FIRST DRAFT of ENS DAO BY-LAWS

Attached is the working Draft of the By-Laws for comment. Please cite the particular Article you seek to comment on via separate postings for the particular Article, so as to avoid conclusion.

For example, Topic: By-laws Article 1 comments; By-laws Article 2 comments; etc.

BY LAWS OF ETHEREUM NAME SERVICE DECENTRALIZED AUTONOMOUS ORGANIZATION
Adopted: ___________________, 2022

TABLE OF CONTENTS

[To be created]

BY LAWS OF ETHEREUM NAME SERVICE DECENTRALIZED AUTONOMOUS ORGANIZATION

ARTICLE I - DEFINITIONS

“Acts” means the Foundation Companies Act of 2017 of the Cayman Islands (as amended) and the law applicable to Exempt Companies.

"Articles" shall mean the Articles of Association of The ENS Foundation

“DAO” shall mean the Ethereum Name Service Decentralized Autonomous Organization, incorporating its Constitution, as expressly set forth herein. DAO may also be referred to as the “council” when dealing with the Foundation Company.

“Foundation Company” shall mean The ENS Foundation, a Foundation Company limited by guarantee with no share capital, formed pursuant to the Foundation Companies Act of 2017 (as amended).

“MOA” shall mean the Memorandum of Association of the Foundation Company and its “Articles”, which are incorporated by reference, as if expressly set forth herein, in full force and effect, but is amended herein, as long as such amendments are not inconsistent.

ARTICLE II - DAO MEMBERS

Section 1. DAO shall consist of all those who possess at least one $ENS token (i.e., Tokenholders).

ARTICLE III - BOARD OF DIRECTORS

Section 1. Power of Board and Qualification of Directors.
The DAO shall be managed by the Foundation Company Directors, in compliance with the Acts, MOA, and Articles, and these By-Laws. Each Director shall be at least eighteen years of age; no disqualifying attributes under Cayman Islands law; no personal financial insolvency for the past 10 years; no convictions or guilty pleas for mishandling of funds or embezzlement of any organization; and have not been involuntary removed or forced to resigned from any DAO.

Section 2. Number and Composition.
a) The Board of Directors shall have at least one director. A Director shall serve for a period of three years from the date appointed and may be reappointed by a vote of the DAO, pursuant to an open election consisting of other nominees, as proposed by the DAO. Commencing in January 2024, the terms of the Directors shall rotate, so that at least one Director’s term and appointment shall be up for a vote. The Board of Directors is not required to accept the resignation of a Director for their resignation to take effect.
(b) Any or all of the Directors may be removed with or without cause by vote of a 3/5th majority of the DAO or a majority vote of the Directors in writing and noticed to the DAO. Removal for cause shall include, but is not limited to, failure of any Director to fulfill his/her fiduciary duties or a violation of the Acts, or for unlawful or illegal conduct detrimental to the best interests of the DAO. If a Director’s conduct is perceived not to be in the best interests of the DAO, but does not rise to the level to justify removal, the Director may be formally censured by a majority vote of the DAO.

Section 3. Newly Created Directorships and Vacancies
Newly created Director positions, whether from an increase in the number of Directors or vacancies for any reason, shall be filled by vote of a majority of the DAO, which shall include ranked voting, if appropriate. Directors elected to fill a directorship shall hold office until their successor have been elected and qualified. Directors may not vote for their removal, compensation, or benefits in a Board of Directors meeting or DAO election. In such cases, a Director’s votes delegated to them shall be released for the DAO vote.

Section 4. Action by the Board of Directors.
(a) Except as otherwise provided by law or in these By-laws, an Act of the Board of Directors means action taken at a meeting of the Board at which a quorum is present and by vote of a majority of the Directors present at the time of the vote.
(b) The following actions require approval by two-thirds vote of the entire Board of Directors and the DAO: the purchase of real property outside of the Cayman Islands.
(c) Any action required of, or permitted to be taken by, the Board of Directors or any committee thereof may be taken without a meeting, if all members of the Board or the committee consent to the adoption of a resolution authorizing the action. The resolution and the written consents shall be filed with the minutes of the Board or committee. Consents may be provided: (i) in a writing signed by the Director or committee member either in hard copy or by affixing a signature by any reasonable means (e.g., fax signature); (ii) by e-mail that includes information from which the recipient can reasonably determine that the transmission was authorized by the Director or committee member, or (iii) verifiable web3 transaction. The Board of Directors may retroactively approve a resolution by unanimous vote, as long as it is not prohibited by the Acts, MOA, or Articles.
(e) Any or all Directors, or any committee members, may participate in a meeting by means they deem to be appropriate. Participation by such means shall constitute presence in person at a meeting provided that all persons participating in the meeting can receive such communication at the same time and each individual may participate in all matters before the Board or committee, including, but not limited to, proposing, objecting to, and voting upon a specific action taken at the meeting.

Section 5. Annual Auditors’ Report
At the Annual Meeting, the Board of Directors shall present a report by an independently certified public accounting firm selected by the Board, showing the following in appropriate detail:
(a) the assets and liabilities, including the funds held on behalf of the DAO;
(b) the principal changes in assets and liabilities, including funds;
(c) the revenue or receipts of the DAO, both unrestricted and restricted to particular purposes; and
(d) the expenses or disbursements of the DAO for both general and restricted purposes.

The Annual Auditors’ Report must provide the above information as of the end of the calendar year period and reported to the DAO not more than 30 days thereafter. The Annual Auditors’ Report shall be filed with the records of the DAO and a copy included in the minutes of the Annual Meeting.

