WEBVTT 00:00:05.020 --> 00:00:08.500 All right, everybody, hello, Sandow podcast number 00:00:08.500 --> 00:00:14.460 64, 64 episodes since we started this thing back 00:00:14.460 --> 00:00:17.800 in May, June of last year. Since then, we have 00:00:17.800 --> 00:00:20.300 been on a journey to understand DAOs and that 00:00:20.300 --> 00:00:22.920 led us to foundation companies. Here we are on 00:00:22.920 --> 00:00:25.620 part six of our foundation company miniseries. 00:00:25.679 --> 00:00:28.539 We have a return guest with us. Carolyn from 00:00:28.539 --> 00:00:38.960 Walker's Global. Back in episode 59, it was Carolyn 00:00:38.960 --> 00:00:43.880 and Melissa. Carolyn, you're an associate with 00:00:43.880 --> 00:00:47.479 Walker's Global, whereas Mel is a partner, correct? 00:00:47.940 --> 00:00:51.460 Yeah, well, I'm actually an associate at Walker's 00:00:51.460 --> 00:00:53.719 and thanks for having me on again, Lance. I'm 00:00:53.719 --> 00:00:55.579 so glad to have been invited back to the show 00:00:55.579 --> 00:00:57.619 and sort of happy to be as helpful as I possibly 00:00:57.619 --> 00:01:00.619 can in answering any questions you have. Yeah. 00:01:01.880 --> 00:01:05.180 Thank you. Very, very happy to have you back 00:01:05.180 --> 00:01:08.439 on. Last time we had to cut it off right at the 00:01:08.439 --> 00:01:11.500 hour mark and there were so many questions left. 00:01:11.719 --> 00:01:14.040 I was able to answer quite a few, I think, on 00:01:14.040 --> 00:01:18.250 some subsequent episodes since I... since then. 00:01:18.829 --> 00:01:20.769 But there's still some really, really burning 00:01:20.769 --> 00:01:22.629 questions I have that I think will close this 00:01:22.629 --> 00:01:25.129 out really nicely. So the scope of the talk for 00:01:25.129 --> 00:01:28.829 today is another analysis of the facts, a Q &A 00:01:28.829 --> 00:01:32.390 with a practicing attorney over in Grand Cayman 00:01:32.390 --> 00:01:35.390 Islands, who is actually very experienced with 00:01:35.390 --> 00:01:38.209 foundation companies, as was Mel. And it's all 00:01:38.209 --> 00:01:40.230 about transparency, trying to give our community 00:01:40.230 --> 00:01:45.250 and others more information to make smart decisions 00:01:45.250 --> 00:01:49.290 as we DAO. Disclaimer is neither of us represent 00:01:49.290 --> 00:01:52.069 the Sandbox Game or the Sandbox Foundation. We're 00:01:52.069 --> 00:01:53.909 not your financial or legal advisors, and nothing 00:01:53.909 --> 00:01:55.810 we say is to be taken as financial or legal advice. 00:01:56.069 --> 00:01:59.049 True for me, Carolyn. Still true for you? Very 00:01:59.049 --> 00:02:02.189 true for me, Lance. Very true. All right. So 00:02:02.189 --> 00:02:07.549 when we say the word SIP, AIFP, or anything of 00:02:07.549 --> 00:02:08.870 that sort, we're talking about an improvement 00:02:08.870 --> 00:02:11.349 proposal for the DAO. When we say DAO, we mean 00:02:11.349 --> 00:02:14.680 a centralized autonomous organization. And if 00:02:14.680 --> 00:02:16.740 I ever use the word SandFam, we're talking about 00:02:16.740 --> 00:02:18.939 the Sandbox community, those who participate 00:02:18.939 --> 00:02:21.599 in the people, product, and purpose of the Sandbox 00:02:21.599 --> 00:02:24.800 ecosystem. That ecosystem looks a little bit 00:02:24.800 --> 00:02:27.159 like this, where you have people, everyone from 00:02:27.159 --> 00:02:29.300 gamers to the Sandbox team. The product is everything 00:02:29.300 --> 00:02:31.860 from the game client to the DAO. And the purpose 00:02:31.860 --> 00:02:34.180 is what is established on the white paper, as 00:02:34.180 --> 00:02:36.400 well as what's been expanded upon by the leaders, 00:02:36.520 --> 00:02:39.719 the leadership of the Sandbox ecosystem, mostly 00:02:39.719 --> 00:02:42.919 Sebastian Bourget and Arthur Madrid. And the 00:02:42.919 --> 00:02:44.819 ecosystem lets everything go round and round. 00:02:46.099 --> 00:02:51.000 Today is episode 64 and we are squarely on the 00:02:51.000 --> 00:02:56.020 Dow. Today we have Carolyn. She's coming, a return 00:02:56.020 --> 00:03:01.180 guest from episode 59 from Walker's Global. Again, 00:03:01.199 --> 00:03:03.800 Carolyn, if you wouldn't mind reintroducing yourself 00:03:03.800 --> 00:03:08.639 and yeah. Absolutely. Thanks, Lance. Yeah, no, 00:03:08.740 --> 00:03:11.539 I'm an associate in the FinTech team at Walkers. 00:03:11.919 --> 00:03:16.240 I have a vast amount of experience working with 00:03:16.240 --> 00:03:19.240 Cayman Foundation companies and providing which 00:03:19.240 --> 00:03:21.960 provides sort of the legal wrapper for the DAO. 00:03:22.800 --> 00:03:25.969 I've worked on sort of with. you know the startup 00:03:25.969 --> 00:03:29.129 um entities in this space very notable names 00:03:29.129 --> 00:03:32.370 in the space uh global regulated cryptocurrency 00:03:32.370 --> 00:03:37.449 exchanges um have advised um you know tens if 00:03:37.449 --> 00:03:41.620 not you know tens of multiples of tens of these 00:03:41.620 --> 00:03:44.759 types of entities so incredibly familiar and 00:03:44.759 --> 00:03:48.919 and we are walkers is the biggest off -chain 00:03:48.919 --> 00:03:53.280 offshore law firm providing services to daz foundation 00:03:53.280 --> 00:03:56.860 companies in this area and we have a really