The failure of crowdfunding publisher Unbound has left affected authors – and, in some instances, crowdfunding sponsors – facing significant financial losses and with their publication plans in tatters.

If a publisher runs out of money, everyone suffers – but especially the author, who has placed their trust, intellectual property and, in the case of crowdfunding publishers, often their own money into the company.

Rather than entering liquidation, Unbound went into administration and assigned its authors’ contracts to a new company, Boundless. It also gave assurances that, when funds became available, Boundless would pay authors who were owed money. Authors have questioned whether Boundless was truly independent of Unbound, raising concerns about governance, transparency and communication.

At the Society of Authors (SoA), many members have sought our advice – a stark reminder of what can go wrong when financial models falter and transparency is lacking. And while no one can predict a collapse, authors can take steps to protect themselves. Here are five key lessons.

1. Understand the terms

When authors sign a publishing contract, they hand over significant rights. With the Unbound contracts, this included not only rights in the published work but also control over the sponsor details and financial aspects of pre-publication crowdfunding – even though most of the actual fundraising commitments had to be met by the author.

We always recommend authors take advice before entering into any agreement under which they are licensing rights in their work (as well as a share of future income). Understand what rights you are giving the publisher, what obligations you are accepting, and what will happen if things go wrong.

Be aware that if you assign copyright, your rights at points four and five below may well be compromised.

2. Scrutinise the financial model

In traditional publishing contracts, the publisher bears the cost and risk of publication.

Where publication is dependent on income from other sources – be that the author, crowdfunders, or in the form of a grant or other sponsor – it needs to be clear what happens if the funding is not secured. Authors should consider what, if anything, the publisher itself is investing in the project in return for the rights and share of future income it takes.

If the worst happens and a publisher collapses, seek advice immediately. The consequences can be complex

3. Know how the royalties are calculated

Royalties based on net profit or post-cost calculations are notoriously opaque. They are hard to audit and can conceal excessive deductions.

Where possible, opt for royalties based on the recommended retail price (RRP) or net receipts (which should be defined as monies received from retailers or distributors, without any deductions other than local taxes). Always check your royalty statements, and if anything seems unclear or inaccurate, raise it with the publisher promptly.

4. Pay attention to termination clauses

Although it can be difficult in the excitement of being offered a publishing contract, most contracts last for the author’s lifetime, plus 70 years. Provisions for earlier termination in certain circumstances are therefore crucial. These should include the right to terminate if sales have dried up, if the work is out of print, if the publisher is in unremedied breach of contract, or if it goes bust.

Most Unbound contracts said that the contract would terminate if the publisher went into liquidation or receivership. In contrast, most Neem Tree contracts also included if the publisher "enters into administration or [is] otherwise unable to meet its obligations".

In practice, this wording can mean the difference between retaining or losing control of your work in a crisis.

5. Act quickly when trouble arises

Authors should not delay if things start to go wrong – especially if they are owed money. The longer you wait, the greater the risk that legal action is no longer viable because the publisher has run out of money.

In most instances authors can do either or both of the following:

• Invoke the breach of contract clause in your contract – if there is one – to get your rights back if the breach is not remedied.
• Threaten legal action (often inexpensive and online) for the monies owed plus interest at 8% above the base rate and a penalty fee.

If the worst happens and a publisher collapses, seek advice immediately. The consequences can be complex and will depend on several factors – including whether the work has been published.

So what’s next? We urge those involved at the Boundless Publishing Group to make every effort to find a solution and commit to paying Unbound’s authors as a priority. For authors, The Society of Authors is here to help. If you have been affected – or want advice on your next deal – do get in touch. Your rights matter.