About the Acquisition and Business Transfer of YouTube Channels and Legal Risks
In general business relations, it’s not uncommon for companies to be acquired or for businesses to be transferred.
When considering expanding a company’s scale, there are options such as establishing a subsidiary or creating a new business division. However, there are many cases where it’s more advantageous to acquire an existing company or accept a business transfer.
Similarly, with YouTube channels, there are cases where it’s more beneficial to be acquired or to accept a business transfer.
For example, by acquiring a company that operates a YouTube channel with a certain number of subscribers, or by accepting a transfer of a YouTube-related business, you can operate a channel with a large number of subscribers without having to increase the number of subscribers yourself. Simply put, there is the advantage of being able to buy the time and effort required to increase the number of channel subscribers with money.
Nowadays, with the growth that has replaced television, the value of channels with a large number of subscribers has increased, making them a subject of business transactions.
Therefore, the number of cases where troubles arise from the acquisition or business transfer of YouTube channels is increasing, and it’s important to fully understand the legal risks involved.
In this article, we will explain what the acquisition and business transfer of YouTube channels are, and the legal risks involved.
YouTube is a video sharing site provided by Google LLC, and it is the largest of its kind in the world.
It offers content that can be enjoyed by people of all ages, from the young to the relatively old. The age range of its viewers is wide, and recently, the profession of a YouTuber has become so popular that it ranks high in the list of desired occupations.
Furthermore, when you post a video on YouTube, it notifies your channel subscribers. The more subscribers a channel has, the more likely it is that the number of video views will increase.
In this article, we will explain about acquisitions in the context of “purchasing a company that operates a YouTube channel“, distinguishing it from business transfers.
Methods of Acquiring a Corporation
Under the Japanese Companies Act, there are various types of companies such as corporations, limited liability companies, partnerships, and general partnerships. However, we will explain using the most typical form of company, the corporation, as an example.
A corporation is composed of shareholders who hold shares.
And, the decision-making of the company is basically determined by a resolution of more than half of the total shareholders who attend, and more than half of their votes. Therefore, if you hold more than half of the shares of the target company for acquisition, you can make basic decisions.
For important decisions, it is determined by a resolution of more than 2/3 of the shareholders who have more than half of the voting rights. Therefore, if you hold more than 2/3 of the shares of the target company for acquisition, you can also make important decisions.
Therefore, in a corporation, it is common to acquire by obtaining the number of shares that can make decisions alone.
Acquisition of a YouTube Channel
If a corporation operates a YouTube channel, it is conceivable to acquire it by acquiring the shares of the corporation.
In the case of acquiring a YouTube channel, it is often the case that the corporation operating it is not listed.
Therefore, it is necessary to consider the acquisition conditions such as the method of acquiring shares, the calculation method of share price, and the number of shares to be transferred.
Also, if it is not clear what kind of company it is, you cannot correctly judge its value and decide whether to acquire it or not.
Therefore, when acquiring a company, it is common to conduct due diligence.
Due diligence refers to investigating the value and risks of the target company to accurately understand its contents.
When acquiring a company that operates a YouTube channel, it is important to thoroughly understand what kind of company it is in advance.
About Business Transfer
A business transfer refers to the structure where a specific individual or corporation transfers the business they are conducting.
For example, a specific company may be running a YouTube channel operation business and a talent management business. In such a case, it is conceivable that the company retains only the talent management business and transfers the YouTube channel operation business to another company or individual.
Business transfers are stipulated in Article 467, Paragraph 1, Items 1 and 2 of the Japanese Companies Act.
(Approval of Business Transfer, etc.)
A stock company must receive approval for the contract related to the following actions by a resolution of the general meeting of shareholders by the day before the date (hereinafter referred to as the “effective date” in this chapter) on which such actions take effect.
1. Transfer of all business
2. Transfer of a significant part of the business (excluding those where the book value of the assets to be transferred by such transfer does not exceed 1/5 of the total asset amount of the stock company calculated by the method prescribed by the Ministry of Justice Ordinance (or a lower ratio if stipulated in the articles of incorporation).)
The significance of business transfer is not necessarily clear from the above provision, but in the old Commercial Code Article 245, Paragraph 1, Item 1, which corresponds to Companies Act Article 467, it is stated:
“The transfer of all or a significant part of a business (operation)” refers to the transfer of all or a significant part of the property organized for a certain business (operation) purpose and functioning as an organic whole, thereby allowing the transferee to take over all or a significant part of the business (operation) activities conducted by the transferor with that property, and resulting in the transferor bearing a non-competition obligation to the extent of the transfer“Supreme Court Judgment of September 22, Showa 40 (1965)
Importance of Confirming the Subject of Business Transfer
In the case of an acquisition, the company is acquired as it is, so the division of the scope of the acquisition is not usually an issue.
However, in the case of a business transfer, it is important to confirm what the scope of the business transfer is.
For example, if you are using a personality on a YouTube channel, you need to transfer the copyright.
Transfer Targets in the Business Transfer of a YouTube Channel
What is included in the scope of a YouTube channel business transfer varies from case to case, but it may include the following:
- A complete set of filming equipment
- A complete set of intellectual property rights related to the channel (original data of thumbnails, etc.)
- A complete set of intellectual property rights related to videos posted in the past and their related content (original data of videos, etc.)
- Channel account (login ID, password, etc.)
- If there is a website for the channel, the server account related to it, the entire website, and a complete set of related intellectual property rights
- If there are SNS accounts such as Twitter and Instagram for the channel, the respective accounts and a complete set of related intellectual property rights
Handling of Performers on a YouTube Channel
If there are performers on a YouTube channel, there are two possible approaches: asking the performers to continue appearing on the YouTube channel and agreeing with the performers that they will not appear on the YouTube channel in the future and will not appear on other YouTube channels for a certain period.
If there are performers necessary for the operation of the YouTube channel, having them continue to appear in videos after the business transfer can help maintain stable views. Therefore, if necessary, arrangements should be made to ensure that they continue to appear in videos.
On the other hand, if the company that has taken over the business will operate it independently in the future and will not have the performers appear in videos, it may be considered to prohibit the performers from appearing on other YouTube channels for a certain period. This is because if the performers appear in other videos, viewers may move to those videos. However, prohibiting performers from appearing in other YouTube channel videos restricts their freedom of career choice, so an agreement to permanently prohibit them from appearing in other YouTube channel videos may be deemed invalid as it violates public order and morals. Therefore, a reasonable period should be agreed upon depending on the case.
Introduction to Our Firm’s Measures
Monolith Law Office is a legal office with high expertise in both IT, particularly the Internet, and law. Nowadays, even among popular YouTubers and VTubers, there are legal risks. Especially when it comes to money-related matters such as channel transfers, it can potentially become a major issue in the future. Our firm also handles legal matters for YouTubers and VTubers.