great 00:03:56.860 --> 00:03:59.539 regulatory team as well as as on the fintech 00:03:59.539 --> 00:04:02.379 side and so we have a real depth and breadth 00:04:02.379 --> 00:04:05.659 of expertise that we can offer to clients in 00:04:05.659 --> 00:04:08.020 this space. And it's led by the wonderful Melissa 00:04:08.020 --> 00:04:13.180 Lim and Lucy Forret -Walkers. Yeah, as we did 00:04:13.180 --> 00:04:18.180 cover in a previous episode, Walkers is highly 00:04:18.180 --> 00:04:20.100 experienced. If you could look, you looked at 00:04:20.100 --> 00:04:23.399 the solutions, looked at the art people, locations 00:04:23.399 --> 00:04:26.699 that they have. And we went over the article 00:04:26.699 --> 00:04:29.399 that eventually led me to Mel and Carolyn from 00:04:29.399 --> 00:04:34.740 episode 59. So. extremely experienced, and as 00:04:34.740 --> 00:04:39.240 you can see, Carolyn is very familiar with foundation 00:04:39.240 --> 00:04:43.120 companies. Hence, episode 64. We'll do a very, 00:04:43.139 --> 00:04:45.439 very brief recap. I slimmed it down quite a bit, 00:04:45.500 --> 00:04:48.519 and then we'll jump right in that Q &A. So that 00:04:48.519 --> 00:04:51.839 recap started with episode 34, moved on, which 00:04:51.839 --> 00:04:54.000 was a look into the DAO origins for the sandbox. 00:04:54.500 --> 00:04:56.660 Episode 56 was a reading of the Cayman Islands 00:04:56.660 --> 00:05:00.350 law. I read through everything from the... Companies 00:05:00.350 --> 00:05:02.810 Management Act, the Companies Act, the Foundation 00:05:02.810 --> 00:05:06.569 Companies Act, and more. And then 57, we had 00:05:06.569 --> 00:05:08.350 a U .S. practicing attorney on where we talked 00:05:08.350 --> 00:05:12.089 about Dow's and case law, particularly the case 00:05:12.089 --> 00:05:15.629 law over happening in California. Episode 59, 00:05:15.910 --> 00:05:19.529 we had Mel and Carolyn on talking, briefing foundation 00:05:19.529 --> 00:05:22.290 companies from a Cayman Islands lawyer perspective. 00:05:22.910 --> 00:05:27.379 And episode 60. was part four, and that was a 00:05:27.379 --> 00:05:29.300 reading of all the Sandbox -style foundation 00:05:29.300 --> 00:05:32.699 documents, particularly the Constitution, which 00:05:32.699 --> 00:05:35.459 is made up of the Articles Association and the 00:05:35.459 --> 00:05:38.259 Memorandum Association, as well as the bylaws. 00:05:39.420 --> 00:05:43.839 And then episode 62, part five, was a reading 00:05:43.839 --> 00:05:46.259 of Star Atlas -style documents and their Constitution. 00:05:47.420 --> 00:05:50.120 So that leads us to today, episode 64, which 00:05:50.120 --> 00:05:52.879 is a Q &A, and there were all the burning questions. 00:05:53.339 --> 00:05:55.939 that I had and received from others about foundation 00:05:55.939 --> 00:06:00.980 companies, we will get answered today. And yeah, 00:06:01.439 --> 00:06:03.839 so that relationship map in episode 34 is what 00:06:03.839 --> 00:06:05.500 kicked it all off, trying to figure out what 00:06:05.500 --> 00:06:08.759 was going on, who was doing what. And so much 00:06:08.759 --> 00:06:12.300 of this now makes so much more sense. We'll do 00:06:12.300 --> 00:06:15.879 a wrap -up episode in a future episode to kind 00:06:15.879 --> 00:06:18.399 of bring it all together. Then we did our, in 00:06:18.399 --> 00:06:20.959 episode 56, that law regulation stack where the 00:06:20.959 --> 00:06:23.019 Companies Act I mentioned. Foundation Company 00:06:23.019 --> 00:06:26.879 Law, and others. It gave a lot of meaning to 00:06:26.879 --> 00:06:28.839 all these things that we were looking at. What 00:06:28.839 --> 00:06:30.660 is an article association? What is a foundation? 00:06:31.060 --> 00:06:32.540 What does it mean to be limited by guarantee? 00:06:33.240 --> 00:06:36.220 Why do we see the words Cayman Islands Monetary 00:06:36.220 --> 00:06:39.079 Authority? Why is there a $50 duty stamp on it? 00:06:39.480 --> 00:06:43.019 So all these sorts of things had a lot of meaning 00:06:43.019 --> 00:06:46.079 given to it after we read the regulations. Then 00:06:46.079 --> 00:06:48.540 in episode 57, we went over some court rulings 00:06:48.540 --> 00:06:52.879 that are applicable. to DAOs right now, OokiDAO, 00:06:53.079 --> 00:06:57.379 BZX, Lido, and others. And then that led us to, 00:06:57.439 --> 00:06:59.779 throughout the course of that, an article that 00:06:59.779 --> 00:07:03.480 I was reading penned by none other than Mel and 00:07:03.480 --> 00:07:06.120 Carolyn in Walker's Global called Cayman Island 00:07:06.120 --> 00:07:08.519 Foundation Companies are a leading vehicle for 00:07:08.519 --> 00:07:12.120 wrapping a DAO. That led us to episode 59, where 00:07:12.120 --> 00:07:14.800 Mel and Carolyn gave us a rundown of foundation 00:07:14.800 --> 00:07:17.519 companies, DAOs, and virtual assets, going over 00:07:17.519 --> 00:07:20.730 things such as why would a DAO form? a Cayman 00:07:20.730 --> 00:07:23.149 Foundation company? What are the timeline events 00:07:23.149 --> 00:07:26.670 that lead from the inception of a foundation 00:07:26.670 --> 00:07:29.189 company to a director -led to a token holder 00:07:29.189 --> 00:07:30.930 -led? I didn't know anything about that until 00:07:30.930 --> 00:07:34.290 they said that. So that was huge, huge education 00:07:34.290 --> 00:07:36.829 for me. And then what documents are required 00:07:36.829 --> 00:07:38.610 to form a foundation company, as well as many 00:07:38.610 --> 00:07:41.430 other things. Check that out in episode 59. We 00:07:41.430 --> 00:07:44.610 left with TLDR, which I began in episode 34, 00:07:44.730 --> 00:07:47.230 and I've been updating ever since. What is a 00:07:47.230 --> 00:07:50.439 foundation company? Right now I have is both 00:07:50.439 --> 00:07:52.920 the name of the Sandbox DAO and a type of company 00:07:52.920 --> 00:07:55.600 in the Cayman Islands. It's also flexible in 00:07:55.600 --> 00:07:57.860 how it's structured and operates. What is an 00:07:57.860 --> 00:07:59.939 exempted company? It means a company that does 00:07:59.939 --> 00:08:02.639 business outside the Cayman Islands. Limited 00:08:02.639 --> 00:08:05.040 by guarantee means the members of the foundation 00:08:05.040 --> 00:08:06.779 can only lose what they put into the company. 00:08:07.180 --> 00:08:10.819 Without any share capital means no shares, otherwise 00:08:10.819 --> 00:08:12.600 known as units of ownership, were created when 00:08:12.600 --> 00:08:15.259 the company was formed. Articles and Memorandum 00:08:15.259 --> 00:08:17.759 of Association. The memo seems to be the thing 00:08:17.759 --> 00:08:20.060 that creates the foundation company. The articles 00:08:20.060 --> 00:08:22.019 describes how it will be operated, kind of like 00:08:22.019 --> 00:08:24.720 your business rules. And bylaws establish internal 00:08:24.720 --> 00:08:27.160 business rules, which are optional if you are 00:08:27.160 --> 00:08:30.420 dealing with a foundation company. Not optional 00:08:30.420 --> 00:08:32.500 if you're in the foundation company. I'm sure 00:08:32.500 --> 00:08:34.960 Carolyn will correct me on that one. Lots of 00:08:34.960 --> 00:08:37.179 business is done in the Cayman Islands. A thousand 00:08:37.179 --> 00:08:40.059 companies alone were registered in the Cayman 00:08:40.059 --> 00:08:44.250 Islands. A thousand alone. with about 120 active 00:08:44.250 --> 00:08:48.649 since late 2024. Foundation rules are flexible 00:08:48.649 --> 00:08:50.850 and varied. Subscriber seems to be the one that 00:08:50.850 --> 00:08:53.009 creates the foundation company. Secretary seems 00:08:53.009 --> 00:08:56.590 to be the one that's licensed by SEMA, the Monetary 00:08:56.590 --> 00:08:58.990 Authority, to document, record, certify other 00:08:58.990 --> 00:09:01.950 activities. Director leads the foundation company, 00:09:02.029 --> 00:09:04.330 and the members, founders, officers, supervisors, 00:09:04.490 --> 00:09:07.850 managers, they all conduct daily activities in 00:09:07.850 --> 00:09:09.960 accordance with their role. All this is governed 00:09:09.960 --> 00:09:13.259 by the Grand Cayman Island law, namely the Companies 00:09:13.259 --> 00:09:15.700 Act and the Foundation Company Act. We're going 00:09:15.700 --> 00:09:17.580 to start our Q &A. And the very first thing we're 00:09:17.580 --> 00:09:20.019 going to ask Carolyn is, is anything I just said 00:09:20.019 --> 00:09:22.379 incorrect, Carolyn? Do I need to fix anything 00:09:22.379 --> 00:09:27.549 on that TLDR? Thank you. I think broadly that 00:09:27.549 --> 00:09:30.490 was that was correct. I mean, maybe just to provide 00:09:30.490 --> 00:09:32.690 a little bit more clarity. So when we talk about 00:09:32.690 --> 00:09:35.409 bylaws and and how that interacts with the M 00:09:35.409 --> 00:09:39.370 &A, it really depends, which is a very legal 00:09:39.370 --> 00:09:42.429 answer. But the bylaws typically set out token 00:09:42.429 --> 00:09:45.610 holder governance and then the memorandum and 00:09:45.610 --> 00:09:47.710 articles of association, the foundation company 00:09:47.710 --> 00:09:52.399 are. updated to reflect that token holder governance. 00:09:52.639 --> 00:09:55.539 So thereby creating this sort of link between 00:09:55.539 --> 00:09:58.320 the two documents. And it's those two documents 00:09:58.320 --> 00:10:01.120 combined that provides the legal wrapper for 00:10:01.120 --> 00:10:05.259 a DAO. So maybe just that's a slight clarificatory 00:10:05.259 --> 00:10:07.220 point that it's token holder governance. They 00:10:07.220 --> 00:10:09.960 are optional, of course, if the intention is 00:10:09.960 --> 00:10:12.019 that there is not going to be token holder governance, 00:10:12.100 --> 00:10:19.379 then bylaws do not need to be implemented. We've 00:10:19.379 --> 00:10:22.059 also seen it where there's a DAO, but the DAO 00:10:22.059 --> 00:10:23.899 provides ad hoc instructions to the foundation 00:10:23.899 --> 00:10:26.580 company. And so those governance mechanics are 00:10:26.580 --> 00:10:29.620 not set out in bylaws. So there's also that consideration 00:10:29.620 --> 00:10:35.080 as well. Now I get that. That's why the director 00:10:35.080 --> 00:10:37.120 led the token hurdle letter the way it was on 00:10:37.120 --> 00:10:40.059 that slide. So the token hurdle letter is initiated 00:10:40.059 --> 00:10:45.289 with the bylaws. That's the document that sets 00:10:45.289 --> 00:10:47.870 out the governance, OK? So that would be the 00:10:47.870 --> 00:10:50.269 document where you see all the kind of voting 00:10:50.269 --> 00:10:55.129 proposal, how proposals can be made, voting thresholds, 00:10:55.129 --> 00:10:57.730 through what channels, who has the right to vote 00:10:57.730 --> 00:11:01.429 on that, you know, sets out the sort of quorum 00:11:01.429 --> 00:11:05.590 and voting process and voting, you know, the 00:11:05.590 --> 00:11:08.370 sort of thresholds for voting as well in terms 00:11:08.370 --> 00:11:11.529 of when a proposal will be passed and then implemented. 