ARTICLE IV - COMMITTEES

Section 1. Committees
The DAO may, from time to time, establish or dissolve committees, working groups, or subgroups as is necessary to carry out the DAO’s mission and operations, which is to be accomplished by a Social Proposal vote. The following are the standing working groups: 1. Meta-Governance Working Group; 2. ENS Ecosystem Working Group; 3. Community Working Group; and 4. Public Goods Working Group. If an active proposal is put forward to dissolve a working group, all working group funds, including outgoing payments, within that working group, are to be frozen with immediate effect, pending the outcome of the vote. Upon the dissolution of a working group, any and all unspent working group funds from that working group, at the time of dissolution, must be immediately returned to the DAO treasury, without delay.

Section 2. Working Group Stewards

  1. Each working group shall be managed by five stewards (hereafter a ‘ Steward ’ or ‘ Stewards ’).
  2. Stewards will be elected, unless otherwise stated in these rules, to serve within working groups for a set period of time (hereafter known as a ‘ Term ’ or ‘ Terms ’).
  3. There shall be two Terms each calendar year:
    a. The first Term commences at 9am UTC on January 1 each year and ends immediately prior to the commencement of the second Term (‘ First Term ’); and
    b. The second Term commences at 9am UTC on July 1 each year and ends immediately prior to the commencement of the First Term of the following year (‘ Second Term ’).
  4. Stewards are responsible for managing the operations of each working group.
  5. The responsibilities of Stewards include, but are not limited to:
    a. Managing operational tasks related to the administration of a working group;
    b. Maintaining a description that sets forth the focus and intent of the working group;
    c. Developing working group goals for the Term and providing a clear road map for achieving those goals, to be published in the ENS governance forum within the first 30 days of a Term;
    d. Approving the creation and dissolution of sub-groups or workstreams within a working group to undertake work and/or carry out specific projects or tasks;
    e. Requesting working group funds from the DAO; and
    f. Approving and making funding available to sub-groups, workstreams, or contributors within a working group.
    g. To request working group funds, Stewards of all working groups will collaborate to submit an active executable proposal, as defined by the ENS governance documentation (‘ Collective Proposal ’), to the DAO within the final 15 days (inclusive) of the months of January, March, July, and October each calendar year (each a ‘ Funding Window ’).
  6. In order for a working group to have a funding request included in a Collective Proposal submitted to the DAO during a Funding Window, the funding request must have passed as a Social Proposal in the same Funding Window.
  7. In the case of an emergency, where working group funds are needed by a working group outside of a Funding Window, an Executable Proposal may be submitted at any time by a Steward of a working group to request funds from the DAO.

Section 3. Steward Eligibility and Nominations

  1. Any individual is eligible to nominate themselves to be a Steward of a working group within the DAO (‘ Eligible Person ’ or ‘ Eligible Persons ’).
  2. To be eligible to be included in the ballot for First Term elections of a given year, Eligible Persons must nominate themselves between 9am UTC on December 6 and 9am UTC on December 9 (‘ First Term Nomination Window ’).
  3. To be eligible to be included in the ballot for Second Term elections of a given year, Eligible Persons must nominate themselves between 9am UTC on June 6 and 9am UTC on June 9 (‘ Second Term Nomination Window ’).
  4. An Eligible Person may nominate themselves to become a Steward of a working group or working groups during the First Term Nomination Window or the Second Term Nomination Window (each a ‘ Nomination Window ’), by meeting the requirements set out in a call for nominations posted in the relevant working group category of the ENS governance forum.
  5. An Eligible Person who completes the steps outlined above during a Nomination Window and receives 10,000 signed votes to support their nomination will be included in the ballot as a nominee in the election for Stewards that takes place following that Nomination Window (‘ Nominee ’).

Section 4. Steward Elections

  1. Elections for working group Stewards for the First Term of a given year will take place by a ranked-choice vote of governance token holders using signed messages and will be open for 120 hours, commencing at 9am UTC on December 10 each year (‘ First Term Election Window ’).
  2. Elections for working group Stewards for the Second Term of a given year will take place by a ranked-choice vote of governance token holders using signed messages and will be open for 120 hours, commencing at 9am UTC on June 10 each year ( ‘Second Term Election Window ’).
  3. The top-ranked Nominees from each working group vote held during a First Term Election Window or a Second Term Election Window (each an ‘ Election Window ’), will fill any available positions for the role of Steward for those working groups for the Term immediately following an Election Window, based on the order in which they are ranked in each working group vote.
  4. A Nominee elected to serve as a Steward may not take up the role of Steward for more than two working groups during a single Term.

Section 5. Delay of Nominations or Elections

  1. In the event that nominations or elections for Stewards take place after a Nomination Window or after an Election Window, the nomination process or elections shall take place, as otherwise prescribed in Section 4 above, as soon as is practicable after the missed Nomination Window or missed Election Window.
  2. In the event that an election takes place outside of an Election Window and after the commencement date of a new Term, outgoing Stewards from the previous Term shall stay in their positions as working group Stewards until immediately prior to 9am UTC the day following the end of the election, which, for the avoidance of doubt, is 120 hours after voting in those elections commenced.
  3. In the event that an election takes place outside of an Election Window and after the commencement date of a new Term, newly elected Stewards will assume the responsibilities of stewardship within working groups at 9am UTC the day following the end of the election for the remainder of that Term.

