Executing a Film Finder’s Fee Agreement in a Film Deal
Film financing and the raising of capital from investors is a major challenge that virtually all independent filmmakers face. Investors frequently express interest in engaging in deals that are likely to provide them with the level of potential risk. And return on their investment. That is ideal for their individual investment needs. This means they’ve got to have strong working relationships with the right people in the industry. So that they even stand a chance of getting involved in the projects that mean the most to them. In fact, one of the most pressing questions that arises from film investors is…Can I execute a film finder’s fee agreement?
WHAT’S THE FILM FINDER’S FEE AGREEMENT?
Financing a film deal is certainly a huge undertaking. That almost always involves several parties that come together to pool their resources and create the most unique, valuable opportunities for those involved.
If you’re attempting to reach an agreement on the various sticking points of a film investment you’re likely to need some assistance. This is where the film finder’s fee agreement comes into play.
Executing the film finder’s fee agreement is a step that frequently comes up over the course of establishing investor financing for a film. Whenever a filmmaker is attempting to secure investment financing for the production.
They will turn to agents to help them connect with finder’s who will then work their magic. To connect the film producer with investors that have interest in the type of production they’re working on raising capital for.
STATE BY STATE BASIS
Before any work can be done, connections are made between the film investor finder and the actual film investor. One needs to establish a film finder’s fee agreement.
However, not all states allow film finders. Which means that in some cases the need to secure investor financing for a production requires the producer to do this leg work for themselves.
Before you consider executing a film finder’s fee agreement. Make sure that you’ve taken all necessary action in advance. And that you are fully aware of the applicable state and federal laws on obtaining film financing for your production.
CAN I EXECUTE A FILM FINDER’S FEE AGREEMENT?
Before you can execute a film finder’s fee agreement a few elements of the potential legal aspects relative to the transaction and underlying situation must be established.
FIRST OFF, THE FILMMAKER AND FILM INVESTOR MUST ESTABLISH WHETHER THIS INVOLVES THE FOLLOWING VARIABLES:
- Is the investment or purchase of shares involved in the sale of a security? Or will this be a non-securities exchange transaction?
- If purchasing securities, such as shares. Is it a public offering or a registered offering? Or is it a public or private hybrid offering or an exempt public or private offering?
- Are you aware of the underlying federal and state applicable laws of the transaction and what are they?
- If purchasing securities in a private or exempt offering , what exemptions will you rely on at both the state, and federal levels?
WHO TAKES LIABILITY FOR AN INVESTMENT GONE WRONG?
One of the key sticking points that is likely to come up in a film finder’s fee agreement between a film agent and the investor is relative to liability.
Typically, agreements made between the filmmaker and any investors are the result of an agent that takes on the responsibility of “Finding” the investors. In exchange for the agent “finding” the investment they are paid a film finder’s fee.
Film finder’s fee agreements are drafted to incorporate terms relative to how the finder will seek and execute financing agreements. While also imposing specific details as to who takes responsibility for any liability involved.
Film investors are aware that there are risks associated with their decision to invest into a movie or film project. But this doesn’t mean that they want to just shell out money and accept risk. Thus, the finder’s fee agreement must disclose risk and address liability.
ENTERTAINMENT ATTORNEYS
The film finder’s fee agreement will address many of the liability issues. But at the end of the day, it’s important that an entertainment attorney outline the legal aspects.
The agreement should clearly specify the agreement. As to how the finder will be paid. As well as how any funds will be returned to the investor should a profit be assumed.
Keep in mind that many states, and federal level securities and exchange commission laws, make it illegal technically to enter into certain film financing agreements.
Particularly those in which a film finder’s fee agreement provides for transaction based fee payments based on success of the film.
PAYMENT TO THE FILM FINDER
Executing a film finder’s fee agreement is certainly a major challenge that many filmmakers face. As they seek to secure the level of financing they desire to produce a film.
In crafting the finder’s fee agreement, the filmmaker’s agent should work closely with an entertainment attorney. As well as with the film’s investor to ensure that all appropriate terms and areas of the agreement to be made between all parties have been covered.
The manner in which compensation is distributed to the finder. As well as how the investor provides funds for their share of the investment into the film project, must be included in the film finder’s fee agreement.
QUESTIONS
Since investments into a film like this are likely to be quite large. Outlining the compensation and means by which such will take place is vital.
How will the finder be paid? How will the investment be transferred? Who will disperse funds?
Finder’s fees are compensated, frequently, in cash but only at a percentage of the total investment made by the actual investor. The typical finder’s fee is between 2 and 5% of the total investment into the film project.
It’s equally important, in the execution of the film finder’s fee agreement, to direct how the compensation will be made to the film finder. Generally, funds are compensated in conjunction with the funds that are invested into the production.
The Takeaway
Thus as the investment progresses, so too does the payment scheduled for the finder.
If you’re new to the idea of paying a film finder’s fee or entering into and fully executing a film finder’s fee agreement. It’s important for you to carefully consider how it all works and what the implications are.
Keep in mind that the information contained in this post is not a supplement for important communication with your entertainment attorney. And should only be considered in conjunction with the assistance of a professional.
