# Driver 3. Legal Architecture

> Part of the *Music ABS and Institutional Readiness* knowledge base, Part III (The Five Drivers). See `03 - The Five Drivers (overview).md` for the driver framework and `INDEX.md` for the full pack map.

Once the platform can administer the collateral, the legal architecture determines whether the cash flows are **enforceable, isolatable, and bankruptcy-remote**. The architecture is built once at high cost and audited continuously, rather than rebuilt deal by deal, and the firms with active practices across structured finance, IP, and bankruptcy law are concentrated. **DLA Piper, Latham & Watkins, Reed Smith, Greenberg Traurig, King & Spalding, and Milbank have been most active in the sector**, managing true-sale and non-consolidation opinions, UCC and Copyright Office perfection, account control agreements, sub-publishing routability, and the re-papering of legacy acquisition documentation. Retaining specialty counsel two to three years before a contemplated transaction is part of the infrastructure of becoming a rated issuer.

## True sale and bankruptcy remoteness

Achieving true sale of music copyrights into a bankruptcy-remote SPV is the legal foundation on which rated music ABS rests, and music copyright introduces specific frictions the standard structured finance template does not. Many smaller catalog acquisitions, particularly those executed on bespoke creator-friendly terms, contain:

- reversion clauses,
- consent-to-assignment provisions, or
- audit-triggered clawback rights

that survive the original transfer to the fund. Any of these can be cited by restructuring counsel to argue against true sale, invalidating the SPV's ownership claim. Claire Hall observes that the friction is largely a timing problem:

> "Clients sometimes don't realize they should involve us at the asset acquisition phase. From our perspective, it's better to get us involved as early as possible. The earlier we're involved, the easier it is for us to address commercial issues or asset-specific nuances, which could potentially be areas of concern for a rating agency or an investor."
> — Claire Hall, Partner, DLA Piper LLP

Re-papering legacy catalog acquisition agreements is consistently among the costs platforms underestimate, because it requires creator-by-creator negotiation that is difficult to accelerate through process changes. Funds that build acquisition documentation with downstream ABS eligibility in mind from the outset substantially reduce the re-papering burden, which is one of the strongest arguments for engaging specialty counsel before the first meaningful acquisition.

## Perfection of security interests

Two parallel filing systems govern the perfection of security interests in music copyrights, and rated transactions complete filings under both.

- **The Uniform Commercial Code (UCC)** covers personal property generally, including copyrights, and is satisfied by filing a UCC-1 financing statement at the SPV level.
- **The U.S. Copyright Office** has its own recording system for assignments and security interests in registered copyrights.

Court decisions have not fully resolved which regime preempts the other, so standard practice combines UCC-1 filings at the SPV level with Copyright Office recordation for all registered works in the borrowing base, supported by legal opinions confirming perfection in each.

The volume of registered works (tens of thousands of compositions, in some cases over a million across master trust pools) makes perfection a material operational workstream, and the platforms that have built systematic Copyright Office filing capability ahead of debut clear this step on a predictable timeline.

## Account control and cash flow ringfencing

Account control agreements over the collection accounts receiving DSP, PRO, MLC, and SoundExchange flows are standard structural elements of a rated transaction. These agreements, signed by the SPV, the indenture trustee, and the depositary bank, give the trustee control so that **cash can only be disbursed in accordance with the contractual waterfall**, regardless of any instruction from the servicer or the sponsor.

Sub-publishing agreements need to be reviewed in parallel to ensure that foreign collecting society distributions can be routed to the lockbox under the trustee's control rather than the sponsor's operating account. The routability discipline applies to all rated transactions, but the operational complexity scales with international exposure. For platforms with significant non-US royalty income, sub-publishing routability is frequently among the items that extend the critical path of deal preparation, because foreign collections can flow through a network of **more than 220 collecting societies in over 110 countries** before reaching the trustee-controlled lockbox.

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**See also:** `02 - Structure of Music ABS.md` (where account control, waterfall, and SPV mechanics fit in the broader structure) · `03b - Operational Maturity.md` (the song-level data discipline that supports perfection) · `05 - Path Forward.md` for the checklist version.