Section 6. Core Team Stewards

  1. For the First Term, commencing January 1 2022 at 9am UTC, each working group will include two Stewards who are core team members of True Names Limited (Singapore) (‘ TNL ’), as selected by TNL and not subject to the Steward nomination and election process outlined above.
  2. For the Second Term, commencing July 1 2022 at 9am UTC, each working group will include one Steward who is a core team member of TNL, as selected by TNL and not subject to the Steward nomination and election process outlined above.
  3. For the First Term of the following year, commencing January 1 2023, and for all Terms thereafter, all Stewards must be elected and appointed in accordance with the rules set out in above.

Section 7. Removal and Replacement of Stewards

  1. Stewards may be removed at any time by:
    1. a Social Proposal passed by the DAO; or
    2. a simple indicative majority vote among the Stewards of a given working group, with the outcome of the vote communicated in the relevant working group category of the ENS governance forum.
  2. Stewards may step down from their position at any time by communicating their intention to step down in the ENS governance forum.
  3. In the event that a Steward is removed, steps down, or is unable to continue as a Steward, for whatever reason, prior to the end of a Term, any vacant positions will be filled for the remainder of a Term by the next highest ranked Nominee(s) in a given working group from the most recent working group vote in the most recent election for Stewards.
  4. In the event that a Steward steps down or is removed prior to the end of a Term and is a member of the core team of TNL in accordance with the above rules in this section, the vacant position(s) will be filled by a core team member or team members of TNL, as selected by TNL.
  5. Any Steward selected by TNL in accordance with the above rules in this section, can be removed by TNL at any time prior to the end of a Term, for any reason, and replaced by another core team member for the remainder of that Term.

Section 8. Compensation for Stewards

  1. Elected Stewards are eligible to receive fair compensation for their work as a Steward.
  2. All requests for Steward compensation must be detailed in a Collective Proposal for working group funds submitted to the DAO in accordance with the above rules in this section.
  3. Stewards may not receive compensation for their role as a Steward outside of that compensation expressly provided for in a Collective Proposal submitted to the DAO in accordance with rule 10.2.
  4. Stewards selected by TNL are not eligible to receive compensation from the DAO or working groups for their work as a Steward.

Section 9. Grants

Section 10. Elections

ARTICLE V - CONTRACTS, CHECKS, DRAFTS AND BANK ACCOUNTS

Section 1. Execution of Documents/Contracts/Loans
The Board of Directors may authorize any officer or officers, agent or agents, in the name of and on behalf of the DAO to enter into any contract or execute and deliver any instrument. Such authority may be general or confined to specific instances, but unless so authorized by the DAO, or expressly authorized by these By-laws, no officers, agent or employee shall have any power or authority to bind the DAO to any contract or engagement or to pledge its credit or to render it liable pecuniarily in any amount for any purpose.

Section 2. Checks, Drafts, etc
All check, draft and other order, or crypto wallet payment of money out of the funds managed by the Foundation Company, and all notes or other evidences of indebtedness of the Foundation Company or DAO, shall be signed on behalf of the DAO in such manner as shall from time to time be determined by resolution or policy of the Board of Directors.

Section 3. Deposits
All funds of the DAO not otherwise employed shall be deposited from time to time to the credit of the DAO in such banks, trust companies or other depositories as shall from time to time be determined by resolution or policy of the Board of Directors.

ARTICLE VI - INDEMNIFICATION AND INSURANCE

Section 1. Authorized Indemnification
Unless clearly prohibited by law or Section 2 of this Article, the DAO shall indemnify any person (“Indemnified Person”) made, or threatened to be made, a party in any action or proceeding, whether civil, criminal, administrative, investigative or otherwise, including any action by or in the right of the DAO, by reason of the fact that he or she (or his or her testator or intestate), whether before or after adoption of this Section, (a) is or was a Director or Steward of the DAO, or (b) in addition is serving or served, in any capacity, at the request of the DAO, as a director or officer of any other entity created by or owned by the DAO. The indemnification shall be against all judgments, fines, penalties, amounts paid in settlement (provided the DAO shall have consented to such settlement) and reasonable expenses, including attorneys’ fees and costs of investigation, incurred by an Indemnified Person with respect to any such threatened or actual action or proceeding, and any appeal thereof to the fullest extent permitted by Cayman Islands law.

Section 2. Prohibited Indemnification
The DAO shall not indemnify any person, if a judgment or other final adjudication adverse to the Indemnified Person (or to the person whose actions are the basis for the action or proceeding) establishes, or the Board of Directors in good faith determines, that such person’s acts were committed in bad faith or were the result of active and deliberate dishonesty or deceit, and were material to the cause of action so adjudicated or that he or she personally gained, in fact, a financial profit or other advantage to which he or she was not legally entitled.

Section 3. Advancement of Expenses
The Foundation Company shall, on request of any Indemnified Person who is or may be entitled to be indemnified by the Foundation Company or DAO, pay or promptly reimburse the Indemnified Person’s reasonably incurred expenses in connection with a threatened or actual action or proceeding prior to its final disposition. However, no such advancement of expenses shall be made unless the Indemnified Person makes a binding, written commitment to repay the funds, with interest, for any amount advanced for which it is ultimately determined that he or she is not entitled to be indemnified under the Acts or Section 2 of this Article. An Indemnified Person shall cooperate in good faith with any request by the Foundation Company that common legal counsel be used by the parties to such action or proceeding who are similarly situated unless it would be inappropriate to do so because of actual or potential conflicts between the interests of the parties. The Indemnified Person shall execute a Common Defense Agreement with the Foundation Company.