00:11:12.169 --> 00:11:17.309 And then the the foundation company and the direct 00:11:17.309 --> 00:11:21.769 foundation company will implement the token holder 00:11:21.769 --> 00:11:25.549 governance votes that have been passed. And the 00:11:25.549 --> 00:11:29.389 director, the director or directors, in accordance 00:11:29.389 --> 00:11:32.309 with the memorandum and articles of association, 00:11:32.429 --> 00:11:36.210 have to act in compliance with the articles and 00:11:36.210 --> 00:11:41.529 also the bylaws. And so they fall if. any sort 00:11:41.529 --> 00:11:44.649 of token holder voters ask the directors to do 00:11:44.649 --> 00:11:46.269 anything that was illegal, contrary to Cayman 00:11:46.269 --> 00:11:49.350 law, then obviously the directors have the ability 00:11:49.350 --> 00:11:52.789 to not follow it. But save for that, they must 00:11:52.789 --> 00:11:56.080 follow, act in accordance. with the bylaws and 00:11:56.080 --> 00:11:59.080 the articles. And so if a token holder vote has 00:11:59.080 --> 00:12:01.919 passed and that's been set out in the bylaws, 00:12:02.019 --> 00:12:04.500 then the directors will enact the will of the 00:12:04.500 --> 00:12:06.919 DAO. So the foundation company itself, obviously 00:12:06.919 --> 00:12:08.899 represented by its directors, will enact the 00:12:08.899 --> 00:12:12.019 will of the DAO in that circumstance, in those 00:12:12.019 --> 00:12:16.019 circumstances. Got it. I don't think I understood 00:12:16.019 --> 00:12:19.399 that nuance. When you first talked about that, 00:12:19.539 --> 00:12:21.960 it kind of went over my head, like token holder, 00:12:22.019 --> 00:12:27.389 what's the trigger now? Okay. Okay. Yeah. Yeah. 00:12:28.129 --> 00:12:30.129 We're getting into the thing that's been, that's 00:12:30.129 --> 00:12:32.669 been on my mind ever since I started this and 00:12:32.669 --> 00:12:35.850 I still, I need to get, I need to, we need to 00:12:35.850 --> 00:12:38.710 tear this apart. What is the relationship between 00:12:38.710 --> 00:12:42.009 the Dow and the foundation company? Talk about 00:12:42.009 --> 00:12:43.870 separate legal entities, people, personalities. 00:12:44.330 --> 00:12:46.750 Can you spell that out for me, please? Yeah, 00:12:46.750 --> 00:12:49.409 so I think probably the best explanation is that 00:12:49.409 --> 00:12:51.549 the interaction between the DAO and its foundation 00:12:51.549 --> 00:12:53.889 companies, a blend of sort of decentralised governance 00:12:53.889 --> 00:12:58.110 and centralised legal execution. So the DAO will 00:12:58.110 --> 00:13:00.289 make decisions through kind of on -chain voting. 00:13:00.450 --> 00:13:03.710 That might be sort of budget allocations, grants, 00:13:03.990 --> 00:13:08.750 you know. improvements to the network. The foundation 00:13:08.750 --> 00:13:12.590 company, because it's a legal entity, implements 00:13:12.590 --> 00:13:15.710 those decisions in the real world. So signing 00:13:15.710 --> 00:13:18.250 contracts, transferring the fiat funds or sort 00:13:18.250 --> 00:13:21.289 of filing legal documents. Now, that's because 00:13:21.289 --> 00:13:25.629 the DAO is not in and of itself a legal entity. 00:13:26.289 --> 00:13:31.809 And so the foundation company acts as the legal 00:13:31.809 --> 00:13:36.309 entity on behalf of the DAO. in that particular 00:13:36.309 --> 00:13:42.929 respect so what you'd have is um you know you 00:13:42.929 --> 00:13:44.750 have these community members as i've said to 00:13:44.750 --> 00:13:49.289 kind of submit proposals um and that might be 00:13:49.289 --> 00:13:52.049 to hire a developer or fund an event and then 00:13:52.049 --> 00:13:53.870 if approved the foundation company is the one 00:13:53.870 --> 00:13:55.850 that might process those payments sign those 00:13:55.850 --> 00:13:57.809 agreements perform the necessary legal actions 00:13:57.809 --> 00:14:02.210 on behalf of the dow um And then the foundation 00:14:02.210 --> 00:14:04.490 is there to also ensure that the DAO activities 00:14:04.490 --> 00:14:08.389 comply with the regulations. So, you know, in 00:14:08.389 --> 00:14:11.990 Cayman, is it acting in accordance with the law 00:14:11.990 --> 00:14:14.669 in terms of the virtual asset service providers 00:14:14.669 --> 00:14:18.950 legislation, particularly KYC AML? And so it 00:14:18.950 --> 00:14:21.350 may reject or modify proposals if those pose 00:14:21.350 --> 00:14:24.529 any legal risks. And hopefully often they're 00:14:24.529 --> 00:14:28.720 doing that with community transparency. And so 00:14:28.720 --> 00:14:31.360 it's basically they're there to manage kind of 00:14:31.360 --> 00:14:33.980 the off -chain assets as instructed by DAO governance 00:14:33.980 --> 00:14:37.620 and enter into those. The foundation is to enter 00:14:37.620 --> 00:14:39.960 into contracts with third parties to carry out 00:14:39.960 --> 00:14:44.809 the kind of DAO approved work. And, you know, 00:14:44.809 --> 00:14:47.370 I think in DAO and foundation companies that 00:14:47.370 --> 00:14:49.210 operate really, really well, you know, the foundation 00:14:49.210 --> 00:14:51.570 court says transparency between the two and the 00:14:51.570 --> 00:14:54.049 foundation reports to the DAO provides updates 00:14:54.049 --> 00:14:56.210 on legal and financial and operational matters. 