{{Short description, Form of insurance used in filmmaking
In
filmmaking
Filmmaking (film production) is the process by which a motion picture is produced. Filmmaking involves a number of complex and discrete stages, starting with an initial story, idea, or commission. It then continues through screenwriting, cast ...
, a completion guarantee (sometimes referred to as a completion bond) is a form of
insurance
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
offered by a completion guarantor company (in return for a percentage fee based on the budget) that is often used in independently financed films to guarantee that the producer will complete and deliver the film (based on an agreed script, cast and budget) to the distributor(s) thereby triggering the payment of minimum distribution guarantees to the producer (but received by the bank/investor who has cash flowed the guarantee (at a discount) to the producer to trigger production). ''The Producer's Business Handbook'' by John J. Lee Jr, Chapter 6, (Focal Press, 2000)
The producer will agree to deliver a film (based on an agreed script/cast/budget) to a distributor in respect of certain territories in consideration ( inter alia) for payment of a "minimum distribution guarantee" payable at the point in time when the producer has delivered the completed film. The producer obviously requires such funds upfront to finance the film so the producer takes the signed distribution contract to a bank/financier and will effectively use it as collateral against a production loan. It is at this stage that the bank will require a completion bond to be executed to provide them with the required level of security against the risk of non-delivery by the producer. The parties to the completion bond agreement are typically the producer, the financier(s), the completion guarantor company and the distributor(s).
These methods of funding can be complicated and expensive due to legal, bank fees and interest. The bond fee itself is negotiable—typically 3–5% depending on the risks as assessed by the completion guarantor. For these reasons, completion bonds are typically used on mid- to high-budget independent films.
Key to the completion guarantor company's risk assessment process will be a careful scrutiny of key persons on the production team to determine whether the film is "bondable". Of particular interest will be the
director
Director may refer to:
Literature
* ''Director'' (magazine), a British magazine
* ''The Director'' (novel), a 1971 novel by Henry Denker
* ''The Director'' (play), a 2000 play by Nancy Hasty
Music
* Director (band), an Irish rock band
* ''D ...
line producer
A line producer is a type of film or television producer who is the head of the production office management personnel during daily operations of a feature film, advertisement film, television film, or TV program. A line producer usually works on o ...
, production manager, producer, cast and cinematographer, since these personnel will ultimately be responsible for keeping the production on budget and on schedule.
The completion guarantor will require a regular (usually daily) flow of production paperwork—for example, production reports, cashflow and cost reports etc. Under the bond agreement, the completion guarantor has the contractual right to "take over the film" (which will include wide "hire and fire" rights over any personnel including the director) since they are financially liable if the film goes over budget. In extreme circumstances, films are sometimes finished by the completion guarantor company (this infamously occurred during production of ''
The Thief and the Cobbler
''The Thief and the Cobbler'' is an unfinished animated fantasy film co-written and directed by Richard Williams. Originally conceived in the 1960s, the film was in and out of production for nearly three decades due to independent funding and ...
'')—an event that is traumatic for the crew and cast, and can be disastrous for a film's creative and commercial ambitions. However completion guarantors also know that it is usually in their interests to work with an established production team to assist them to bring a production back onto schedule and within the agreed budget.