Investor contract

Hi, I'm currently fundraising in the UK for a feature film and may have found an investor, however I'm not sure how to proceed.

In the UK a film can be a start up company and fund raise by selling shares in that company where the investors get huge tax discounts, however it is conditional based on terms that must be met.

An investor has offered all the money and wants to be sole investor which doesn't qualify him for tax benefits via SEIS and EIS because no one investor can own more than 30 percent of the company. And also if he pays for all the shares in the company then he would own 100 percent of the company so what does that leave my production company?

So It's thrown me a bit, not sure if we should sell shares in the company or just draw up an investor contract for a percentage. Does anyone have any advise? Thanks.
 
MDMP's advice is probably the best - you need to get a lawyer involved.

On the question of your production company - I'd say in a situation like you're describing you'd want to form a separate company for the sole purpose of producing the film. You can then divide ownership of that company in whatever way makes sense for your investment process. Your production company remains yours alone and simply gets contracted by the film company for the production.
 
Thanks for the reply.

The problem is that at the moment, I can't actually afford a solicitor and none I know of will work on the promise of funding.

I have started a new company for the purpose of the film because as I stated, new companies get SEIS and EIS tax benefits but they do not apply to this investor because he wants to invest the whole amount and EIS isn't set up that way.

I suppose a better question should be; what is the standard terms of agreement for a sole film investor?
 
I have started a new company for the purpose of the film because as I stated, new companies get SEIS and EIS tax benefits but they do not apply to this investor because he wants to invest the whole amount and EIS isn't set up that way.

I suppose a better question should be; what is the standard terms of agreement for a sole film investor?

The problem you have of asking on forums, those who are qualified to answer, rarely answer as it can create liability issues. The advice of those who do answer is usually worth about what you paid for the advice. The next part of the problem you have is if you do it wrong, A). It could cost you a lot of money in the long run if you do it wrong. and B). While I'm very much unaware of securities law (simply said: laws dealing with investors) where you live, but if you do it wrong, there is a chance of a prolonged law suit or even the possibility of jail time.

Seek the advice of a qualified and insured lawyer.
 
Let's start with the really basic elements. In the UK, if you use a Ltd company as the production vehicle and you give away 100% of the shares to a single individual, you are effectively giving 100% financial control to the investor. If the screenplay etc... rights are tied up in the Ltd company, then you will be giving this away as well.

This means whoever owns 100% of the shares will have 100% control over all aspects of the production ranging from the amount of money they will be investing through to what they want to do with the screenplay. With 100%, they could do anything. Worst case scenarios would be:

- They decide not to go ahead with you and withdraw all money from the Ltd company. Rather, they decide to sell the screenplay to someone else.
- The go ahead, make money and decide to give you nothing. Legally, they could keep everything, especially if they are paying you based on profits or some kind of points system.

Having zero percent of the control simply means you need a contract in place so you can recover money, retain rights etc...

In terms of SEIS, this is no longer your issue. Rather, it is the issue for the investor and you will have no legal rights to any aspect of the financials.
 
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Thanks Gorilla on a bike for an intelligent answer. I assumed the same. I suppose the share selling aspect of a ltd company doesn't quite work so a contract is the best thing to do.

Does anyone know of any low budget (sub 1m budget) solicitors in London than won't pull my pants down? Or perhaps a good resource for investor contracts?
 
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Thanks Gorilla on a bike for an intelligent answer. I assumed the same. I suppose the share selling aspect of a ltd company doesn't quite work so a contract is the best thing to do.

Does anyone know of any low budget (sub 1m budget) solicitors in London than won't pull my pants down? Or perhaps a good resource for investor contracts?

You have to create an SPV (Limited company) for financing purposes. It is the structure which is important in terms of financing.

And all lawyers from the magic circle crew down to dinky one-man-bands will look at sub million USD advisory work. The issue is they charge hourly rates. This means if you want advice, they will charge you per hour so you'd better get out the lube if you don't know what you want as this will mean lots of talking time.

One suggestion is to use an advisory firm to help and a firm such as Progress Advisory headed up by Paolo Maranzana can talk you through the financials. My mum used to drive him to school so we have a good, albeit distant relationship.

If you are really serious about this, PM me and I would be happy to make suggestions.
 
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