January 12, 2006
More on Rock N Roll Financing
Posted by Gordon Smith

Mike Madison asks some good entity-law questions about the Korn financing plan, which I blogged about below:

Live Nation looks an awful lot like a minority shareholder. Do band members own Live Nation any fiduciary duties? What happens if Korn decides to go in some new musical direction? What happens if Live Nation wants the band to play its most popular stuff night after night, but the band doesn’t want to? And what about personnel changes? Good lawyering means that a lot of this stuff got covered in the contract, but even good lawyers sometimes forget to cover some obvious things.

Now I am feeling like I need to know more. How are rock bands organized? Are they typically incorporated? Whatever the form of organization, Mike is right that these issues would arise if the band started taking investors in the band, but that doesn't seem to be Korn's strategy. Its financing deal looks more like a non-entity alliance than a corporate investment, in which case Korn would not owe the investors fiduciary duties and the control issues would be resolved by contract, just like any other arm's length business deal.

If anyone out there has access to the deal documents -- or deal documents for other musical bands -- that you would be willing to share, I would be quite curious to look at them.

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