship, the entire process is made easy, as there is a legal team. They will review the contract and ensure it is clear and concise.
Accessibility
Given that the sponsor takes most of the company’s decisions, is it essential for them to be available at all times. Since they are often on the move, either for business or leisure purposes, it can negatively impact your business’s operational efficiency. With a corporate sponsor, however, you eliminate this risk, as you have a whole team to rely on for any assistance that may be required.
Cost
The costs involved are one of the main reasons why entrepreneurs opt for individual sponsorship. That said, you need to understand that certain fees are often not added to the contract shared by the sponsor. It is vital to check with them beforehand and perhaps ask for a more comprehensive agreement that states all the costs involved. On the other hand, corporate sponsorship is costlier, but when you choose them, you are assured of transparent terms and transaction processes.