Section 4. Indemnification of Others
Unless clearly prohibited by the Acts or Section 2 of this Article, the Board of Directors may approve indemnification as set forth in Section 1 of this Article or advancement of expenses as set forth in Section 3 of this Article, to a person (or the testator or intestate of a person) who is or was employed by the Foundation Company or who is or was a volunteer for the DAO, and who is made, or threatened to be made, a party in any action or proceeding, by reason of the fact of such employment or volunteer activity, including actions undertaken in connection with service at the request of the Foundation Company or DAO in any capacity for any related entity.

Section 5. Determination of Indemnification
Indemnification mandated by a final order of a court of competent jurisdiction will be paid by the DAO. After termination or disposition of any actual or threatened action or proceeding against an Indemnified Person, if indemnification has not been ordered by a court, the Board of Directors shall, upon written request by the Indemnified Person, determine whether and to what extent indemnification is permitted pursuant to these By-laws. Before indemnification can occur, the Board of Directors must explicitly find that such indemnification will not violate the provisions of Section 2 of this Article. No Director with a personal interest in the outcome, or who is a party to such actual or threatened action or proceeding concerning which indemnification is sought, shall participate in this determination. If a quorum of disinterested Directors is not obtainable, the Board of Directors shall act only after receiving the opinion in writing of independent legal counsel that indemnification is permissible under the Acts and these By-laws.

Section 6. Binding Effect
Any person entitled to indemnification under these By-laws has a legally enforceable right to indemnification which cannot be abridged by amendment of these By-laws with respect to any event, action or omission occurring prior to the date of such amendment.

Section 7. Insurance
The Foundation Company may purchase Directors’ and Officers’ liability insurance or Fiduciary Liability insurance, if authorized and approved by the Board of Directors. To the extent permitted by law, such insurance may insure the Foundation Company for any obligation it incurs as a result of this Article or operation of law and it may insure directly the Directors, Stewards, employees or volunteers of the DAO for liabilities against which they are not entitled to indemnification under this Article as well as for liabilities against which they are entitled or permitted to be indemnified by the Foundation Company.

Section 8. Non-exclusive Rights
The provisions of this Article shall not limit or exclude any other rights to which any person may be entitled under law or contract. The Board of Directors is authorized to enter into agreements on behalf of the DAO with any Director, officer, employee or volunteer providing them rights to indemnification or advancement of expenses in connection with potential indemnification in addition to the provisions therefore in this Article, subject in all cases to the limitations of Section 2 of this Article.

ARTICLE VII - AMENDMENTS

These By-laws may be ratified, amended, or repealed by 3/5th majority vote of the DAO.

ARTICLE VIII - CONTROLLING AUTHORITY

To the extent there are substantive inconsistencies with these By-laws and other authority, the order of controlling authority shall be: (1) Acts, (2) DAO Constitution, (3) MOA, (4) Articles, then these DAO by-laws. Nevertheless, the DAO, pursuant to its authority may seek to amend the aforementioned, if permissible, to conform to these By-laws.

3 Likes

Thanks for putting this together! I feel like this conflates the DAO bylaws with the Foundation bylaws, though? We have Fenwick working on bylaws for the foundation, but nobody (AFAIK) working on bylaws for the DAO itself to cover voting etc.

3 Likes

I was aware of The ENS Foundation’s interest and need for its own bylaws, but tried to keep the DAO’s voice consistent with its role vis-a-vis the Foundation Company. There is a section that was left open for input to cover procedures, which voting should properly be in the Meta-Governance section and procedures. Each work group’s responsibilities will be spelled out in their section.

ARTICLE IV - STEWARD LED COMMITTEES

Section 1. Working Committees [To be developed]
Section 2. Grants and Procedures. [To be developed]

Each groups’ Stewards should have the strongest voice in the development of their group’s by-laws, the framework of its operations and critical oversight.

  1. Meta-Governance: related to DAO governance and management (this would include voting procedures)
  2. ENS Ecosystem: related to the continuing development and improvement of the ENS protocol and ecosystem, with a focus on all technical matters related to ENS (this would include guidelines to be followed for technical matters)
  3. Community: related to the people and organisations that are users of ENS, with a focus on non-technical matters (this would include responsibility for and development of a Code of Conduct and procedures)
  4. Public Goods: related to the amplification of ENS as a Public Good and funding Public Goods within the ENS ecosystem and more broadly in web3 (This would include the grant application process, creation of a grant committee to make recommendations, and procedures for implementation)

Please share with other members, as I’m limited to 10
@validator.eth @Coltron.eth @spencecoin
@jefflau.eth @nick.eth @slobo.eth
@Leon @James
@matoken.eth @AvsA

Good stuff from my non-law perspective. Taking notes as I read here:

Article II - Should this be clarified? $ENS token versus ENS domain name, etc?
Article III, Section 4, (c), (iii) - Should “web3 transaction” by clarified?
Article V, Section 2 - how would the DAO sign for payments? I suppose this will need to be expanded
Article V, Section 3 - Does this mean that DAO funds should be deposited into a bank account, rather than kept in a crypto wallet?
Article VI - I got completely lost in this part, sorry.

Thank you for all the hard work @berrios.eth

1 Like

Yes, it should be $ENS Tokenholders as we have not extended membership to ENS Domain holders.

Being a non-technical contributory member, I could use help in clarifying, if there is a way this can be done.

I believe only the Board of Directors has such authority unless they delegate.

