Completion Guarantees

A completion guarantee is a particular type of contract of insurance required by financiers and distributors of films to protect the investment they have made until such time as the film is delivered to them for exploitation. Completion guarantors are specialist companies who offer a form of insurance coverage against certain events that could prevent a film production from being completed.

Contributors to the financing of a production would lose their investment, without a hope of return, if a film was not completed for a particular reason. There are many reasons why a film may not complete. Running out of money usually tops the list.

Therefore, most banks or financiers of a production require a completion guarantee or a completion bond (a 'bond' or 'guarantee') that will either:

• guarantee that the film is completed and delivered on time and on budget; or

• guarantee to repay the financier its investment if the film cannot be completed.

A feature film production will require a bond almost without exception. Financiers are unwilling to provide an open chequebook to a production. They need certainty that if and when the sum that they have agreed to provide runs out, additional funds will be available to finish the production. The fee charged by completion guarantors for providing a guarantee is approximately 5-6 per cent of the production budget of the film. However, guarantors commonly give refunds, referred to as the 'guarantee fee rebate' if the guarantee is not called upon.

Under their agreement with the producer and as an obligation to the bank or financier to whom the guarantee is given, guarantors have the right to monitor a film from the first day of principal photography of production. This means that a completion guarantee company needs extensive knowledge of the production process. Monitoring the production gives the guarantor the ability to stop any potential problems or overruns either by stepping in and taking over production or by exercising some lesser form of control over the production. The guarantor's objective, as with all insurers, will be to minimize the extent of its financial liability.

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Responses

  • Mustafa
    Do banks always require a completion gurantee?
    9 years ago

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