Production Incentives

What is a Completion Bond?

A “completion bond” (also referred to as a “completion guaranty”) is akin to an insurance policy and is usually a prerequisite for a producer to secure financing (be it private equity investments, bank loans, gap loans or even distribution advances). Most independent films that are produced are bonded. If a film is not bonded and the producer fails to complete the film (usually because he has run out of funds) or goes over schedule (risking the loss of cast members and/or missing a delivery date with a distributor), the film’s investors are out of luck and their investments are most likely lost. The bond is intended to protect the film’s financiers as it guarantees that the film will be completed and delivered on budget and on schedule. If the producer fails to complete and deliver the film, the completion guarantor has the option of either completing and delivering the film itself or abandoning the production and reimbursing the investors. The bond company, if it accepts to bond a film, will enter into two agreements: a “Completion Guaranty” among itself and the investors (who are the beneficiaries of the bond); and a “Completion Agreement” between itself and the producer. Bond representatives must be kept informed of all relevant production matters during the shoot (with daily and weekly reports) and will oversee the production to make sure it stays on track. Occasionally, the bond rep will visit the set. The bond company usually has the power to fire and replace the producer, director or other key elements of the production crew if it judges that the film is at serious risk. Whether or not a bond company accepts to bond a film in the first place will depend on a number of factors including the reputation of the producer, the script, the cast, the budget, the production schedule, the qualifications of department heads, and the value and reliability of the sales estimates. The two most prominent bond companies as of the writing of this text are Film Finances and International Film Guarantors.