That doesn’t make any sense. If it shouldn’t act on its own, how is it supposed to act “in its capacity to grow ENS”.
It’s only capacity should be what the DAO votes on it to do.
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I mistyped, see again (sorry I am on phone)
I think we are getting to the point where there are to many cooks in the kitchen, the participation and open debate is good, it’s just a little hard to follow in the forum and I worry the efforts will shortly begin to outpace the progress.
Unless I am mistaken, at this time there seems to be a consensus that the DAO should allow Fenwick to draft the Foundation By-Laws first as that would be helpful in narrowing the scope of the proposed DAO By-Laws (I agree). It also appears like there are pending questions, and differences of opinion, related to the need and benefit of separate By-Laws for the Foundation and the DAO. Personally I don’t think there is a right or wrong answer and I remain open minded, but with the benefit of @berrios.eth’s draft and the discussion that followed I have begun leaning towards By-Laws for the Foundation only. Of course my opinion would ultimately be dependent on the Foundation By-Laws.
Moreover, based on the proposed goals of the DAO By-Laws outlined by Nick, I just don’t think there are any issues which can’t be properly memorialized within the Foundation By-Laws and controlling over the DAO. Alternatively, if the DAO were to begin incorporating additional legal entities separate from The ENS Foundation Company or if the Foundation Company were to be dissolved the DAO would continue to exist without the legal entity “wrapping it”, then I would see the benefits of DAO By-Laws as more of a necessity under those examples.
Maybe it might be helpful to schedule a group chat to discuss some of the outstanding questions/concerns raised in the thread related to jurisprudence. If this makes sense we should start by creating a list of questions/topics to be discussed starting with the goals of the proposed DAO By-Laws as originally outlined by Nick and coordinate a date/time thereafter.
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I agree on the need for a call
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I going to go through this thread and incorporate or address some issue and provide the Second Draft this weekend.
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I disagree; the grant process needs more formality because of the expenditure of DAO assets.
I’m not arguing one way or the other, I’m saying that today, the agreed upon governance process the DAO passed doesn’t discriminate on the type of proposal. So I don’t see why grants today wouldn’t be covered by the current proposal process, like any other proposal.
I understand your point. Because a formal process has not yet been developed, the current process is the process.
@inplco @berrios.eth FYI, something that we could consider for future social proposals: Possible New Snapshot Strategy for Social Proposals
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Can you elaborate on this? I’m not a lawyer, but my understanding is that those kinds of risks would come from not being viewed as a single entity.
Agreed, we should start compiling a list of topics that need to be addressed by any DAO bylaws. Here are the ones that have come to my mind:
- Proposal process
a. Format of a proposal
b. Proposal lifecycle states: Draft, Active, etc. See Governance Process - ENS Documentation
c. Criteria for advancing to each stage in the process.
d. Who posts votes on Snapshot and how
e. Acceptable voting strategies (simple voting, ranked choice, etc) and how they are selected
f. If and how successful snapshot votes can be combined for onchain voting
g. Handling Snapshot proposals put forward outside this process - Grants
a. Application process.
b. Eligibility criteria
c. How to determine when a grant is handled by a WG or the whole DAO.
d. WG steward involvement and responsibilities for DAO-wide grants.
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I guess I don’t understand what the idea of separate by-laws because by-laws can only be enforced by a legal jurisdiction, right? And if the Foundation is the legal face of the DAO, how can you have separate by-laws that apply to the DAO but not the Foundation?
Or, to ask the same question in reverse: by what mechanism can by-laws “for the DAO” ever be enforced?
I disagree. By-laws are an intra-organizational set of rules of governance. The only way they can be enforceable in a court, is if there is a clause that makes them an enforceable contract and provides for a right of action.
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Like Berrios says - the DAO bylaws would specify how the DAO conducts itself. They don’t need to be enforceable outside the DAO by a legal mechanism.
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I would go one step further. The DAO (or an ENS Tokenholder) has no standing to sue the directors or The ENS Foundation. Because the ENS Tokenholders have no capital interest in the Foundation Company, there’s no standing to bring a derivative action, nor is there anything like a class action under Cayman Islands’ law. Generally, it is the Foundation Company who has standing to sue a director for breach of duty or breach of fiduciary duty for pecuniary loss. This is not legal advice.
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This is great. Going to get familiar with this. Would be awesome to have a short-form version of the By-Laws made easily accessible by the greater community; for the sake of accessibility and transparency.
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I think the problem becomes a significant issue when the term “DAO” is being used as a term as if it has a corporate identity, or as if it is the Foundation. For example, here are two fact patterns - using only a slight tweak of language (NOTE - none of this is legal advice):
Let’s say a proposal is put forward to transfer the ENS Treasury from the ENS Multisig to another entity.