This is something to be worked out with the Board of Directors and can consist of both. In safeguarding the assets, the Board would need to consider a prudent investment protocol.

This pertains to circumstances where someone is sued (or a regulatory action) in their official capacity in connection with their Board or DAO duties.

1 Like

Got it, thank you. I’ll try my best to give a clarification here.

A “web3 transaction” refers to the transfer of cryptocurrency assets (such as Ether on the Ethereum blockchain) from one custodian’s digital wallet to another.

@RSACannabis @coopahtroopa @Cthulu.eth @Cod.eth @codemonkey @cryptomonkey42069 @ethmaxitard.eth @Crypty @DAOPro @enthogenesis.eth Sharing this around guys

Nice work @berrios.eth!

For the Stewards that have been invited to contribute to the voting rules and procedures related to Section IV, please be sure to reference the existing DAO Governance Documentation, with emphasis on the DAO voting procedures under the “Process” Section within the Documentation. In fact we may consider memorializing, or incorporating by reference, the terms of the existing Governance Documentation into the DAO By-Laws. One final thought, the verbiage for Section IV might be revised from “Steward Led Committees” to “Steward Led Working Groups”, unless “Committee” was used intentionally to collectively encompass both Working Groups and the anticipated Sub-Groups (in which case “committee” should be added to the definition section).

Regarding @nick.eth’s concern that there might be potential overlap between the draft DAO By-Laws and By-Laws being discussed for the Foundation, this might be best addressed by adopting the Foundation By-Laws first, and then finalizing and adopting the DAO By-Laws. Importantly, it is not unusual for legal documentation like Articles and By-Laws to overlap, cross-reference one another, or even to conflict/be inconsistent. For example there are already references to, and deferments to, By-Laws in the Foundation’s Articles even though the Foundation By-Laws do not currently exist. Further, we can also see this in @berrios.eth first draft where the draft DAO By-Laws cross-reference the MOA and Articles (and the controlling law/Acts) where appropriate. The reason this is done is for consistency, to avoid conflicts, and/or acknowledge what document shall be controlling in the instance there is a conflict between governance documentation. There isn’t a right or wrong, but unless the DAO waits for Fenwick to draft the Foundation By-Laws allowing the DAO the benefit of finalizing and conforming the DAO By-Laws in light of the Foundation By-Laws, then the DAO will be shooting in the dark to an extent resulting in foreseeable overlap and potential inconsistencies between the two sets of By-Laws.

I added the following to deal with any substantive inconsistencies with other governing authority:

ARTICLE VIII - CONTROLLING AUTHORITY

To the extent there are substantive inconsistencies with these By-laws and other authority, the order of controlling authority shall be: (1) Acts, (2) DAO Constitution, (3) MOA, (4) Articles, then these DAO by-laws. Nevertheless, the DAO, pursuant to its authority may seek to amend the aforementioned, if permissible, to conform to these By-laws or amend these By-laws to eliminate such inconsistency.

cc: @nick.eth

I agree with Nick here. Reading through this, it felt like I was reading the bylaws of The Foundation, not of the DAO. Does the DAO have a legal entity of any kind (for example, I know of some other DAOs forming Wyoming LLCs)? Or is The Foundation the legal entity representing The DAO, which would explain the conflation.

Sorry for the dumb questions, just trying to make sure I get my mental model of what we’re doing here right.

I’m curious specifically what “shall be released” means here, and how this could be done at a technical level?

This is correct, hence the conflation.

We are looking at it. Released means votes un-delegated back to the tokenholders. It seems like this is not possible without a contract migration to a new governance.ens.eth and a 1:1 token swap.

Interesting. Until now I thought of The Foundation as a separate legal entity that had in its by-laws that its directors would be elected by the DAO. It seems this is the wrong way to think about it, and really The Foundation == The DAO for legal purposes.

Correct. I’m very familiar with the internals of these contracts (from other projects) so I’m happy to advise here if needed. Feel free to message me.

Even if it were possible technically, I’m not sure it’s the right direction. The point of delegation is to let someone else you trust manage the day-to-day decisions. My guess is we’d have extremely low participation from the tokens delegated to the directors, as evidenced by the low participation in the sub-snapshots that @nick.eth and others set up for the most recent vote. As such, this would set up a weird incentive where someone hoping to be elected as a Director would be motivated to have their delegators move stake to different, but also supportive delegate. I would argue if you delegate to a person, there’s a good chance you also trust them to be a Director, or at least to vote For/Against themselves in this decision.

Edited: typos

@berrios.eth @ENSPunks.eth

I have been pondering about it for two days but haven’t had the time to formally propose this yet; I want to do a light TempCheck here first. Most corporate structures have an independent auditor (not accounts auditor) appointed directly by the shareholders and operates with full autonomy from the Board of Directors or the Executive branch. Such an auditing committee for a DAO,

a) will be elected by and answers to the Delegates and Delegates only (excluding the Directors, Stewards and Core team at TNL),

b) cannot be formed by members who are delegates,

c) cannot take any actions but only provide independent feedback on the governance, disbursement of funds, and ensure that by-laws are followed.

I had some more criteria that ensured the autonomy and independence of such a body but I seem to be forgetting (sorry I am swamped mentally beyond measure). I will edit more as they come to mind but feel free to tell me how you folks feel about it. It could be set up to absolve the Directors from conflict-of-interest cases by passing duties that lead to conflict to this committee explicitly.

1 Like

Yes. Correct. Foundation was created primarily as the legal face of DAO.

