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Incorporation and PartnershipsLegal advice is critical when producers want to formalize their relationship. A lawyer can ensure that the most appropriate agreements are in place to accomplish the goals of the producer(s) and to meet potential obligations.Partnership The term “partnership” is used in a variety of ways. It can describe a working relationship among a group of people; or a particular type of legal relationship (referred to as a “general partnership” formed by oral or written agreement); or a type of legal entity called a “limited partnership” which is not available in all jurisdictions and, where available, requires formal registration with the provincial authorities. A lawyer will usually recommend that partners formalize their relationship by incorporating a company to produce a film. Corporation Generally, a corporation is the most efficient and flexible structure for producing a film. Since the corporation is treated, under the law, as a separate individual, it can own the rights to the production, enter into contracts, and borrow money. A corporation limits liability for the producer and other shareholders who would otherwise have to purchase rights, sign contracts and borrow money in their personal capacity. In addition, a corporate structure is extremely flexible, allowing shareholders to issue various classes of shares with differing characteristics to meet the expectations of various potential participants (such as private equity, foreign investors and private funds). Additionally, many tax credit programs require that a corporation exist for a project to be eligible for credits. Shareholders’ agreement A shareholders’ agreement is important if multiple shareholders are involved. It will help to protect all parties with respect to representation on the board of directors, appointment as officers, voting rights, dividends, and treatment of shares if one shareholder dies or divorces. Other matters to consider include the availability of “buy-out” provisions in the event one shareholder wishes to leave the project, or, alternatively, the remaining shareholders wish to remove another shareholder.  |
