IIP-149: Incorporate Index Coop

Hi @CryptoTaxGuy.ETH,

Thank you so much for coming onto the forum and providing valuable insights here.
Would you be able to provide further colour on the following points ?

We are over 18 months old now and have not filed any tax returns. If incorporated in the Caymans, what implications could this have ?

It appears that an individual contributor (not an LLC) is probably one of the worse approaches here.
Are you able to share any thoughts on how a DAO (bunch of random on the internet) approach / think about signers on the multisigs ?

A more broad question, do we need to made aware of any potential considerations relating to an overly concentrated token distribution ?
Around one third of the DAO token distribution is controlled by a single entity.

With respect to organisational structures, if there was a CEO or board of directors ie: Council, are there any considerations we should take onboard when consider mirrors a corporate board and incentive construct ?

Thank you for taking the time to engage with Index Coop and especially on the forum in such an open arena. We very much appreciate you sharing your thoughts with us.

4 Likes

Hi @Matthew_Graham - Sure thing. In response to your questions:

Unfortunately, there isn’t a clear or easy answer to this. I think the position the multisig signers would likely take is that they were acting as mere agents for a to-be-formed Cayman foundation, and thus were not in fact partners, although this position is not insusceptible to a challenge. Happy to further discuss this live.

Typically, under the structure I’ve described, the multisig is held by or on behalf of the Cayman foundation (e.g., director(s) and possibly officer(s)). With that in mind, I think there are two big considerations embedded in your question.

  1. NEXUS RISK. The existence of US directors could potentially cause the Cayman foundation to be engaged in a US trade or business. I understand there is a similar “nexus” risk for other onshore (i.e., non-Cayman, non-BVI, etc.) jurisdictions, although I practice only US tax law.

Nexus risk typically is mitigated by trying to ensure that the “mind and management” of the Cayman foundation is offshore. The most common approaches that we’ve seen are (a) one independent Cayman director, with DAO oversight built into the foundation’s organizational documents, or (b) two independent Cayman directors with one DAO member as a third director so that the majority of the board isn’t onshore. Option (b) is more expensive. Another option would be to ensure that directorial meetings take place, and material governance decisions are made, offshore, although this might be more difficult to accomplish if one or more US directors are also active participants in the DAO. We can discuss these options live and tailor a solution to the DAO’s preferences and risk tolerance.

  1. PERSONAL RISK. Our understanding is that Cayman law generally protects directors from personal liability with respect to the actions they take for a foundation so long as they don’t breach their fiduciary duties to the foundation. That said, we have seen US officers and directors use LLCs as further liability protection. It also is not uncommon for US developers who are to be compensated by the foundation to each form their own LLC, or to jointly act through a single LLC, to mitigate the potential for personal liability if, e.g., someone asserts that they were harmed by their actions.

There is a legal answer and a practical answer to this question. The legal answer is that token concentration shouldn’t make a difference if the DAO is structured properly. The practical answer is that a more diluted concentration arguably makes it easier for the Cayman foundation to assert that it is not being de facto managed by people in any one country such that it has a nexus there.

I hope this is helpful.

9 Likes

Hi Jason, It’s great to see you engaging with the community on these issues! I’m a NY attorney, but use it more so in my current Web3 business activities than to represent clients. Many colleagues resist speaking up in ways that would be so helpful to DAO communities simply because there is no client that can retain them. I would love to attend a Twitter Space on this topic!! Thanks for your comments. ~ Kianga Daverington

7 Likes

Thanks, @CryptoTaxGuy.ETH, for weighing in on the community’s various questions on this topic.

I believe we’re at the point to move forward with a vote. Tagging @JosephKnecht, @shawn16400, @0xModene, @Matthew_Graham, and @mel.eth in particular, for any additional comments before formally calling for a vote. Will give it another 24 hours.

4 Likes

Let’s put this to vote. We are keen to move this forward. :slight_smile:

@GovNest - can we please schedule a vote for this week.

Thank you in advance.

1 Like

This is a pretty big decision for the Coop. Would it be worth dedicating a Leadership Forum to talking through the pros/cons and giving people a chance to ask questions in a group setting?

1 Like

Great stuff @CryptoTaxGuy.ETH thanks for clarifying the communities questions. I think we should move this forward to a vote this week so that we can start working through the specifics and implementing the structure.

@StepvhenH if you have any specific questions I would urge you to add them to this forum post so that @CryptoTaxGuy.ETH can aid with any concerns you may have.

Hey @Finance , assuming this is a request from Finance Nest Contributors (@ElliottWatts and @Matthew_Graham ). Could we please create a separate proposal post inorder to comply with the standard IIP Template.
Assuming the intention of this post was community feedback and preliminary discussion with no indication of the ideas presented here being implemented. A new post in the standard proposal format, would be much better served to inform the community that you now plan to move forward with incorporation of the Index Coop.

4 Likes

Hi @GovNest,

We have amended the post to reflect the IIP format. Do let us know if there are any concerns. If not, please do schedule a vote at the earliest.

2 Likes

As a matter of practice please make sure DRIs for execution are specified along with governing account as there is a funding requirement should this pass.

1 Like

Hi @GovNest. Can this be scheduled to go live today on snapshot? Thanks

Gm @Finance -

Given that this appears to be a request from a nest within the Index Coop DAO not covered by the current DAO Seasonal funding request (IIP-139 - Season 1 Budget Approval) I’m tagging the sitting Index Council for review and approval as this would represent an external agreement with fee obligations to IC. I’d recommend coordinating directly with the council responsible for delegation of new areas of execution within the DAO.

For expeditious review and comment: @afromac @0x_Dev @catjam @edwardk @anthonyb.eth

1 Like

Hi All,

For those that are interested in following this topic as it move across the industry, Balancer recently made a post on there governance forum detailing a similar strategy to what is outlined above.

The details can be found below:

4 Likes

Hi @mel.eth

The council has read and signed off on this proposal. We are happy for it to proceed to vote.

cc: @Matthew_Graham @ElliottWatts @Metfanmike

5 Likes

Hey @Finance , an IIP number (149) has been assigned to this proposal.
Since an IIP number has just been assigned, and the status has been changed from ‘draft’ to ‘proposed’, the 48 hour formal discussion period for this IIP will start now. This signals to the community that this vote will soon go up for a snapshot vote, and we request that any additional feedback and discussion be done during this formal and final discussion period.

A GovRep (@sixtykeys ) has been assigned to review and run this proposal through the IIP Process.

Unfortunately as per process, this vote cannot go live today. The soonest this vote can be queued is 21st April 2022, to go live on the same date. If this presents any blockers, feel free to communicate this here.

For reference, an overview of the IIP Process can be found here, and guidelines for the usage of the GovNest account can be found here.

cc: @Matthew_Graham @ElliottWatts @Metfanmike @mel.eth

1 Like

Hey @Finance, review is complete. If you are alright with 21st April 2022, I will go ahead and queue the vote on that date (@1800UTC).
I will report back here with a snapshot link once the vote has been queued.

1 Like

21st April is fine. Thanks

1 Like

Hi @sixtykeys the vote is due to start in 1 hour but I haven’t seen it posted to snapshot? Just want to make sure we aren’t delayed here. Thanks in advance

@ElliottWatts Forgive me for the suspense. The 48 hour period had just ended a few hours prior.
This IIP has been queued on snapshot and will start today (@1800 UTC). As promised, please find the link below.
Snapshot here

4 Likes

Confirming that this IIP has passed with 462K INDEX (95.12%) voting FOR :white_check_mark:
Snapshot here

6 Likes