Corporate structure helps exploit and control musical work

Advice for musician to protect her work but attract investment

Our client was a musician aiming to create her first album. She lacked a record label or an agent, but she had sufficient angel investment to produce an album in a form suitable for distribution agencies. However, she needed our legal advice to keep the project on track for delivery.

The assistance we provided

We created a company structure that gave control to the musician, but ensured that there were priority financial returns to the investor. This involved developing an investment agreement that met the angel investor’s concerns whilst protecting the musician's intellectual property rights in the works.

The company now exploits the musical works.

Appropriate corporate structure

The angel investor contributed £3 million funding and wanted a financial return. However, our client, the musician, wanted control over the creation and exploitation of her work.

Our solution was to create a company with tailored articles of association. This company had two share classes,  A shares which were held by the angel and had preferential dividend rights, but limited voting rights and  B shares which were held by the musician, and had secondary dividend rights, but full voting rights.

Key terms of the investment agreement

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. 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 investor 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 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.

Music Licencing and protection of work

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.

Summary

The creation and exploitation of copyright works requires an appropriate corporate structure. Then it requires appropriate agreements. We manage the entire process for cliengts, and so guard against risks.