Exploit & control musical work
- John Deane
- Updated: Thu, 8th Dec 2016
We helped an established musician create an appropriate corporate structure to exploit her musical work. She had sufficient angel investment to produce an album in a form suitable for distribution agencies. However, she needed legal advice to keep the project on track for delivery.
Our value add
- Created a company structure that gave control to the musician, but ensured that there were priority financial returns to the investor;
- Developed an investment agreement that met the angel investor’s concerns;
- Protected the intellectual property rights in the works.
The company now exploits the musical works.
Exploit music: Appropriate corporate structure
The musician aimed to create an album. However, the musician lacked a record label and an agent, as this would be her first album.
An angel investor contributed £3 million funding. The angel investor wanted a financial return. Our client, the musician, wanted control over the creation and exploitation of her work.
Our solution was a company with tailored articles of association. This company had two share classes:
- A shares: held by the angel, which had:
- Preferential dividend rights,
- Limited voting rights.
- B shares: held by the musician, which had:
- Secondary dividend rights,
- Full voting rights.
Investment agreement for angel investment
Both parties sought certainty which our investment agreement provided. In the investment agreement, the musician, at the angel’s request, warranted that she:
- Was the original creator of the works;
- Would proceed with the development.
The agreement also detailed the parties’ dividend entitlement. The plan was to market the album overseas. Thus, after much negotiation, the company would retain its profits for 3 to 5 years, to finance growth and development. However, the agreement entitled the angel to a fractional percentage of the annual profits each year, capped at a maximum sum.
The investment agreement regulated the parties’ relationship. The angel agreed to appoint two non-executive directors. These directors had valuable and specific music sector knowledge.
Non-executive directors appointment
Non-executive directors owe the same duty to the company as ordinary executive directors. The non-executive directors’ role is to pitch the completed musical work to agencies and record labels.
We drafted bespoke non-executive director contracts, which set out each non-executive director’s rights and duties. In addition, the non-executive directors were bound by strict confidentiality agreements.
Later we prepared non-disclosure agreements to enable the non-executive directors to confidentially pitch the work to agencies, record labels and associated third parties.
Licencing and protection of works
The musician owned the music’s copyright. Therefore we created a licence agreement so she could licence the work to the company. This bespoke licence agreement enabled the company to grant sub-licences to other companies.
The company created an album cover. We trademarked the album’s name which gave the company a monopoly right of protection. This further protected the works’ intellectual property rights, and protected the angel’s investment.
The creation and exploitation of copyright works requires an appropriate corporate structure. Then it requires appropriate agreements. We manage the entire process, and so guard against risks.
John Deane is the partner charged with running the commercial team. John’s clients are in the creative sectors, and he works with musicians, labels, agents, and the investors.