The question of how a developer can reserve the right to the game in case of receiving an investment is answered in their column by Irina Gushchina and Vadim Kocheshev, lawyers at Semenov&Pevzner.

Irina Gushchina and Vadim Kocheshev

Investing in games can be very promising for both investors and game creators. Before investing in game projects, it is necessary to agree on all the details and sign a contract. Usually, such an agreement describes the investment mechanism, the obligations of the parties and the distribution of rights to the final product. If the parties have disagreements and these disagreements cannot be resolved on their own, one of the parties may apply to the court.

When resolving a dispute, the court analyzes not only the provisions of the concluded contract, but also the general terms of the legislation applicable to this type of contract. The outcome of the dispute may vary greatly depending on the type of a specific investment agreement in the game. This can be influenced by including in the contract the key terms of the type of contract that best suits the relationship between the investor and the developer studio.

Below we will describe the main options for qualifying investment contracts and give recommendations on which conditions are better to include and not include in the contract.

Please note that the article is based on Russian law. If the contract is concluded under foreign law, the terms of the applicable legislation may vary greatly.

Legislation on investment activities

There are several laws in force in Russia that apply to investment activities. The key is the Federal Law "On Investment Activities in the Russian Federation carried out in the form of capital Investments". Next, we will call it the "Federal Law on Investment Activity".

As the name of the law implies, it applies to investments in the form of capital investments. Capital investments are investments that are invested in the fixed capital of a company. Examples of capital investments are the construction of new buildings, the purchase of new equipment or transport. The fixed capital also includes the intangible assets of the company. They include intellectual property rights.

The Federal Law on investment activity is usually applied to real estate and manufacturing, but does not limit the types of property in which investments can be made. Therefore, this law can also be applied to the field of gaming.

There is also a law "On foreign investments in the Russian Federation". This law guarantees a safe investment regime in Russia for foreign investors. Since the goal of any investor is to get maximum income with minimal risks, it is important for foreign investors to effectively protect their rights from the state that receives investments.

The legislation on investment activity takes into account the fact that investing is a risky area. For investors, there is always a risk of loss and lack of payback of their invested funds. Investing is not a gift, the investor is interested in deeper participation in the process of spending his investments.

Pros and cons of applying investment legislation to investments in games

The legislation on investment activity protects the rights of investors. For example, in accordance with the Federal Law on Investment Activity, investors have the right to:

  • own and manage the results of investing, that is, the finished game;
  • to control what the money provided by them is spent on.

Accordingly, such investment agreements provide for stricter reporting for the developer studio. This may be the regular provision of financial reports on costs, the need to strictly follow an agreed development plan, and limits may be set for certain categories of costs.

On the other hand, there are advantages for the developer studio as well. This is due to situations when the investor does not receive a lot of income from using the game, or when the contract is terminated prematurely. The parties can determine the financial conditions for such situations themselves, up to the condition of non-repayment of investments. If such conditions are not specified in the contract, the studio will need to reimburse the investor for all losses (including lost profits), or return the investor's property according to the rules on unjustified enrichment. If the dispute is resolved in court, the amount of payment to the investor may be determined by the court.

Judicial practice: what do the courts pay attention to in order to apply investment legislation?

The arguments for the application of legislation on investment activities will be the following contractual terms:

  • the investor's goal of making a profit is clearly spelled out;
  • there are conditions for the distribution of income from the finished product between the investor and the developer studio. These conditions may vary, but usually the investor receives royalties from using the game;
  • the investor acquires the rights to the finished product. The transfer of all rights to the investor is not required. It is possible that the investor and the developer studio become joint copyright holders of the game;
  • there is no direct reference to other legal norms in the agreement (or it is indicated that the norms on the loan agreement are not applicable).

But there is judicial practice when the courts applied the Federal Law on investment activity to the contract, although the rights to the finished product were not transferred to the investor even in part. However, the remaining conditions for the application of the legislation on investment activities specified above were met.

How to reduce the risks of applying investment legislation to the contract?

To ensure that the legislation on investment activity does not apply to the contract, we recommend the following:

  1. Specify that the rights to the finished game remain with the developer studio and are not provided to the investor;
  2. Describe the terms of the distribution of income from the finished game as repayment of the loan;
  3. Limit the investor's rights to control the spending of funds. You can specify that the studio is not required to provide reports, or that the range of funds is not limited.
  4. If the investor needs a guarantee to receive the amount of investment back, then determine in advance the conditions for the return of the amount of investment (so the agreement will become a loan agreement).

Application of the loan agreement design

The courts can evaluate the game investment agreement as a loan agreement.

Loan agreements come in different types, depending on what is transferred under the contract: money or other property. When investing in games, the developer is usually provided with money – therefore, below we will consider a cash loan agreement. It is described in the Civil Code of the Russian Federation. Under the loan agreement, one party, the lender, transfers ownership of the money to the other party, the borrower. The borrower undertakes to return to the lender the same amount of money for which interest can be accrued. As a rule, an interest-bearing loan is used for investment purposes.

