In the music industry, a band with any sort of longevity has likely experienced business disputes among bandmates. They could be relating to royalties or profit splits, use of the band name, copyright ownership, song credits, etc. Bands like Pink Floyd and Guns n' Roses, to Stone Temple Pilots and Slipknot, have all faced serious (and expensive) legal battles over the years.
A well drafted band agreement is critical to ensuring all band members are on the same page from the beginning and will hopefully assist in avoiding disputes altogether, or provide swift clarity in the event a dispute arises.
Whether your band has just started playing, or has been together for years, if you don't have a band agreement in place, it's time to look into it.
What is a Band Agreement?
Simply put, a band agreement is a legally binding agreement among band members, which sets out each member's rights and obligations with respect to band business.
What Could Go Wrong?
For one reason or another, in my experience, bands don't typically enter into band agreements, and those bands that do are often working with agreements that are not clearly drafted or are missing key terms. As a result, unfortunately, dealing with disputes or a breakup becomes much more complicated and expensive.
For example, if the band breaks up, multiple band members may attempt to use the band name. Disputes may arise as to who is entitled to what royalty/revenue split of master or publishing income, who is entitled to perform and/or administer the band's catalogue, who should drive off with the band van, entitlement to funds in the band bank account, etc. Assuming there is no breakup, band members may also disagree on who can sign cheques, withdraw funds from the band account, sign certain contracts such as performance agreements, retainer letters with professionals, etc. As you can imagine, things can get ugly quick if relationships sour and there is no agreement among band members to sort these things out.
Business Structure Considerations
Before diving into provisions you might see in a band agreement, there are important points on legal business structures for consideration. In Nova Scotia, for example, bands will be deemed general partnerships under the law if the band members carry on business with a view to profit, and the relationship among band members/partners is not an incorporated company. In other words, if the band hasn't taken steps to incorporate a company, and if the band members carry on business with a view to profit, the band will likely be deemed a partnership at law.
Why is this important? If a partnership exists at law, and if the partners do not have an agreement to the contrary, the following could apply under Nova Scotia law:
- Partners equally share profits and liabilities (including revenue from copyrights)
- Partners are jointly liable for decisions made by others
- Each partner is an agent and binds the partnership
- Not even a majority can remove a partner from the partnership
- New partners cannot be brought in unless all existing partners agree
- The partnership dissolves upon the death or bankruptcy of a partner
- Every partner takes part in management of the partnership
Being bound by all of these default rules is often not appropriate in band situations, where bandmembers would prefer to structure their own relationship and make their own rules, rather than have the rules dictated by provincial law.
Band Agreement Terms/Considerations
Here is a non-exhaustive list of terms you will likely see in a standard band agreement includes the following:
Partnership Purpose – Bands should clearly identify the purpose of the partnership, such as recording, song writing, touring, selling merchandise, etc. This is also a good exercise to ensure everyone is on the same page with how the business will be operated into the future.
Band Name – This is a big one. If your band breaks up, the last thing you want is all of the members fighting to use the same band name. Bands need to determine who is authorized to use the band name if the band breaks up. If the band has one key performer/songwriter, for example, it might make sense to allow them to continue using the name if the group disbands. Alternatively, the agreement may dictate that only the entire group may use the name (or upon consent of all members).
Existing Assets – The agreement should confirm whether members of the group have brought assets into the partnership, such as gear, cash, tour van, etc. If so, the agreement should clearly set out how this unequal investment in the partnership will play out. For example, if a partner brings significant assets into the partnership, they may be awarded a higher royalty split, or it may simply be established that the individual partner (and not the partnership) owns the equipment brought in by that partner.
Copyright Ownership – The agreement should outline who owns existing copyrights and copyrights on a go-forward basis (both musical work and sound recording copyrights). Whether the band/members are party to a label or publishing deal will impact how this clause will be drafted.
Money – What is the revenue share among bandmembers from sound recording and publishing revenue, merch sales, touring, etc.? The band may want to split everything evenly. Alternatively, an unequal division of revenue might be appropriate in the circumstances if 2 of 4 members, for example, do most of the writing and produce and make all arrangements for sound recordings. Disputes can arise if there is no clarity on this from the outset
Decision Making – Bands should determine how decisions will be made, such as exploiting the band's copyrights, removing/adding a bandmember, or making certain expenditures. Day to day band decisions might be made by majority vote while more significant decisions, for example, might require unanimity.
Expenses – How are expenses dealt with if, for example, one primary member pays for recording time, rehearsal space, and legal and accounting fees? What (and how frequent) is the reimbursement mechanism? If there is no reimbursement, does that band member get increased royalties/profit shares until they are paid back in full?
Joining and Disassociated Band Members – The agreement should clarify the impact of members joining or leaving the band. For example, if a new member joins the band, will they participate in revenue associated with existing partnership assets, or only assets on a go-forward basis? Alternatively, if a current member quits, gets fired, dies or suffers a disability rendering them unable to contribute to the band in the same way, should they be compensated for their share of the partnership upon disassociation? If so, how will that share be valued and ultimately paid out by the band? If the partner quits, should they be required to provide notice? What about if there is an upcoming tour or other existing contractual obligations? Dealing with these scenarios should be dealt with in the agreement.
Non-Band Activities – Should partners be permitted to engage in other businesses, including other bands or solo projects? If so, should there be any restrictions around those activities, non-music or otherwise?
Dissolution of the Band – The agreement should determine the circumstances in which the partnership could break up or dissolve. Upon any such dissolution, it is important that the partnership agreement set out how partnership property will be dealt with and how existing debts/ liabilities will be paid. Keep in mind that under some provincial legislation, unless there is an agreement to the contrary, a partnership automatically dissolves if a partner dies, declares bankruptcy, or becomes insolvent. A carefully drafted band agreement could ensure this is avoided, but the applicable provincial law should be consulted first.
The above list is not exhaustive, and the terms/considerations should always be tailored for the specific band and their circumstances. Whatever your reason for not signing a band agreement up to now, hopefully this article has armed you with some new information and will encourage you to have that long overdue chat with your band.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