00:14:56.809 --> 00:14:59.590 And transparency is that key to maintaining that 00:14:59.590 --> 00:15:02.789 community trust and decentralization. But effectively, 00:15:03.070 --> 00:15:06.149 you know, we also spoke about the shield of liability 00:15:06.149 --> 00:15:09.309 that the foundation company may provide to the 00:15:09.309 --> 00:15:11.830 DAO. And that article of mine that you read. 00:15:13.039 --> 00:15:17.879 um touched upon that because um the idea is that 00:15:17.879 --> 00:15:22.980 if an action is brought against you know There 00:15:22.980 --> 00:15:27.100 is a litigious claim, for example, that the foundation 00:15:27.100 --> 00:15:29.779 company would absorb that claim as opposed to 00:15:29.779 --> 00:15:32.320 the DAO members in and of themselves, provided 00:15:32.320 --> 00:15:34.080 that it's the foundation company that is entering 00:15:34.080 --> 00:15:36.559 into, for example, a contract that becomes litigious. 00:15:36.980 --> 00:15:39.159 It wouldn't be the individual DAO members is 00:15:39.159 --> 00:15:43.019 the sort of theory behind the shield of liability 00:15:43.019 --> 00:15:45.200 point that the foundation company can provide 00:15:45.200 --> 00:15:51.000 to the DAO. So I think that that's kind of a 00:15:51.000 --> 00:15:55.120 good summation of the interaction between the 00:15:55.120 --> 00:16:03.059 two. Okay. And we're getting some touchy subjects, 00:16:03.120 --> 00:16:08.139 but it needs to be asked. What is the legal authority 00:16:08.139 --> 00:16:11.039 that the foundation company has over the DAO, 00:16:11.200 --> 00:16:18.080 if any? Yeah, it's an interesting question. Yeah, 00:16:18.080 --> 00:16:21.419 conceptually, it's not really the way it works. 00:16:21.659 --> 00:16:25.500 You know, you have a DAO that will pass community 00:16:25.500 --> 00:16:29.600 governance proposals and then the foundation 00:16:29.600 --> 00:16:32.460 company implements those. The foundation company 00:16:32.460 --> 00:16:34.779 and the director of that foundation company, 00:16:35.000 --> 00:16:37.500 the director of the foundation, you need to act 00:16:37.500 --> 00:16:40.559 in the best interest of the company. And so if 00:16:40.559 --> 00:16:43.419 the DAO members propose something that gets passed, 00:16:43.740 --> 00:16:48.559 that the directors. You know, that's, for example, 00:16:48.620 --> 00:16:50.940 contrary to Cayman law or in breach of one of 00:16:50.940 --> 00:16:53.320 their duties, the directors have the ability 00:16:53.320 --> 00:16:58.220 to reject that proposal, but otherwise must act 00:16:58.220 --> 00:17:00.360 in compliance with the bylaws and the articles. 00:17:00.559 --> 00:17:02.679 So it's not so much what legal authority does 00:17:02.679 --> 00:17:05.000 the foundation company have over the DAO as it 00:17:05.000 --> 00:17:07.720 is, how can the DAO influence the foundation 00:17:07.720 --> 00:17:11.019 company? And I think you've mentioned like SIPs, 00:17:11.140 --> 00:17:15.359 you know, the improvement proposal process and 00:17:15.359 --> 00:17:19.519 that. All of that, like SIPs and improvement, 00:17:19.720 --> 00:17:22.799 any sort of improvement proposal process will 00:17:22.799 --> 00:17:25.440 be set out in the bylaws. So it's a really important 00:17:25.440 --> 00:17:28.500 document. And that kind of sets the tone for 00:17:28.500 --> 00:17:32.180 the relationship between the two and provides 00:17:32.180 --> 00:17:35.900 the authority, if you like, for the DAO to instruct 00:17:35.900 --> 00:17:38.519 a foundation company to carry out the will of 00:17:38.519 --> 00:17:46.440 the DAO. Okay. I'm writing that down because 00:17:46.440 --> 00:17:47.819 that's going to become important for us later. 00:17:48.200 --> 00:17:53.920 So I've been endowing now as a verb since May, 00:17:54.039 --> 00:17:57.319 and I've been dowing near full time. It's like 00:17:57.319 --> 00:18:00.160 a second job to me now. I'm enjoying myself thoroughly 00:18:00.160 --> 00:18:03.839 in the process. What I've learned is that in 00:18:03.839 --> 00:18:07.140 the execution of its responsibilities, I have 00:18:07.140 --> 00:18:10.779 observed foundation companies, and not disparaging, 00:18:10.859 --> 00:18:14.009 just my observation. I've observed foundation 00:18:14.009 --> 00:18:17.009 companies exercise a degree of authority over 00:18:17.009 --> 00:18:23.930 the DAO in different situations, such as a foundation 00:18:23.930 --> 00:18:32.170 company director, let's say, would appoint someone 00:18:32.170 --> 00:18:36.769 to a DAO position. Or in your case, you mentioned 00:18:36.769 --> 00:18:40.789 a foundation company officer or director would 00:18:40.789 --> 00:18:46.440 alter. the voting results of a dow uh and when 00:18:46.440 --> 00:18:50.240 i say alter i mean change parts of the proposal 00:18:50.240 --> 00:18:53.839 that it did not believe was executable so i think 00:18:53.839 --> 00:18:55.480 that falls squarely within what you're saying 