In Scenario 1, the Treasury is proposed for transfer from the ENS Multisig to ENS DAO. This is basically the language in EP1.
Although it is hard for me to find a ‘legal’ definition of the ENS DAO - let’s say the ENS DAO is equivalent to the Council, as defined in the Articles of Association of the Foundation, and is basically ENS Tokenholders. In the proposal, there appears to be no mention of the Foundation. As a result, the ENS Multisig is transferred to the DAO - ENS tokenholders - which, as a result of having no specific corporate identity or designation, would likely be categorized as a General Partnership (GP) under certain jurisdictional requirements (e.g., U.S.) (although local tax/corporate counsel would be best situated to make a formal determination on this). This designation comes with significant tax implications and liabilities. Generally (in the U.S. at least), all partners (i.e., all tokenholders) could be 100% personally liable for all actions of the DAO (the partnership). In other words, if a lawsuit was brought as a result of any issue with the Treasury, liability is not limited to a corporate entity but actually extends to all members/tokenholders. Basically, the important protections that are beneficial for working within a legal/corporate structure are not available here based on drafting that gives ‘control’ or ‘ownership’ to the DAO (not a legal structure or entity).
Scenario 2 - Alternative Language: "Treasury is proposed for transfer from the ENS Multisig to the ENS Foundation, in its capacity to develop, incentivize, and support the growth of the protocol, decentralized network, and ecosystem - including the DAO. The DAO (“DAO or “Council”), having been appropriately delegated powers pursuant to Article XX to manage affairs related to the Treasury, shall be able to do X.” Language similar to this would provide significantly more liability protection to members who generally would not have 100% liability under a corporate legal structure like a Foundation, as well as certainty with respect to tax implications as a result of the Treasury being encompassed within a Foundation Company, duly incorporate within the Cayman Islands. And, with careful drafting, the DAO/Council could likely avail itself of the protections that being under the Foundation provides, while ensuring the DAO has full control over any actions that are taken with respect to the Treasury.
Although the language is only slightly different - Scenario 1 is transferring to the “DAO”. Scenario 2 is transferring to the “Foundation” (with significant delegated power to the DAO to control the Treasury). However, liability and corporate protections afforded under each structure is completely different. If everyone voted for Scenario 1, with the complete understanding of the risks, liabilities, and responsibilities that it comes with - everything is fine. The problem arises when Scenario 1 language is proposed, but everyone assumes that the protections in Scenario 2 are provided (limitation of liability, clarity on any tax obligations or requirements). When, in fact, they are not.
I am not here to say Scenario 1 is a better option, or Scenario 2 is a better option - but simply that they are different. Hopefully this examples helps explain why the terms Foundation and DAO cannot and should not be used interchangeably, and are not the ‘same’ entity.
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The DAO does not have a corporate identity; it is a beneficiary of the Foundation Company. I generally agree with scenario 2, because the directors should keep oversight over funds. Even if there is a transfer of the Treasury to the DAO, there should be a residual interest for oversight purposes, which the Foundation Company can’t escape, because of fiduciary obligations.
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So what happens if there is a dispute, or if someone within the DAO simply doesn’t follow the by-laws? How is this resolved?
Dispute between whom? If someone within the DAO doesn’t follow the DAO by-laws, the DAO can enforce it by removing the Steward(s). Except where recommended in connection with indemnification, there are no individual rights because the by-laws pertain to operations and not personal conduct.
- I agree with the “DAO does not have a corporate identity.” statement. I am not clear what is meant by being a ‘beneficiary’. (Article 37 specifically indicates the Foundation does not have any beneficiaries). But perhaps, you meant this in a different meaning of beneficiary.
- I think it should be noted that in this situation - Scenario 1 was already voted on re EP1: Snapshot and passed. Not an issue, if everyone intended for the risks, liabilities, tax implications, etc to occur as outlined in Scenario 1. But, if the assumption was that there would be a corporate veil around this transaction somehow - I think that is where the issue comes in.
- I am not sure what is meant by ‘residual interest for oversight purposes’ means. I agree there ‘should be’ in theory - although I would also clarify that I do not believe there currently is, as structured. Other than the rights the Council/DAO has over the Foundation as specified in the Articles, I would be interested to know where any ‘fiduciary obligations’ stem from. I think the Foundation has the requirement (or could easily be structured to) follow the instructions from the DAO/Council in accordance with the Articles. But that does not necessarily lead to an overarching fiduciary duty to the DAO (if structured correctly, possibly a contractual duty? Although again, as currently structured, I do not think either of these types of duties exist). Could you explain your rationale a bit more so I understand from where this fiduciary duty form the Foundation to the DAO would stem from?