Signing a Sport Sponsorship Agreement

Sponsorship is usually an economic agreement that gives financial security as well as additional incentives to the athlete. But then there are donations to consider as well. What do these contracts entail?

A sponsorship agreement can represent a big opportunity for athletes; it can mean a better salary and new strides in their careers. But before signing anything, they should understand the legalities, image rights and tax obligations that come with these contracts.

In our post today, we want to clear up a few central topics regarding sponsorship agreements. And there’s no better way to start than by diving into their content matter and legal implications.

What is a sponsorship agreement and how does it work?

For starters, sponsorship is an aid– generally of economical nature– that’s both an incentive and source of security for the signatory, who in turn carries out their task, lucrative activity, investigation or studies.

In Spanish Law, the main text regarding sponsorship lies in Article 22 of the General Advertising Law 34/1988. The law provides a very similar definition of sponsorship as we saw above:

Thus, sponsorship agreements can take on many different forms and aren’t only limited to the sporting world.

However, if we focus primarily on sport sponsorship agreements, we can see that they mainly consist of companies that step into the sporting world to offer aid to athletes or sports entities.

Types of agreements and their regulation

Today, there are two main types of sport sponsorship agreements: informal or promotional. Promotional sponsorship agreements are directly related to advertisements and image while informal agreements are usually one-time acts of sponsorship.

While both of these agreements share a similar process, legally they’re quite different and imply different things. Thus, understanding their differences before signing is essential.

Promotional sports sponsorship agreement: regulation

A promotional agreement is directly related to advertising. In short, athletes receive economic compensation from a company in exchange for promoting or endorsing their products. In addition, the signing athletes must also participate in advertising events that the contract stipulates as well.

So what does Spanish Law consider advertising?

Once again, we need to study the Spanish General Advertising Law in order to find an answer. In Article 2, we can find that advertisement encompasses all the forms of communication of an individual or a legal entity in both public or private context. The forms of communication take place in a sports context as a commercial, industrial, professional or artisan activity.

Moreover, the same text states that the main objective of said activities is to promote the sales of assets or properties, services and obligations or rights. Lastly, the company is free to promote directly or indirectly.

Before signing a contract, the content must state the length of the contract, forms of expected commercial presence and image rights of the athlete in question. Athletes should sign under the guidance of a seasoned manager and financial consultant.

Key points of informal sport sponsorship agreements

In short, informal sponsorship agreements consist of offering a one-time aid without lucrative interest in order to help official activities or training non-professional athletes. These agreements don’t list obligations nor terms of agreement for their aid.

In other words, athletes and sports entities don’t have to fulfill obligations in order to receive an economic sum. Thus informal sport sponsorship agreements often follow the legal terms of sponsorship.

The main legal reference to these types of agreements lies in Article 1 in the Law 49/2002 of the Tax System of Non-Lucrative Entities and Sponsorship Tax Incentives. The Article states that informal sponsorships are voluntary donations that imply private participation in activities of public interest, such as sport.

However, according to Spanish Laws, the legal conditions of informal agreements change when the entity receives a donation that isn’t included in the Law 49/2002.