00:18:55.480 --> 00:18:59.960 earlier but i've noticed other situations that 00:18:59.960 --> 00:19:04.079 don't fit neatly within the if it's aml or if 00:19:04.079 --> 00:19:06.160 it's illegal immoral unethical that sort of thing 00:19:06.160 --> 00:19:09.380 it's more of like um i don't even know what it 00:19:09.380 --> 00:19:14.289 is procedural um Do you get what I'm getting 00:19:14.289 --> 00:19:18.869 at? Are you? It's difficult to comment without 00:19:18.869 --> 00:19:22.930 knowing the kind of the context of what we're 00:19:22.930 --> 00:19:26.230 talking about here. But I suppose, you know, 00:19:26.230 --> 00:19:29.190 the directors, one of the non -executive independent 00:19:29.190 --> 00:19:32.869 directors are there to provide independent oversight 00:19:32.869 --> 00:19:37.009 and will highlight risk. That's part of their 00:19:37.009 --> 00:19:40.480 job is to highlight risk. act in accordance with 00:19:40.480 --> 00:19:43.200 the best corporate governance procedures and 00:19:43.200 --> 00:19:46.019 so if there is something that the directors perceive 00:19:46.019 --> 00:19:49.299 as a risk to the foundation company because you 00:19:49.299 --> 00:19:51.039 know ultimately the directors have to act in 00:19:51.039 --> 00:19:53.160 the best interest of the foundation company they 00:19:53.160 --> 00:19:55.960 have fiduciary obligations sort of you know a 00:19:55.960 --> 00:20:00.140 duty to disclose any conflicts for example and 00:20:00.140 --> 00:20:03.400 so if there is something that the directors perceive 00:20:03.400 --> 00:20:06.700 as a threat to that then they are within their 00:20:06.700 --> 00:20:11.259 rights to highlight that risk appropriately. 00:20:11.660 --> 00:20:18.519 And if that risk, you know, is if that risk is 00:20:18.519 --> 00:20:21.579 something where it is, you know, illegal or against 00:20:21.579 --> 00:20:24.920 their primary obligations to the foundation company, 00:20:24.980 --> 00:20:30.450 then. they have the ability to refuse to or certainly 00:20:30.450 --> 00:20:34.589 to maybe adapt it so that it conforms to the 00:20:34.589 --> 00:20:38.809 required standard before they implement it. Okay. 00:20:38.829 --> 00:20:42.970 In situations where there's no legal issue at 00:20:42.970 --> 00:20:47.650 play, there's no money laundering at risk, let's 00:20:47.650 --> 00:20:49.849 just say that the special counsel is elected 00:20:49.849 --> 00:20:56.609 and one of them is moral disrepute. Moral turpitude 00:20:56.609 --> 00:20:59.049 maybe is the word, but it's not spelled out in 00:20:59.049 --> 00:21:01.289 the bylaws that that is a thing. The director 00:21:01.289 --> 00:21:04.529 believes, regardless of whether or not the bylaws 00:21:04.529 --> 00:21:08.690 specify that as a reason to remove someone, decides 00:21:08.690 --> 00:21:12.450 to remove that council member anyways. What would 00:21:12.450 --> 00:21:16.920 you say, how would you classify that? I think, 00:21:16.920 --> 00:21:18.799 you know, they have the authority to act in the 00:21:18.799 --> 00:21:20.559 best interest of the company. And if you have 00:21:20.559 --> 00:21:23.420 a council member that does not is in, you know, 00:21:23.420 --> 00:21:27.039 it's called disrepute to the foundation company, 00:21:27.140 --> 00:21:32.500 then they potentially would have, you know, they 00:21:32.500 --> 00:21:35.220 would certainly be raising questions about that. 00:21:35.319 --> 00:21:37.480 And I would imagine that the bylaws would have. 00:21:38.319 --> 00:21:42.400 um mechanics for i mean i've reviewed and commented 00:21:42.400 --> 00:21:46.799 upon many bylaws where there is a process for 00:21:46.799 --> 00:21:49.920 removing special council members and so to the 00:21:49.920 --> 00:21:53.779 extent that that process is followed um then 00:21:53.779 --> 00:21:58.779 um you know i it would i think that would be 00:21:58.779 --> 00:22:02.220 within their their remit of their authority so 00:22:02.220 --> 00:22:05.299 it sounds it sounds as though the directors regardless 00:22:05.299 --> 00:22:09.049 of kind of how the Bylaws are structured because 00:22:09.049 --> 00:22:12.410 the director has that fiduciary responsibility 00:22:12.410 --> 00:22:16.910 and they're the overall person responsible for 00:22:16.910 --> 00:22:19.109 the company. They kind of have that ultimate 00:22:19.109 --> 00:22:21.250 authority to do what's in the best interest of 00:22:21.250 --> 00:22:24.329 the foundation company, regardless of what the 00:22:24.329 --> 00:22:28.829 bylaws say. No, no. So they know. No, I mean, 00:22:28.849 --> 00:22:31.289 they have their primary duty is to act in the 00:22:31.289 --> 00:22:33.849 best interest of the company. But it's not. And, 00:22:33.869 --> 00:22:38.109 you know, I think if that is at odds with a proposal 00:22:38.109 --> 00:22:42.299 that is being passed. or there is something like, 00:22:42.299 --> 00:22:44.180 in your example, whether it's a special council 00:22:44.180 --> 00:22:46.380 member who's been brought in to do this repute, 00:22:46.480 --> 00:22:51.319 then the directors would need to look at that 00:22:51.319 --> 00:22:54.160 very closely and to determine whether or not 00:22:54.160 --> 00:22:55.579 that's in the best interest of the foundation 00:22:55.579 --> 00:22:59.519 company. But they also have to be cognizant