FIRST DRAFT of ENS DAO BY-LAWS

🗳️ Meta-Governance DAO-Governance
9

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

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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?

11

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.

12

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

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@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.

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14

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

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@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

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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.

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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.

18

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.

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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.

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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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I kind of agree that separate by-laws might not make sense, because decision-making authority primarily rests with the DAO but the directors also have their role, as representatives of the legal entity. Much of what has been incorporated so far can be used.

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I definitely think they need to be separate. I think there is too much confusion already that the DAO and Foundation are 1-in-the-same. There needs to be clear distinction between the two.

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If they’re going to be combined, they need to be Foundation bylaws, and in that case we should loop in Fenwick on it.

It may be simpler to have separate bylaws, though; the Foundation ones can be written by the lawyers and as straightforward as possible, while the DAO bylaws can cover day-to-day DAO operations (many of which will not involve the Foundation taking any action) and be more easily extended and amended.

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Just to be clear - from a legal perspective they are one and the same. The Foundation is the legal entity for the DAO.

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If there is going to be one set of By-laws, it must recognized the DAO’s full authority. If there is going to be two sets of By-laws, then Fenwick should delete those articles that should be incorporated into and addressed in the Foundation By-laws.

I think we should pause further work until Fenwick has opined.

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26

I think that regardless of the issue of one or two sets, we could work on drafting the bylaws that would relate to the DAO’s day-to-day practice - extending EP4 to add rules around voting etc.

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This is what is most interesting to me - and the biggest need within the DAO at the moment:

Are proposal processes outlined anywhere?

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No, not as far as I can tell