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Author:  James Shirras Director of Legal and Business Affairs, Film Finances

What is a Completion Guarantee?

A completion guarantee is a legal undertaking by the guarantor to the film's financier(s) that the film will be completed and delivered to the specification agreed (ie. based on the agreed script, featuring the agreed principal cast, being of roughly the agreed length etc.) and by the date agreed in their contracts with the producer. A completion guarantee is not, however, an insurance policy - the guarantor will not automatically pay out in the event that the film is not completed as specified, but will work with the producer and financiers to try to ensure the best outcome from whatever the current situation may be. Nor does the completion guarantee represent a financial guarantee that all the production finance will be forthcoming: if one of the financiers defaults on its commitment during the course of production the problems which flow from that will not be the completion guarantor's responsibility.. However, assuming an uninterrupted production cashflow, the guarantor will be responsible for ensuring that either (a) completion and delivery of the film take place or (b) that the financiers are repaid the money that they have advanced to that point. Whenever a film runs into serious difficulties, the guarantor must assess whether and how the film can be completed or whether the correct action is to close the production down and repay the money that has been advanced. The latter is of course likely to be a most unattractive option for all concerned.

Contractual Relationships

The completion guarantor has contractual relationships with the film's producers and its financiers, including any film support funds (such as the UK Film Council), and the distributors who have agreed to take delivery of the film. The relationships with these different parties are quite distinct:

i. Banks: their priority is to ensure that they are repaid by the distributors on delivery of the film or by the completion guarantor in the event that the film is not delivered. They have little to no interest in what the film looks like when it is delivered as long as the distributors are willing to accept delivery on that basis. They may also seek assurances from the guarantor that the film will qualify as British and, thus, be eligible for tax relief based funding.

ii. Film Funds: are looking to ensure that they can get their money back out of the film when it is completed but may also have a political mandate in relation to cultural or economic development. To some extent, they are acting like a bank but they have more creative interest and input into the film and will take a keen interest in the ongoing production process.

iii. Distributors: their main concern is to receive the film that they originally contracted to distribute - and at the price that they originally agreed to pay. However, because their priority is having the best possible film to sell in their territory, they may be willing to put up more money if they feel that this is likely to yield returns in terms of the commercial performance of the film.

iv. Producers: the expression "producer" can refer both to the company which is making the film and also to the individual who has responsibility for delivering the film to budget and schedule. In co-productions, the guarantor will contract with each separate production company that has any share of the executive responsibility for the making of the film. Given the producers' intimate knowledge and experience of the film, the guarantor will generally have to work with these individuals if the guarantor needs to become involved in the making and delivery of the film, but it will be the guarantor who calls the shots in terms of making sure that the film is completed on time and budget.

When entering into a contract with the producer, the guarantor must be confident that the individuals involved are capable of delivering the film in the way that the financiers expect it to be made. They also need to ensure that in the event of anything going wrong, the producer has taken appropriate action to minimise the guarantor's exposure. This will include ensuring that the producer has taken out adequate insurance for the cast (including essential elements insurance when necessary), the negative, and any other potential losses.

The Guarantor's Rights

The guarantor has the right to approve everyone involved in the production and several other aspects of the shoot, including the locations. The key members of the crew, as far as the guarantor is concerned are: the line producer (or production manager), the production accountant and the director of photography (who is responsible, with the director, for ensuring that the film stock is used responsibly). It is unusual for the guarantor to become involved in creative decisions, but it may happen if there is any danger that creative differences or tensions could threaten the completion of the film. There can also be problems if any creative elements are deemed to be essential to the completion of the film (for example because the distributor insists on a certain director or star) in which case, the guarantor will seek to ensure that this element has signed up to the shooting schedule, approximate film stock requirements etc.

The guarantor will insist on receiving daily reports on progress detailing the beginning and end times for the day's shoot; the number of people on set; what scenes have been shot; and how much screen time has been shot that day. They will also require a weekly cost statement showing how the spend is progressing against budget. They have the right to insist on meeting anyone connected with the production at any time, and can visit the set, unannounced, whenever they want. Although their aim is to keep the process collaborative whenever possible, they will also retain the right to issue instructions to anyone on the film - or to order anyone off the film - if they deem it necessary to the successful delivery of the film as contracted.

Protective Actions by the Guarantor

One of the first actions that the guarantor might take if the film is running into budgetary problems would be to take control of the film's cash flow. This would involve taking over responsibility for all payments from the production account, and checking, or in some circumstances counter-signing, all cheques drawn on the account. If this action fails to bring the production back under control, the next step would usually to be to look for changes to the script to bring the film back to budget and schedule. The guarantor also has the right to change personnel on the production, for example by bringing in a supervising producer to take day to day control. Guarantors have to take some involvement in the control of the film in about one in five cases.

If the production still goes over budget, the guarantor will have to discuss with the producer and the other parties involved what action to take to ensure that the film is still delivered as required by the distributors. Although, at this point, the guarantor starts to become liable for any overages, it is not in their interest simply to slash and burn to bring the budget back to a reasonable level, as the main priority is to deliver a film that the distributor will accept. Sometimes the financiers and/or the distributors will agree to put more money into the production in order to avoid the need for any potentially damaging cutbacks. In about one in twelve cases, however, the guarantor will end up putting money into the film to meet overcost. They will usually have a recoupment position to enable them to recover this finance but they stand well back in the queue (immediately behind the principal financiers) and do not expect to see any of their money back.

Relations with Producers

It is important that the relationship between the guarantor and the producers is as open and positive as possible. The producer has to let the guarantor know everything relevant about the production both before the guarantee has been issued and during the production. The producer should start the process of arranging the guarantee as soon as he is reasonably confident that the financing for the film is in place. The serious detailed discussions begin when the budget is fixed, the final script is ready and a production schedule has been prepared. Typical fees for a guarantee are around 4% of the total budget (excluding any contingencies and the cost of the guarantee) for a very small film, dropping to around 2.5% to 3% for a medium budget and 2% at the top end. In some circumstances, the guarantor may pay a rebate on the fee if the guarantee is not called, but these arrangements incur a higher cost and may not be worthwhile for the producer: the role of the guarantor is really to protect the financier (and thereby ensure that the financier is willing to support the film), so the producer should not expect anything back from the fees that they pay. The guarantor may refuse to offer a guarantee if the film is too small, if the producers have a poor track record, or if they are concerned about specific factors around the shoot, such as weather conditions or security risks, which, in their view, make it doubtful that the film can be completed successfully.

Top Tips

• A completion guarantee is a legal undertaking by the guarantor to the film's financiers and distributors that the film will be completed and delivered to the specification agreed and by the date agreed in their contracts with the producer.
• The main obligation of the guarantor is, depending on the circumstances, to ensure that completion and delivery take place or that the financiers are repaid the money that they have advanced to that point.
• The guarantor will insist on receiving daily reports showing how the film is proceeding against schedule and detailed weekly cost statements summarising the spend to date against budget.
• If the production starts to go over budget, the guarantor can take over financial control of the film, or bring in their own producer to supervise the production. In about one in twelve cases, the guarantor will have to put money into the film to meet overages.
• The relationship between the guarantor and the producers must be open and positive. The producer must tell the guarantor everything relevant about the production both before the guarantee has been agreed and during the production.