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Tuesday, September 10, 2013

Special Purpose International Division

The company has received some shareholder inquiries about our postings yesterday concerning the benefits of organizing an entity in the Republic of Ireland.  To be clear, the purpose of such an activity would be to maximize shareholder return from International Sales (including pre-sales for "Mother Goose").  However, HHSE does not otherwise envision a scenario of moving the public-company itself to a domicile out of the United States. 

With each motion picture production, most studios form a "Special Purpose Entity" (SPE) for such endeavors for a variety of reasons (ranging from liability insulation to accommodation of third party investments).  In determining the structure and domicile of a special purpose entity, consideration needs to be made with respect to tax issues, co-production ventures and sales-revenue benefits.  A Hannover House related SPE domiciled in Ireland could potentially save the company substantially in taxes, while positioning the film for enhanced revenues through E.U. Certification Status.  Bottom-line, a SPE domiciled in Ireland could result in millions of dollars of net benefit to HHSE.

Next time you're watching a major feature film, don't leave the theatre (or turn off the television) until the final credits have scrolled.  Towards the end of the closing credits (often the very last lines), you are likely to find that SPE's were utilized for each film production, while the overall distribution (for instance) might be UNIVERSAL or FOX or some other major studio.  When you're dealing with a film that has a $20-million revenue potential, if the studio can effect a savings of 28% on taxes and see an improvement in E.U. Territorial Sales of 15%, the net results literally translate into multiple millions of dollars.