Financing and Investor Agreement is drafted and negotiated with a focus on protecting an investor’s assets, the investment itself and the intellectual property of the borrower when both parties are committing to a project. Whether working on a stage program, television show, movie or other creative venture, having a strong, detailed and cohesive agreement is essential when moving forward.
The entertainment industry is unique in that large-scale risks can pay off in the form of larger rewards. Financing a creative venture can be a huge risk when it is independent. For example, an independent film can depict an amazing story, possess great post-production quality, and still struggle to break into mainstream light. Meaning all of that work, time and investor money may be recovered in the form of experience and credits, but not in dollars and cents. Experience in this industry is valuable, but when you’re trying to impress investors, it’s often not enough.
- Forms of Investments
Forms of Investments
With television, stage or film projects, there are several options for investors who want contribute. For example:
Equity
This is a simple and common investment method. Actual money is contributed to the production of the project in exchange for a partial ownership interest in the project, as well as a potential portion of profits stemming from the project’s success. There are many ways for this form of investment to be structured, but it revolves around several questions:
- What percentage of ownership does the investor receive for their investment?
- How will the investor recoup their investment?
- How/Will the investors see a profit?
If this is the form of investment being made, then the Financing and Investor Agreement needs to focus on those three questions to ensure that the investor is aware of the risk/reward with the project and to see how they will have their investment returned to them.
Loans/Bridge financing
Bridge financing, often in the forms of loans, comes into play after regular financing is already in place. Essentially these types of loans are used to “bridge the gap” between what has already been contributed or raised for the project and what the total cost actually is.
Setting up a Financing and Investor Agreement for this form of financing or investment needs to ensure that both parties are protected. With only a promise of the completed project and its related intellectual property as collateral, the playwright/filmmaker behind the project could be on the hook for the full amount of any unpaid loan.
Things to keep in mind
While there are several options available to investors, both parties and financial institutions all need to be considered and represented in any Financing and Investor Agreement. Each agreement should aim to protect investors and creatives as they embark on a venture together, seeing a project go from paper to stage or screen.
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Contact the Toronto entertainment lawyer at Hummingbird Lawyers LLP today to help you draft and negotiate your Financing and Investor Agreement. Ensuring that your intellectual property is protected as a creative and that your finances will be returned as an investor are both crucial when creating the agreement. Having both parties on the same page can help any project run smoothly.
