Royalties can be used to finance privately owned companies
Having to maximize reported profitability.
Bearing the burden of directors appointed by investors to the Board
Restricting the compensation, retirement plans and perks of the founders.
Being pressured to sell the company or go public.
Disclosing plans and confidential data to investors.
Being influenced or constrained by investors with regard to the hiring or firing of personnel.
Revealing or needing approval for acquisitions or budgets.
Being restricted with regard to terminating the royalty on pre-agreed terms.
Founders losing full control of their companies, as is the case when equity is used to raise capital. If they use royalties, instead of equity, in obtaining the growth capital that permits the expansion of their business, they retain full ownership of their business.
Royalties can benefit investors
Enabling them to participate in corporate revenue growth through royalties for agreed periods of ten to twenty years.
Removing concerns about reported profit levels, unless the company’s sustainability is threatened.
Collecting royalty payments immediately on the receipt by the issuer of all defined revenues.
Receiving an agreed percentage of revenues monthly, or as frequently as negotiated.
Being secured by the company’s critical assets regarding the royalty issuing company’s contractual compliance to immediately pay to the investor the agreed percentage of revenues.
Accepting a lower percentage of revenue payment for an assured minimum payment level over agreed periods.
Having an option to require the company to repurchase the royalty, at the investor’s net cost of the royalty, at the end of an agreed period.
Receiving an independent audit of the royalty issuing company.
Being the beneficiary of favorable terms permitting the termination of the royalty earlier than the maturity of the royalty agreement.
Avoiding the significant conflicts of interest frequently present and experienced by private-company investors with the founders and controlling shareholders of privately-owned companies.
Royalties are the better way of both investing in and financing privately-owned companies.
Arthur Lipper, Chairman
British Far East Holdings Ltd.
+1 858 793 7100
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