of 00:22:59.519 --> 00:23:02.299 the fact that if a proposal has been passed and 00:23:02.299 --> 00:23:05.559 the bylaw sets something out, then they're... 00:23:05.849 --> 00:23:08.150 It's not so much that one kind of trumps the 00:23:08.150 --> 00:23:10.410 other. They need to sort of view it in side by 00:23:10.410 --> 00:23:14.490 side. But in essence, you know, their duty and 00:23:14.490 --> 00:23:16.789 their obligation is to the foundation company 00:23:16.789 --> 00:23:20.849 to ensure that they are making the right decisions 00:23:20.849 --> 00:23:26.390 for the foundation. It's not for. the the dow 00:23:26.390 --> 00:23:30.490 the dow in and of itself is it's slightly separate 00:23:30.490 --> 00:23:33.690 um but you know you create this nexus through 00:23:33.690 --> 00:23:37.230 the bylaws with the foundation company to um 00:23:37.230 --> 00:23:40.369 to so that you know the foundation company enacts 00:23:40.369 --> 00:23:43.990 the will of the dow to the extent that it is 00:23:43.990 --> 00:23:47.009 not you know contrary to cayman law or that it's 00:23:47.009 --> 00:23:50.230 not in the um you know the directors are not 00:23:50.230 --> 00:23:53.809 in breach of any of their duties I need to I 00:23:53.809 --> 00:23:55.730 need to crystallize that because that to me is 00:23:55.730 --> 00:23:58.849 is the period right there. As long as it's not 00:23:58.849 --> 00:24:04.990 in contrary to Cayman Island law or in breach 00:24:04.990 --> 00:24:10.029 of their duties, did you say? Yeah. OK, cool. 00:24:10.150 --> 00:24:13.390 All right. I think I think that settles it right 00:24:13.390 --> 00:24:16.390 there is there is a difference. That difference 00:24:16.390 --> 00:24:20.150 does take on significant meaning. Should there 00:24:20.150 --> 00:24:23.609 be any divergence between what the Dow recommends 00:24:23.609 --> 00:24:27.789 or votes and the foundation company or the director 00:24:27.789 --> 00:24:31.670 decides within all due bounds that this is not 00:24:31.670 --> 00:24:34.970 within the best interest of the foundation company. 00:24:35.549 --> 00:24:39.250 But to use that power, would you say sparingly 00:24:39.250 --> 00:24:41.930 and to ensure that it's still the act within 00:24:41.930 --> 00:24:45.490 the will of the bylaws and the Dow? Yeah, exactly. 00:24:46.150 --> 00:24:48.890 Exactly. Yeah. All right. I think that's the 00:24:48.890 --> 00:24:51.809 best way to look at it. Excellent. Cool. I think 00:24:51.809 --> 00:24:55.369 this is coming together very nicely. All right. 00:24:55.690 --> 00:24:58.849 Here is, let's get some techniques down. This 00:24:58.849 --> 00:25:01.150 one has been plaguing me for a while. I've been 00:25:01.150 --> 00:25:04.670 trying to figure it out. Are the DAO token holders 00:25:04.670 --> 00:25:08.990 considered members or beneficiaries of the foundation 00:25:08.990 --> 00:25:14.690 company? No. Okay. Can you tell me more about 00:25:14.690 --> 00:25:19.130 that? Especially the beneficiaries part. Um, 00:25:19.130 --> 00:25:24.160 so. So beneficiaries, you don't have to designate 00:25:24.160 --> 00:25:26.319 beneficiaries of a foundation company, but you 00:25:26.319 --> 00:25:29.920 can. And I think we maybe touched upon this when 00:25:29.920 --> 00:25:32.339 we spoke at the beginning and because of the 00:25:32.339 --> 00:25:35.539 way in which the concept of foundation companies 00:25:35.539 --> 00:25:39.519 came to fruition. But if you think about how 00:25:39.519 --> 00:25:42.140 the foundation company is set up with them, sort 00:25:42.140 --> 00:25:46.779 of. where it's limited by guarantee and it has 00:25:46.779 --> 00:25:48.960 the characteristics of a civil law foundation. 00:25:49.279 --> 00:25:52.339 And so civil law foundations were used for succession 00:25:52.339 --> 00:25:56.160 planning and philanthropic purposes. And but, 00:25:56.220 --> 00:25:58.240 you know, foundations were not available in the 00:25:58.240 --> 00:26:00.579 Cayman Islands. Therefore, we had civil law clients 00:26:00.579 --> 00:26:02.859 who required to use more traditional common law 00:26:02.859 --> 00:26:05.859 trust structures. And so the concept of a trust, 00:26:05.940 --> 00:26:08.119 it's quite important to understand beneficiaries, 00:26:08.259 --> 00:26:11.019 although is sort of quite flexible and reliable 00:26:11.019 --> 00:26:13.920 in succession. planning tools it's less attractive 00:26:13.920 --> 00:26:17.500 to many civil law clients um and so two of the 00:26:17.500 --> 00:26:19.640 main reasons for that was the unfamiliarity with 00:26:19.640 --> 00:26:21.259 the separation of the legal and the beneficial 00:26:21.259 --> 00:26:23.759 interests and the uncertainties to kind of the 00:26:23.759 --> 00:26:27.180 tax treatment so there was lots of you know offshore 00:26:27.180 --> 00:26:29.420 jurisdictions who then want to establish sort 00:26:29.420 --> 00:26:34.900 of um common law or offshore foundations by statute. 00:26:35.700 --> 00:26:38.019 However, the difficulty with that approach is 00:26:38.019 --> 00:26:40.240 that offshore foundations is kind of sort of 00:26:40.240 --> 00:26:42.519 statutory constructs with no established body 00:26:42.519 --> 00:26:45.440 of jurisprudence. So this has resulted in considerable 00:26:45.440 --> 00:26:48.640 uncertainty. So the Cayman Islands solution to 00:26:48.640 --> 00:26:50.880 this was to establish a hybrid that looks like 00:26:50.880 --> 00:26:52.980 a civil law foundation, but benefits from long 00:26:52.980 --> 00:26:55.259 established jurisprudence, which relates to companies. 