https://harrisbricken.com/
firm [at] harrisbricken.com
In most jurisdictions, an organization of two or more people for a purpose, without corporate formalities, is a general partnership. A general partnership has no liability protection, and organization liabilities flow “jointly and severally” to each of the participants. This is an ominous legal reality for Decentralized Autonomous Organizations (DAOs) and their members.
What should DAO participants do?
Do Nothing
By doing nothing, all DAO participants risk joint and several liability on all DAO activities by all participants across the world. This is obviously ill-advised from a legal perspective.
Go to Wyoming
In July 2021 Wyoming applied its limited liability code to DAOs. But that limited liability code does not completely apply to a decentralized organization. Wyoming addresses this tension by allowing smart contracts to act like operating agreements.
Go Offshore
“Offshore” refers to countries that welcome web3 innovations. Cayman Islands, British Virgin Islands, El Salvador, Singapore, and Gibraltar are the current forerunners.
We put our clients in a DAO-friendly jurisdiction. Then we overlay principles of decentralization (i.e. smart contracts as a basis for governance). The smart contract algorithms can play their role, the autonomous group can have some level of liability protection, and the DAO is attached to a maturing regulatory environment.
DAOs are the beginning of a new global restructuring, furthered by jurisdictions with visionary regulatory schemes and creative international practitioners.
