Securitisation of author/composer copyrights

The Securitisation Law allows the securitisation of an intangible asset such as copyright and the risks/income linked to these royalties.

Step 1

Let's take an author/composer who owns a catalogue of original works that from time to time generates royalties derived from his intellectual property rights.

Step 2

He can securitise his copyright, transferring his copyright to a securitisation vehicle.

External investors can finance the securitisation vehicle. These subscriptions fund the purchase of the copyrights while the investors receive securities in return for their investment.

The securitisation vehicle pays the author or composer the price for the acquisition of his intellectual property rights.

The author is no longer owner of these rights; the securitisation vehicle becomes the sole owner.

Step 3

All income deriving from the granting of these copyright licences are payable to the securitisation vehicle which will assume the operating expenses linked to this ownership.

Each investor will receive dividends in proportion to the number of shares that he holds in the securitisation vehicle.

Advantages

Any person (natural or corporate) can transfer their intellectual property rights to a securitisation vehicle without limitation on the type of right or the amount of the transaction.

This operation allows the Transferor (author) to transfer his rights (and for a company to remove them from the balance sheet) which were generating risks or income and which he wishes to customise in a special purpose vehicle. From the time copyright is granted, he receives a fixed amount, although discounted. Therefore he receives a unique source of capital which will not suffer from the fluctuating royalty payments received by the securitisation vehicle.

The investors, via the securitisation vehicle, assume the risks linked to the future payment of royalties. Should the securitisation vehicle receive more than the initial investment capital paid to the author, it will distribute the profit to the investors. Should the securitisation vehicle get less than the initial investment capital paid to the author, the investors will assume the loss.

The holders of the securities issued by the securitisation vehicle may transfer, give or sell their shares to other shareholders, who will receive dividends linked to this activity and, in the future, any possible proceeds arising from the liquidation of the vehicle (for example the resale of the copyrights to a third party).

This method enables risk to be spread between several investors, who, via the securitisation vehicle will be able to acquire a share in the securitised rights.

This transaction allows a group of individual investors to acquire an asset without having to bear the full investment alone.

This securitisation process also allows the transformation into securities of the copyrights of authors or composers that, by definition, are linked to their original creator.