There are a bunch of caveats to this; sorry cannot elaborate more currently but you have raised valid points. You might want to give this a look: Beyond EP6: Addressing issues in governance emerging from the EP6 experience

2 Likes

@bendi

The issue that I trying to seek a solution to and balance is that there are certain circumstance that directors should not or are cannot vote where they have an interest. If we cannot find a solution for the disenfranchisement issue then the directors cannot vote at all. I’m not looking for a technical solution, but, simply, that the directors inform their delegators of the director’s inability to vote on a particular proposal, because it concerns them.

I’m not going to address the other issue, as it seems you understand the makeup of the organization is a unique one.

@inplco

1 Like

I’m not sure what “managed by” means here, but it seems to assign Foundation directors more powers than they previously had.

This section seems like it should be part of the Foundation bylaws or AOA; I don’t think DAO bylaws can dictate how the foundation operates unless the foundation’s rules say they can.

The same applies to sections 3, 4 and 5; it seems like these are setting rules for the Foundation, and many of them overlap with what is already spelled out in the AOA.

These are just some example sections; the bylaws you’ve written so far seem mostly concerned with the legal operation of the Foundation rather than the DAO’s day to day operations - voting, stewardships, etc etc.

While I agree, what word do you suggest would better fit.

The DAO has a voice in these operations. As we undergo this process, I welcome suggestions.

I generally agree with @Nick that I think there is some conflation re DAO vs. Foundation in the current draft (Draft_V1).

Apologies for long post – but thought one long post, with revised provisions and comments regarding the issues noted with V1 are all included together – while trying to propose a revised version for moving forward. Also note, the version below includes **NOTES or other points for review/clarification/discussion and footnotes (which can be cleaned up in future versions depending on feedback/comments.

Proposed Draft_V2 – taking into account some the conflation concerns, while including other provisions from V1 below:

BYLAWS OF ETHEREUM NAME SERVICE DECENTRALIZED AUTONOMOUS ORGANIZATION

CLAUSE 1 – DAO AUTHORITY

Section 1. Relationship between the ENS DAO and the ENS Foundation.

The ENS DAO (“DAO”) is represented in the real world by the ENS Foundation, a Foundation Company, limited by guarantee with no share capital, formed pursuant to the Foundation Companies Act of 2017 (Cayman Islands) (“Foundation Company”) having been duly registered pursuant to a Memorandum of Association of the Foundation Company (“MOA”) and its Articles of Association (“Articles”) in accordance with Cayman Islands law.

Section 2. ENS DAO, the Council, and Rights of ENS Tokenholders

As specified in the Articles, the Foundation Company has empowered ENS Tokenholders, by virtu of the Council, as defined in Article 1 of the Articles of Association (hereinafter referred to as “DAO” and/or “Council”), with certain rights and privileges, including, but not limited to, the following:

• Authorize the Directors to admit as a member any person who has applied for membership to the Foundation Company pursuant to Article 7;
• Restrict or prohibit the admission of Members to the Foundation Company pursuant to Article 8;
• Appoint or remove one or more Directors of the Foundation Company pursuant to Article 15;
• Appoint or remove one or more Supervisor pursuant to Article 28;
• Alter the Articles of Association of the Foundation pursuant to Article 78 and 79.

For the purposes of further clarification, these Bylaws further define membership in the DAO as those who possess at least one $ENS token.

**(NOTE FOR DISCUSSION on Section 2 - is our definition of DAO pegged to Article 1? Or is it broader/defined differently? If broader, how would we make that connection between the Council/Tokenholder definition in the Articles and any broader DAO definition? Also, I recognize some of this Section re-states what is on the website – and happy to remove as appropriate),

Section 3. DAO Constitution

These bylaws are also subject to the provisions set forth in the ENS DAO Constitution (“Constitution”). In the event of any inconsistency between the Bylaws and the Constitution, the Constitution shall prevail.

CLAUSE 2 – VALUES, CODE OF CONDUCT, and RULES OF ENGAGEMENT

**NOTE: Proposed TBD: Add section relating to “Valued, Code of Conduct, and Rules of Engagement”. Perhaps, indicate that these docs will be drafted in the future/separate? We could do all 3 as part of this process – either in the Bylaws, or Separate docs? Thoughts?

CLAUSE 3 – GOVERNANCE AND OTHER ROLES

Section 1. Relationship between Directors, Foundation Company, and DAO

As specified in the Articles, the Directors manage and control the business and affairs of the Foundation Company, with the exception of those required by the Articles or Foundation Company Bylaws to be exercised by a General Meeting or others, including the Council.

The Directors shall at all times act in the interest of the Foundation Company and its objects, and shall observe the Articles and the Foundation Company Bylaws. [FN Article 24, Articles] The duties of the Directors are owed to the Foundation Company only. [FN Article 26, Articles] In the event that a conflict arises for any Director between the Foundation Company and the DAO, it is understood that the Director has a duty to act in the best interest of the Foundation. **[NOTE FOR DISCUSSION – does everyone agree with this statement (including: (i) agree to the interpretation based on the documentation, and/or (ii) agree that this should be the case – that a Director puts the Foundation ahead of the DAO?) Currently, the only legal requirement for Directors is to the Foundation. No legal requirement to the DAO – accordingly, the Directors should do what is in the interest of the Foundation (otherwise, they put themselves in personal/financial/ethical jeopardy. Any suggestions as to this provision? How to better address this?)

