Legal Question in Entertainment Law in Massachusetts

Film Investors and the S.E.C.

I am currently producing an independent film which has been financed by multiple investors; five long-time friends of mine. The deal we have in place is that they will each receive a share of the gross based on the percentage they invested into the production budget (e.g. Inverstor A financed 25% of the budget, they get 25% of the gross). With having multiple investors versus the traditional single investor, does that fall into SEC territory where the film is now a public offering of sorts because I have more than one investor? Or does that apply only if they are investing in my production company itself and not a singular product (the film) I'm developing. Any information would be appreciated.

Asked on 3/04/09, 1:14 pm

1 Answer from Attorneys

Re: Film Investors and the S.E.C.

An investment in the film or the company requires that you meet certain exceptions to the sale of stock or a security. If they are deemed founders in the enterprise (part of the original formation of the company) in this case you would appear to have a partnership of sorts. To answer the question simply given if your investors are less than 35 in number, meet the qualified investor requirements under Reg D then you are probably OK. You might have less problems if all of them are located in MA.

You might want to speak with an attorney to clarify what you want to do to avoid problems as you bring the film to market. Please feel free to contact me if you have more questions.

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Answered on 3/05/09, 12:16 am

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