Inside Law: It pays to be vigilant when it comes to recoupment
Producer, director and lawyer Murray Fahey, principal Fahey Rosenblum Laywers and Mediators, warns producers to be mindful when it comes to recoupment.
Too often creatives are focused on one of two issues: raising the money or creating the content. But if we are to have a sustainable industry, there should always be an eye on the third and most crucial issue in production: recouping the money from the various territories and formats that creative content is licensed to.
Traditionally, this has been the role of producers, who either are hands-on and chase the returns, or appoint collections agents to manage the collection of revenues. It has always been difficult for producers to track funds, particularly from overseas territories, and even more difficult to litigate and track the sales agents who change their executive and corporate structures quicker than rooms in a renovation reality TV show.
The big question is: Who do you trust? The answer: No one, unless it is you. Even long-term relationships turn sour, and established companies can end in financial distress. Add this to the industry changes in the last five years, which has seen a consolidation of sales agents and new, diversified companies appearing, and things are not getting any easier.
In July, a major UK collection account management (CAM) company, MM Cam Limited, was placed into administration. This company had been around for years and had accounted for thousands of feature film royalties and television royalty collections over the years.
One of the administrators appointed, Brian Baker, stated “the ultimate beneficiaries of the film revenues were concerned that it appears that the directors had abandoned the company and a significant amount of royalties and commissions were left unaccounted for. Our job now is to reconcile hundreds of accounts overseen by the company”.
This is an unusual case and it has taken a lot of feature film producers in Australia and overseas by surprise, including government agencies and US media firms.
The dilemma for the filmmakers is how you commence legal action to recover money in a foreign territory, when by the time you hear about the trouble, the money is probably already gone. The answer is either expensive litigation with a low prospect of recovery, or take pre-emptive action.
So what can a producer do to prevent the above? Be vigilant.
- Only deal with reputable established sales agents and collection agents. However, we note that the above collection agent was a very established agent.
- Rigorously stay in contact with your sales agents and collection agents. If there is a lack of response, alarm bells should start ringing. Check for new sales after each major market and make sure you follow up on when the money is due to arrive.
- Read the press to see if your sales agent has just taken a major loss on another project.
- Maintain contact before and after each quarterly reporting period.
- Open your own distribution account, ensure that contracts dictate that payments are to be directed to that account, invoice after each sales report and demand payment .
- Use block chain technology to lock in receipts (refer to our earlier block chain article, IF Magazine #182 Apr-May 2018).
- Seek legal advice on the contract ande nsure that you have the correct contracting partners and not an empty shell company. Ensure that sales proceeds are held in a trust account opened specifically for the project and not a general revenue account. Place ASIC alerts in the case of Australian distributors or Company House UK alerts so that you are notified of any changes in directors.
- If a payment is delayed then you should threaten to terminate the contract for breach and if payment does not arrive, act and retrieve your rights.
Fahey Rosenblum Lawyers and Mediators: www.frlegal.com.au
An original version of this story was published in IF #190 August-September.