Pursuant to Article 18, the Directors may also delegate to committees as they think fit. And any committee formed shall, in the exercise of such powers so delegated conform to any regulations that may be imposed on it by the Director. **[NOTE for DISCUSSION – it is unclear to me whether is this re Council/DAO? Or something else? (Also, see Articles 20-23. Question – are these Articles relating to DAO Steward-Led Committees/working groups (EP4?) etc? Or is this relating to Foundation Company Committees in some other way? Can anyone confirm? The Articles are not clear, and I am not clear on the linkage between the DAO Committees and legal/corporate rights based on the current structure)

It is also stated on the ENS website that the DAO may also instruct the Directors to take action on behalf of the Foundation – such as signing a contract, engaging a company for a service the DAO requires, or delegating some of the Directors’ powers to a DAO working group. **[NOTE for DISCUSSION – where does this authority stem from? This would not be binding, but merely a suggestion or request? I think this concept needs to be discussed and vetted as it is a pretty big leap from legal/corporate responsibilities of Directors to being ‘instructed’ by the DAO to do something? Perhaps a modification to the Articles pursuant to 78 and 79?

**[NOTE: Note that there are significant changes from Draft_v1 re Article III. I proposed to revise Article III of the previous draft, as I think the role of the Directors (Foundation) and the power the DAO has over those Directors, may be misleading.

Accordingly, my comments on Article 3 of Draft_v1 as follows:

Article III, Section 1 – I removed first sentence, as the Directors do not currently manage the DAO – and I don’t think the intent is, or should be, to give them this power via the Bylaws. If you disagree, please cite a provision/document that points to how the Directors of the Foundation have the authority to manage the DAO. I have retained the language describing certain qualifications/disqualifications for the Directors. I believe this can remain, with a tweak to the language. This has been included in Section 2 below.

Article III, Section 2(a) – Deleted in its entirety. I do not believe the DAO has the right to modify these provisions – including modifying timeframes and terms for the Directors of the Foundation. In order to enforce these, I believe these requirements would need to be modified in the Articles of Association pursuant to Articles 78-79.

Article III, Section 2(b) – Deleted for now, pending further clarification and discussion. 1st sentence: The DAO could dictate a 3/5 majority of the DAO. But it cannot dictate what type of vote the Directors of the Foundation would need to take (unless it was codified in an amendment to the Articles.) What does a ‘formal censure’ mean? How does this work tactically – would there need to be another, separate vote to censure? What does it mean ‘not rise to the level to justify removal (not voted out?).

Article III, Section 3 – Deleted for now, pending further clarification and discussion. I do not believe the DAO has the power to dictate how/when the Directorship of the Foundation can hold office (until successor has been elected and qualified.) I think this overreaches (unless an Amendment to the Articles is effectuated to specify this by the Foundation.) Although the DAO can mandate a Director not vote in a DAO election for their removal, etc. – the DAO does not have the authority to dictate that with respect to a “Board of Director’s” meeting which you have included in this provision. I think this provision, similar to others above, would need to be formally amended the Articles of the Foundation in order to be enforceable.

Article III, Section 4 – Deleted for now, pending further clarification and discussion.
(a) General comment for Section 4 – too much conflation between DAO and Foundation. DAO cannot control or dictate what the Directors or Foundation do (unless specified in the Articles.) I think many of these provisions, to be enforceable, would need to be included in an amendment to the Articles. Otherwise, the DAO is overreaching in terms of its authority to mandate/require the Directors to take certain actions/vote in a certain way. Happy to go into specific detail, but think the entire section needs to be reworked/deleted.

Article III, Section 5 – Can you cite to ‘which annual meeting’ you are referring to? Also, I would use reference to “Directors” and “Directors Meeting” versus Board of Directors to remain consistent with terminology used in the Articles of Association. This provision is adding requirements to the Foundation/Articles/Directors that is not included in the Articles of Association. If the DAO wants to include a requirement to do this, I think this would need to be included in an Amendment per Articles 78 & 79. As is, it is overreach. Also, as drafted, there are provisions that the Auditor look at both the Foundation and the DAO - (a) appears to be the Foundation (funds held on behalf of the DAO), (b) unclear whether that is review of DAO or Foundation, (c) DAO, and (d) DAO. Is the intent of the auditor to look at both the Foundation and the DAO? I do agree we need some provision re Audit report provision though. Tbd – perhaps in Treasury section below?

Section 2. Director requirements

Pursuant to the powers vested in the Council to appoint or remove one or more Directors of the Foundation Company by Article 15, these Bylaws further detail the criteria and requirements of the DAO for being appointed to a Director position of the Foundaiton Company: (i) be at least 18 years of age, (ii) no disqualifying attributes under Cayman Islands law, (iii) no personal financial insolvency for the past 10 years, (iv) no convictions or guilty please for mishandling of funds or embezzlement of any organization, and have not been involuntarily removed or forced to resign from any DAO.

Section 3. Stewards and Working Groups

**[NOTE: I think the suggestions from @berrios re including the area of steward-led communities sounds like a pretty good way to structure this section. I would want to double-check any already passed governance proposals (i.e., EP4), to ensure everything is consistent, but generally think it makes sense. One item again though – where does the authority of the working groups come from? Is it delegated authorities from Articles 18-23 re committees? Or somewhere else? I am just trying to tie these rights and duties together based on documentation.]

Describe the role of Stewards. Reference any appropriate docs.
Describe the role of the Working Groups. Reference appropriate docs (e.g., EP4?)

Section 3. Others to include? Possibly delegators? Contributors?

