A Letter of Direction (LOD) is a legal document instructing a third party on how to disburse or manage funds or assets, often used in the world of finance and music business. It specifies the directive of the asset owner about how a particular asset or stream of income should be handled.
In the music industry, an LOD is often used in situations where a musician or songwriter assigns a portion of their royalties to another party, such as a manager, producer, or another band member. This letter is then provided to the relevant royalty collection agency (such as a Performing Rights Organization or mechanical rights agency), instructing them to pay a portion of the royalties directly to the named party.
For example, a songwriter might issue an LOD to their Performing Rights Organization instructing them to pay a percentage of their performance royalties directly to their manager, as per the terms of their management contract.
It’s important to note that an LOD should be drafted with the help of a legal professional to ensure all details are correctly addressed, and the agreement is legally binding.