Legal Guide: Funding
Legal Guide: FundingLegal advice on things to consider when receiving funding/prizes for your film.
- Funder's Rights
- Finder's Agreements
- Investment Offer Documents
- Funding Arrangements
- Related Guides
- Help us improve the Filmmaking Guide
Be aware that when somebody 'gives' you money to make a film, they will usually expect to acquire rights in return. They may want all rights to distribute your film, which means you'll need to ask their permission if you wish to show it or allow others to screen it. This may include submitting films to Film Network – we need the permission from whoever owns the distribution rights for your film before we can showcase it. It is essential that you follow the terms of your funder's agreement carefully to maintain a good relationship with them and protect yourself from legal action if you fail to honour your obligations under the contract.
More commonly used in feature filmmaking, producers can enlist finders or sales agents to help fill deficits in production budgets. The finder's obligations should be clearly defined i.e. are they introducing the producer to potential financiers or actually securing finance? The finder's fee should also be stated. This is usually expressed as a percentage of funds raised, a fixed fee or a mixture of both. It should be clear that you are under no obligation to accept the offer of funding and that the finder's fee is payable only if you proceed and sums are received.
Investment Offer Documents
Care needs to be taken when issuing communications to potential investors that the communication (whether oral or written) does not fall foul of financial services legislation. There are strict rules on how finance can be raised. A financial promotion is an invitation or inducement to engage in investment activity. You must not communicate a financial promotion in the UK, in the course of business, unless either its contents are approved by the Financial Services Authority (FSA) or a firm approved for such purposes by the FSA or it is subject to an exemption (for example, communications to facilitate investment by high net worth individuals or sophisticated investors). The underlying principle is to help the public achieve a fair deal by ensuring financial promotions are clear, fair and not misleading. You should make sure that you follow financial services legislation carefully as the FSA run an enforcement division to deal with breaches of the law. Further information is available on the FSA website: www.fsa.gov.uk
It's a good idea to seek legal advice before entering into a financing agreement. Ultimately the terms and conditions attached to each investment will differ according to the specific needs and arrangements of each production.
Here is a list of some of the elements you need to look out for in short film funding agreements. They tend to be less onerous on the producer than feature funding arrangements:
Rights Clearances: Producers will be expected to clear all rights in the film in all media. Some funders also expect the producer to acquire sequel, prequel, remake and other such rights and expect to participate in any revenues from such exploitation.
Banking: Funders want to know that their money will be safe and so will want protection to ensure that the money is spent only on the production, this may involve setting up a separate account in the name of the production.
Recoupment: Investors will seek to recoup their investment from any income received from any sales of your film. In some cases this will also include income from ancillary rights such as merchandising.
Copyright ownership: This varies according to each particular arrangement. Funders may want to take all rights including copyright and/or the right to distribute and sell your film although you should not accept this as a given. You need to establish the priorities of your funder for instance some may just want a credit, whilst others may want a financial return. Where possible, you should resist giving over your rights.
Credit: All funders will want to be given sufficient credit for their part in financing the film.
Third Party Finance: Funders will want to know who the other financiers are (if any).
Approvals and documentation: The investor may want a right of approval of elements of the production process, for instance:
- Script development
- Key personnel
- Distributor(s) and the terms of their deals
- Delivery date
- Running time
- Film certificate (where applicable)
- Credits: including onscreen title and end credits
- Cuts of the film
Production information: Funders will want the right to be kept abreast of the production process. This includes receiving statements of finance and expenditure, crews and cast list and publicity material.
If your film goes onto win a financial award there may be a dispute as to whether that money belongs to the filmmaker or the financier. It will very much depend on what is said in your funding agreement. If the funding agreement talks about the funder receiving a percentage of 'receipts' from the film then it will need to be established exactly what constitutes 'receipts'. If the award is for the film as opposed to the director, then it could be argued that the money should go to the funder. However the amount of financial awards that are for short films themselves are negligible and it is more likely to be the case that an award for a director or an actor goes straight to that individual or the film production company. If the funding agreement is silent as to what should be done with such monies, then it may be advisable to state openly in the agreement that such funds should go to the filmmaker to be re-invested in the purposes of filmmaking.
Filmmaker question:"I received funding for my film. I now want to stream it online. Is this ok?"
Answer:See our Legal Guide: Filmmaker FAQ section
Related GuidesFor information about funding and how to get it see our Filmmaking Guide: Funding For organisations which offer funding, see our Related Links: Funding For more information about competitions and production schemes, see our Related Links: Competitions & Production Schemes
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