MUSIC LAW NEWSLETTER - Band Agreements
30th August 2007
Here is the latest music law newsletter from music industry lawyer David McLaughlin. Meet David in person at the Music Managers Forum seminar on 'Understanding Contracts' at the Dux Lounge this Tuesday, Sept 4th at 7pm.
Introduction
In the last few editions of our Music Law
Newsletter we have been looking at the rights which copyright provides creators of original music.
In this edition of our Music Law Newsletter we're going to change focus to something which is of a
much more practical nature, namely, Band Agreements. Band Agreements
So what is a band agreement and
why would you need one? A Band Agreement is pretty much what it sounds like, an agreement between
members of a band with respect to how they are going to run the affairs of the band, either
generally, or just with respect to certain issues.
Structures
Before we discuss the type of
issues that are usually covered in a band agreement, there is another important issue that needs to
be addressed. That is, what kind of structure you will be running your band through? Partnerships
Unless it is specifically agreed
otherwise, at law it is considered that whenever two or more people are carrying on business
together with the intention of making a profit, they are operating as a partnership. This can
include bands. So what is the big deal here? Liability
Probably the most obvious issue
here is that any member of a partnership can incur a debt on behalf of the partnership that the
other partners will be liable for. A further aspect of partnerships that makes this important, is
that if a partnership owes anyone money, that person can collect the debt from the partnership as a
whole, or any specific member of the partnership. As the law can automatically deem a partnership
exists, you can be exposed to these risks without even knowing it. Companies
The other common option in terms
of a structure to run a band through is a limited liability company. One of the benefits of using a
company structure is that you limit your liability to the assets of the company. A company can also
function much easier on a more long term basis than a partnership, particularly where band members
may come and go. Costs
The downside of limited
liability companies is that there are certain ongoing costs involved in running them. Companies are
also taxed at a level that may be more than band members would otherwise be taxed if they operated
through a partnership structure. In practice, a company structure may not be economically viable
until your band has achieved a certain level of consistent income and is also intended to be
operated on an ongoing basis for a decent period of time. Issues
So let’s assume you've picked
the structure best for you. What are the kinds of issues you would generally expect to see in a band
agreement?
* Song Ownership: If your band has an ongoing
arrangement as to how songwriting credits are apportioned in the band, then it can be useful to
summarise this in the agreement. * Band name: You may wish to set out the rights
of the band members to use the band name once they leave the band. For instance, is there one person
who retains all rights in the band name, meaning that they are the only person who can use the name
on an ongoing basis, or will use of the name be the right of the majority of band members? If there
is likely to be some interest in merchandise using the band name (even after the demise of the band
itself) then rights to use the band name or logos can be very important.
* Sound recordings: Where a band arranges and
pays for its own recordings, deciding who has rights in these sound recordings can be very
important. Ownership of sound recordings can mean significant income in terms of ongoing licensing
for advertising, film and TV placement, as well as for the reproduction of the sound recordings as
CDs, digital downloads and in other formats for sale.
* Loans to the band: Deciding how any money that
is earnt by the band but reinvested in the band's activities is to be treated, can prevent problems
down the track if a leaving member feels they should be compensated for the money they have
historically agreed should be reinvested. Similarly, where a band member pays for certain things on
behalf of the band, how is this to be treated? Is it a loan to the band? If so, then how is that
person to repaid and on what terms? If it isn't a loan but is used to fund the recording of say the
band album, does that mean that the band member can expect to own such sound recordings to the
exclusion of everyone else in the band?
Understanding
The above are just a few examples of some of the things that can be included in
a band agreement. There is no limit on the specific issues that you may decide it is important for
your band to cover in a band agreement. However, whatever it is that you decide to include, it is
important that everyone clearly understands what they are agreeing to.
Changes
It is also important that whenever your band’s approach or way of doing things
changes, that this is reflected in your band agreement. After all, an out of date or incomplete band
agreement can equally cause you some headaches!
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Next Issue
In the next issue of our Music Law Newsletter we’ll be keeping the focus on some
of the contracts you commonly come across in the music business and specifically we’ll be looking at
management agreements. Questions?
In the mean time, if you have
any queries or questions in respect of the above please don’t hesitate to contact me at david@mclaughlinlaw.co.nz or on 021 630 201 or 09 363 2738. I can also be contacted through myspace at www.myspace.com/nzmusiclawyer
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Disclaimer:
This article is intended to provide a general outline of the law on the subject matter. Further
professional advice should be sought before any action is taken in relation to the matters described
in the article.
This article
written by David McLaughlin of McLaughlin Law recently appeared in New Zealand Musician
Magazine and has been reproduced with the kind permission of New Zealand Musician
Magazine.
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