The essential condition is the subject of the agreement: the parties need to agree on the amount and currency of the loan. If the agreement does not specify how much money is transferred to the borrower, then the agreement may be considered not concluded.

If the lender expects to repay exactly the same amount as he gave to the borrower, it must be specified in the contract that the loan is interest-free. If you do not specify such a condition, the contract will imply the accrual of interest for the use of the loan. When the amount of interest is not specified in the contract, it will be determined by the key rate of the Central Bank of the Russian Federation, which was in effect during the relevant periods.

If the parties have not specified in the agreement the term for repayment of the loan or such a period is determined by the time of demand, the loan, as a general rule, must be returned within 30 days from the date of the lender's request to do so. However, as a rule, the loan agreement includes conditions on the term and procedure for repayment of the loan.

In order to make an investment, the loan agreement may be targeted. To do this, it is necessary to include in the contract a condition on the use of funds by the developer for certain purposes. As a general rule, in this case, the developer is obliged to provide the lender with the opportunity to control the intended use of the loan. When the developer does not fulfill the condition on the intended use of the loan or does not provide the lender with the possibility of control, the lender may refuse further execution of the contract and demand early repayment of the loan and payment of interest for the use of funds.

Pros and cons of a loan agreement for investment purposes

The main advantage of the loan agreement is the certainty of the conditions for the return on investment. Investing does not always entail making a profit. When registering the relationship of the parties as a loan, the investor is guaranteed a refund of the invested amount within a specific period and with certain percentages specified in the agreement, or calculated at the key rate of the Central Bank (if the parties have not agreed on the amount of interest in the agreement). In this case, the investor does not bear the risk of complete loss of invested funds, and the successful implementation of the investment project is not important for making a profit.

The disadvantage of the loan agreement is that it generates only interest income from the loan amount for the investor. Another disadvantage is that when concluding a loan agreement, the lender is not an investor in essence of the legislation on investment activities. That is, as a rule, the lender is not granted exclusive rights to the finished game.

The loan agreement is usually more beneficial for the developer, since he receives financing and retains exclusive rights to the game, while committing to repay only the loan amount with interest – the income from the distribution of the game remains entirely with the developer.

Judicial practice: what do the courts pay attention to when qualifying a contract as a loan?

To distinguish between loan agreements and investment activity agreements, the courts are mainly guided by two conditions:

  • the repayment of the invested amount. A loan relationship arises when one party transfers money and other objects to the other party, and the other party undertakes to return the same amount of money with accrued interest.
  • under the loan agreement, the investor is not granted the exclusive right to the finished product.

As the courts point out, an investment agreement, under the terms of which the investor undertakes to deposit funds and at the same time has the right to return the invested funds, but does not acquire ownership of the result, is a loan agreement.

If the parties irrevocably transfer funds to each other in the same amount, such an agreement may be assessed by the court as a fake transaction that covers an interest-free loan agreement.

If the investor has information about the financial difficulties of the financed studio, the courts usually conclude that the relationship between the parties is compensatory financing, and not a loan agreement.

How to reduce the risks of recognizing an investment agreement as a loan agreement?

In order to avoid recognition of an investment agreement as a loan agreement, we recommend paying attention to the following:

  1. Do not specify a specific period for the return of the investment amount;
  2. It is not necessary to calculate the investor's profit as a percentage of the investment amount – it is better to determine profit through the potential income from the turnover of the investment object (royalties from the use of the finished product);
  3. We recommend that you specify the conditions for the joint activity of the investor and the studio: include in the text of the agreement the conditions on the investor's right to control the activities of the invested person, on control over the expenditure of investments;
  4. Provide either the alienation of the exclusive right to the created object in favor of the investor, or the conditions for joint ownership of the rights to the finished game.


Although investment activities and loans have intersections, they differ in the main objectives of the activity of the party that provides money to the developer. The purpose of investment activity is to receive income from the result of investments and obtain rights to it. Investment relations are based on the possibility of a complete loss of invested funds. Investments are not characterized by signs of urgency and repayment of the investment amount, unlike loan relationships. The purpose of the loan is more financial: the lender provides financing, does not receive rights to the finished object, but can make a profit at the expense of interest on the loan. Even if a loan is issued for a long time, or it has a targeted nature associated with the ability to control the expenditure of borrowed funds, it does not become an investment activity agreement.

The choice of a contractual structure is influenced by the basic agreement between the parties on the repayment of invested funds and income from the final result. In addition, it is important to immediately agree on the distribution of rights to the finished game: will it belong entirely to the developer studio, or will the investor also have the rights. It should be borne in mind that if the agreements of the parties clearly fall under the terms of investment legislation, then artificially adding rules on the loan agreement to it does not guarantee that the court will agree with the qualification of the agreement as a loan agreement.