CLAUSE 3 – TREASURY AND CONTRACT OWNERSHIP

**NOTE: I propose to delete Article V of the previous draft entitled – and include a section re “Treasury [and Contract Ownership]”. I think this should more likely track to EP1 re Treasury and Contract ownership – versus ‘contracts, checks, drafts, and banks.’ Generally, I have same hesitation about Article IV – Contracts, Checks, Drafts and Banks as I did for Article 3 – where is this legal authority stemming from? How has a Director of the Foundation conferred this authority? If not, how/where is the authority for a non-legal entity (the DAO) to govern something as important as the ENS Treasury? Via what delegation? Via what authority? The DAO simply does not have the authority that the provision is trying to bestow on it.

Specifically with regard to the initial proposed language, I take the following exceptions:

[Section 1 – Could you point me to the provision that allows the Directors to authorize anyone to enter into a contract on behalf of the DAO? As a ‘Director’, they generally only have authority over the Foundation – and the legally binding commitments of the Foundation (i.e., they potentially could request someone enter into an agreement on behalf of the Foundation, but I am not seeing the connection with their legal authority to bind the DAO? Moreover, the DAO, does not have the capacity to enter into a legal agreement (i.e., contract) as is stated in this section. It is not a legal entity under any law based on the current structure.

Section 2 – re Checks, Drafts: There is no authority for the DAO to do this. I am unclear what bank, check draft, order, etc is in play other than generally what is spelled out in EP1 re the Treasury (those that were transferred over from the multisig? Also, DAO is not a legal entity and does not have legal authority to sign anything, enter into contracts, hold a bank account, etc.

Section 3 – Deposits. This provision is unclear to me. I do not understand how the DAO can receive funds/credits, nor, do I believe, can the Directors direct a non-legal entity to deposit funds (this goes back to my broader statements re: up the chain in the corporate/legal documentation – where is this authority stemming from) – I am not seeing the connection?

Side note, after reading EP1, I would love to get some additional info re how/why it was structured this way and whether the implications for important issues like ‘limited liability of DAO participants” and taxation requirements etc were discussed. Wondering bc I, ideally, would like to see that connection/linkage I keep talking about thru this thread. EP1 gives a non-legal entity - the DAO - ‘ownership’ over the Treasury. The basis upon which one could give ownership for something like the Treasury to something that is not a person or legal entity based on the current structure is tenuous. As stated on the ENS website, the reason for having the Foundation is to limit liability, ensure compliance with tax requirements, enable an entity that is ‘capable of entering into contracts with other ‘real world’ entities, of holding assets (including IP). The lawyers who drafted it clearly did not believe the DAO has the ability to do any of those things – and so, created the Foundation to do them on behalf of the DAO (which I agree.) So, why would the ‘DAO’ then go to own assets, etc.? This seems to defeat the whole purpose for the original corporate/legal structure of the entity. Would be keen to better understand any discussions around these concerns if anyone has additional info. [disclaimer, none of this is legal advice – just asking  ]

**NOTE: Delete Article VI from initial draft. Reasons have been noted throughout re conflation of DAO/Foundation. DAO is not a legal entity. DAO not having directors/officers/board of directors. No fiduciary duties to insure against. The DAO cannot mandate the Foundation to pay or reimburse an indemnified party without the consent of the Foundation (or, potentially, modification to the Articles), nor can the DAO require the Foundation to execute an agreement.

CLAUSE 4 – VOTING PROCESS **(NOTE: to be further flushed out)

Section 1. Proposal Discussion - Creating a Proposal and Proposal Approval

Detail here: what type of proposal categories are there? (Social, Executable, etc.). What is the format (is there a template? Should we create one?) How many days is the review/comment time (5 days minimum?), # of stewards from whom input is required? Other suggested details here?

Section 2. Vote on Proposal

Upon completion of the Proposal Discussion in Section 1, a formal vote can take place. Detail here how the formal vote goes: off-chain voting, on-chain voting. Detail requirements. How they are posted (Snapshot, etc.) and handled. What voting strategies can be used for what questions (note that these were highlighted by @nick in another post).

Section 3. Quorum

Detail any quorum requirements. Min votes needed, etc.

Section 4. Conflicting Proposals

Detail any requirements/information regarding two competing proposals occurring simultaneously or within x days. This section may also be able to address any ‘statute of limitations’ on re-voting a specified issue or requiring a cooling off period.

Section 5. Conflicts of Interest
Detail the definition of conflict (including whether steward, director, community member, etc.), who can raise a conflict, what occurs if a conflict is determined (i.e., vote is considered in valid?), how a conflict is addressed.

CLAUSE 5 – AMENDMENT

These Bylaws may be ratified, amended, or repealed by x vote of the DAO.


This is just a start, but thought this might help us move forward for our second draft.

Do we need anything here? I’m not sure what it’s trying to convey.

Sure - but the Foundation bylaws can be written to give the DAO a voice.

Look at III.2.b, for example, which gives the directors the power to remove each other. Implemented as a Foundation bylaw, this would make sense, but implemented as a DAO bylaw, it has no effect; directors can only be removed in accordance with the Foundation’s AOA and bylaws.

There’s a reasonable argument that maybe we should have just one set of bylaws that covers both DAO and Foundation operations, since they’re the same legal entity - but then they’d need to be constituted as Foundation bylaws and adopted as such.

If we’re writing bylaws for the DAO alone, though, the directors are almost irrelevant; the bylaws that concern the DAO would be around voting, appointments of stewards, etc.

Thank you for your comments and suggestions. I will review and incorporate, if I agree, or I will discuss further with you and anyone else who comments.

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