Author: Olena Andriyko, lawyer at F&P
Investing in art and antiques is not only a profitable financial instrument but also a field regulated by special legislation. Transactions involving such objects require legal expertise, as they may have the status of cultural value, be subject to customs restrictions, and also be the subject of copyright and inheritance law.
Investing in art objects (paintings, sculptures, iconography) is not a classical form of investment. In fact, such objects are purchased for their subsequent sale, rental, with the aim of making a profit. The formation of the value of objects is influenced by numerous factors, such as: the author; the author’s reputation; the “age” of the object; the materials from which the object is created, etc. An important aspect for the formation of the object’s value is intangible assets, and intellectual property that arises as a result of the creative process.
An important role in investing in art objects is played by copyright. In particular, the author of the original work retains personal non-property rights to the work even after its alienation, such as:
- the right to demand recognition of their authorship by properly indicating the author’s name in the original and copies of the work and in any use of the work, if practically possible;
- the right to prohibit the mention of their name during any use of the work if the author wishes to remain anonymous;
- the right to choose a pseudonym, to indicate and demand the indication of the pseudonym instead of the author’s real name in the original and copies of the work and in any use of the work;
- the right to demand the preservation of the integrity of the work, to oppose any distortion, alteration, or other modification of the work, including the accompaniment of the work with illustrations, prefaces, postfaces, commentaries, etc., without the author’s consent;
- the right to give a title to the work or leave it untitled;
- the right to dedicate a work to a person (persons), event, or date.
Personal non-property rights belong solely to the author and cannot be transferred (alienated) to other persons and do not pass to heirs.
The author may transfer (alienate) their economic rights to another person based on law or transaction either fully (for all methods of using the work in the territory of all countries of the world) or partially (for specific methods of using the work in the territory of all countries of the world or for specific methods of using the work in the territory of individual countries of the world, or for all methods of using the work in the territory of individual countries of the world). The person to whom the economic rights to the work have been transferred in full or in part is a subject of copyright within the limits of the acquired rights.
If copies of a work have been lawfully introduced into civil circulation through their first sale in Ukraine, further transfer of these copies is allowed without the consent of the copyright holder and without payment of remuneration (exhaustion of rights), except for original works of art, the further transfer of which is carried out with the payment of remuneration for the right of suite.
Depending on the price of the next sale excluding taxes, the amount of fair compensation (right of resale) provided by the first part of this article is:
- 6 percent – for the sale price equivalent to between 50 euros and 3000 euros inclusive;
- 5 percent – for the sale price equivalent to between 3,000.01 euros and 50,000 euros inclusive;
- 3 percent – for the sale price range equivalent to 50,000.01 euros to 200,000 euros;
- 1 percent – for the sales price range equivalent to 200,000.01 euros to 350,000 euros;
- 0.5 percent – for the sale price range equivalent to 350,000.01 euros to 500,000 euros;
- 0.25 percent – for a sale price above the equivalent of 500,000 euros.
Thus, the acquisition of an art object requires conducting a legal examination regarding the authorship of the work and the necessity of making additional payments to the author (or their heirs) during the resale of the work, which, undoubtedly, can affect its investment attractiveness.
Particular attention in the context of investing in art should be paid to transactions involving the acquisition of antiques. Antique items differ from ordinary works of art in that they possess historical and cultural value. They may be subject to special legal regulations, including:
- restrictions on their sale;
- prohibition of export abroad;
- mandatory authenticity examination.
Legislation defines antiques as objects created more than 50 years ago that have cultural, historical, or artistic value. The sale of such objects is possible only through specialized institutions – auctions, antique shops, or galleries.
The antique buyer has the right to demand from the seller an expert opinion on the origin and value of the item. This will help avoid the purchase of a counterfeit or an item subject to legal restrictions.
For individuals, the legislation does not impose restrictions on the purchase of paintings, sculptures, iconography, antiques, and jewelry, as these objects are considered civil rights objects according to the provisions of the civil code. However, if such objects have cultural value, established restrictions on import and export may apply to them.
In turn, a number of specific requirements are established for legal entities. In particular, for business entities engaged in the sale of antiques, requirements are set that such entities must meet. Moreover, legal entities must keep records of their assets in accordance with the current legislation of Ukraine.
Thus, when investing in art objects, the most important stage is the verification of the object and the conclusion of a contract with the author or owner. These processes have the greatest impact on the subsequent realization of the investor’s rights and the reduction of the risks of negative consequences.
When investing in antiques, it is essential to demand expert conclusions and research from the seller. The conclusions will help determine the level of cultural value and the absence or presence of restrictions regarding the further disposal of the acquired assets.
The company FEDORYSHYN&PARTNERS provides support for transactions related to investing in art objects and offers a full range of services in this area.
