Completion bond: a guarantee that your film gets finished
A completion bond is a guarantee that a film will be completed and delivered to a distributor or financier in accordance with the specifications. The completion guarantor steps in if the production runs into trouble, and covers any additional costs.
How does a completion bond work?
The completion bond in fact consists of two agreements. The producer enters into an agreement with a completion bond company, the guarantor. The guarantor analyses the script, the budget, the schedule and the track record of the producer and key crew. If the guarantor is satisfied that the film can be made within the proposed budget and schedule, it issues a guarantee to a financier or distributor.
The fee for a completion bond is usually between 2 and 4 per cent of the production budget. Where exactly you end up depends on the risk profile: how experienced is your team, how realistic is your budget, how complex is the production? Some guarantors return part of the fee if the film is delivered without difficulties.
When is a completion bond needed?
Completion bonds are mainly customary on productions with external financiers (investors, banks, international co-producers) who want certainty that their money will not disappear into an unfinished film. On fully subsidised productions a bond is less usual.
In practice a completion bond only becomes viable from a production budget of around three to five million euros. With smaller budgets the cost of the bond does not justify the amount being guaranteed.
What happens if things go wrong?
If the production threatens to go off the rails, the guarantor has far-reaching powers. It can take over the production, replace the director or producer, or decide to stop the production and repay the financiers (abandonment). The last of these happens rarely, but the prospect of it concentrates minds.
It is important to appreciate that the guarantor is not itself a financier: it does not step in if you have problems collecting receivables, and it has no obligations until the financing that has been committed has actually been received.
Preparation is everything
Good preparation improves the chances of obtaining a bond on favourable terms. The guarantor will ask, at the very least, for your script, a detailed budget, a shooting schedule and CVs of your key crew. Beyond that it wants sight of the contracts with your cast and crew and an overview of your financing structure. The more complete your file, the faster the assessment and the more favourable the terms. Reckon on at least four to six weeks once your documentation is in order.
The difference from errors and omissions insurance
A completion bond and errors and omissions insurance are regularly confused, but they are two different things. The bond guarantees that your film gets finished. Errors and omissions insurance protects you against claims about the content, such as copyright infringement or defamation. On many productions you need both.
A lawyer for your completion bond application
We guide producers through the entire application process: from reviewing and drawing up the contracts the guarantor needs, through to advising on the terms of the bond itself. Merel Teunissen and Roland Wigman know the requirements completion guarantors impose and make sure your file is complete and in order.
