Co-Productions and Joint-Ventures
Producers often realize that co-productions or joint ventures are a useful methods to develop film projects because of the complimentary skills and resources that each party brings to the table and some of the benefits derived from international and inter-provincial co-production treaties.
Whether the co-production or joint-venture is simple or complicated, a number of important issues should be determined in advance so the parties understand the nature of their relationship, rights, obligations and potential liabilities involved in the project.
One of the first issues that arise in a co-production or joint venture is the appropriate business structure that the parties will use to carry out the project. Generally, there are four kinds of business structures that can be chosen:
– Limited Partnerships; or
– Limited Liability Companies (in the United States).
Although each structure has its specific advantages and disadvantages, two common issues that many parties are concerned about are potential liabilities and tax implications. In view of these concerns, a corporation or a limited liability company is often utilized as the legal business structure to carry out the project.
In a co-production or joint venture where the parties use a corporation as the legal structure to carry out the project, the parties will usually become shareholders of the corporation and will have to decide the appropriate corporate structure and shareholding options (e.g. voting and non-voting stock, and dividends).
Where one party may be providing the financing while the other party may be contributing all the technical and administrative skills necessary to carry out the project, or where both parties contribute capital and services, the parties should consider a number of further issues which should be included in a written co-production or joint venture agreement, including but not limited to the following:
- What services and/or resources will be provided by each party?
- If a third party producer is required for the project, do both parties have to agree on an acceptable third party producer?
- Should one party no longer want to be involved in the project and desire to carry out another project alone or with other parties, should the corporation have a first right of refusal to undertake the development of that project? -Is there an exclusivity clause?
- Who has authority to decide important business and financial, legal, and creative elements of the project? For example, in the case of a financier partner, one may not think that he or she is in the best position to determine creative elements pertaining to the project.
- What rates of remuneration, if any, shall be provided to the parties?
- Should producer fees and executive producer fees that either party may be entitled to, and general overheads, be shared equally?
- Should all distribution decisions be made jointly?
- What happens if one of the parties passes away or becomes bankrupt?
- Are there management contracts? What do such contracts say about confidentiality and non-competition?
- What happens if one of the parties breaches the agreement?
Is the project international?
Although the above points are not meant to serve as an exhaustive list of things to consider when entering into a co-production or joint venture, they serve as a sample of some of the important issues that producers and filmmakers should consider prior to carrying out their project.
This article was written by Jindra Rajwans, a business and entertainment lawyer based in Toronto, Canada. The information in this article is not intended to be legal advice and is of a general nature. Consult a lawyer for advice for any specific situation.