00:26:55.859 --> 00:27:02.569 And so What you have is you can have in the articles 00:27:02.569 --> 00:27:05.349 of association provisions, which include having 00:27:05.349 --> 00:27:07.789 beneficiaries, but it's not a requirement that 00:27:07.789 --> 00:27:12.990 Cayman Foundations have beneficiaries. Details 00:27:12.990 --> 00:27:16.150 of if you did appoint beneficiaries, they would, 00:27:16.230 --> 00:27:18.349 you know, they're set out in the bylaws or otherwise. 00:27:20.440 --> 00:27:22.140 And unless otherwise provided the memorandum 00:27:22.140 --> 00:27:24.099 of association, the beneficiary has no power 00:27:24.099 --> 00:27:26.099 or rights relating to the foundation company 00:27:26.099 --> 00:27:30.339 if one is in fact instituted and its management 00:27:30.339 --> 00:27:32.140 or on its assets. And it's not considered to 00:27:32.140 --> 00:27:34.759 be an interest in person as defined in the act. 00:27:35.559 --> 00:27:40.480 So it's not really relevant for the types of 00:27:40.480 --> 00:27:43.400 clients we work with. And I don't know whether 00:27:43.400 --> 00:27:46.309 the sandbox DAO, do you guys have? I've not seen 00:27:46.309 --> 00:27:48.250 your constitutional documents. I don't know whether 00:27:48.250 --> 00:27:52.150 you guys would, your foundation company has beneficiaries 00:27:52.150 --> 00:27:55.670 or not, but typically we don't often see that, 00:27:55.730 --> 00:28:00.450 but it can, it can. I believe that was one of 00:28:00.450 --> 00:28:02.710 my questions is who, because they weren't specifically 00:28:02.710 --> 00:28:09.130 identified, but there is a role for it. Oh, right. 00:28:09.309 --> 00:28:11.470 In your, in your articles, is that what you're 00:28:11.470 --> 00:28:15.690 saying? Right. Yes. That's right. Right. That 00:28:15.690 --> 00:28:19.750 was my question to TTA and the Dow admin team 00:28:19.750 --> 00:28:22.910 is, who are the beneficiaries? I'm trying to 00:28:22.910 --> 00:28:27.890 understand who fulfills those roles. Yeah, I 00:28:27.890 --> 00:28:29.730 mean, they benefit from the foundation's purpose, 00:28:30.009 --> 00:28:32.730 right? They should be explicitly named, really, 00:28:32.829 --> 00:28:38.390 in the constitutional documents. But yeah, I 00:28:38.390 --> 00:28:40.849 mean, it could be like classes of persons, but 00:28:40.849 --> 00:28:44.599 it potentially depends on... Yeah, it's difficult 00:28:44.599 --> 00:28:48.180 to say without looking at the documents and knowing, 00:28:48.259 --> 00:28:54.079 but effectively, yeah. And members, I think we 00:28:54.079 --> 00:28:56.460 discussed before, obviously, a foundation company 00:28:56.460 --> 00:29:01.400 is incorporated with a subscriber who guarantees 00:29:01.400 --> 00:29:05.339 to contribute the amount on a winding up, which 00:29:05.339 --> 00:29:09.039 I think is typically like a dollar in the memorandum 00:29:09.039 --> 00:29:10.460 and articles of association. Yeah, all of them 00:29:10.460 --> 00:29:14.380 say a dollar. yeah there's a dollar right um 00:29:14.380 --> 00:29:17.880 and so um uh but then on incorporation that that 00:29:17.880 --> 00:29:21.640 member resigns and um the foundation company 00:29:21.640 --> 00:29:24.180 is left as a shareholderless memberless entity 00:29:24.180 --> 00:29:30.339 moving forward okay keep going please and then 00:29:30.339 --> 00:29:32.359 the dao token holders obviously we're talking 00:29:32.359 --> 00:29:35.529 about the community there right So that is separate 00:29:35.529 --> 00:29:37.730 from the foundation company. The way in which 00:29:37.730 --> 00:29:40.410 the nexus between the foundation company and 00:29:40.410 --> 00:29:42.650 the DAO token holders is established, it's through 00:29:42.650 --> 00:29:45.269 the bylaws and the articles being amended to 00:29:45.269 --> 00:29:47.529 conform to the token holder governance mechanics 00:29:47.529 --> 00:29:51.490 as set out in the bylaws. Got it. I want to pose 00:29:51.490 --> 00:29:54.390 a... I won't say a hypothetical. I'm going to 00:29:54.390 --> 00:29:57.670 pose a situation. I'm trying to peel this apart 00:29:57.670 --> 00:30:03.619 a little bit. Let's say there becomes a... unmitigatable 00:30:03.619 --> 00:30:06.599 conflict between the token holders i'm not saying 00:30:06.599 --> 00:30:09.319 this is real this is let's just bring this to 00:30:09.319 --> 00:30:11.420 where it's going to be sometime in the future 00:30:11.420 --> 00:30:14.200 someone's going to trip over this when the token 00:30:14.200 --> 00:30:17.920 holders are at odds with the leadership of the 00:30:17.920 --> 00:30:21.779 foundation company what recourse do they have 00:30:21.779 --> 00:30:26.700 to correct things as they'd see fit let's call 00:30:26.700 --> 00:30:32.799 it do they have any recourse um that is probably 00:30:32.799 --> 00:30:37.920 a question that requires gen uh actual legal 00:30:37.920 --> 00:30:41.099 advice okay because it's a bit tricky because 00:30:41.099 --> 00:30:43.039 we've got clark you know i i wouldn't want to 00:30:43.039 --> 00:30:45.259 speak out of turn on sure and i wouldn't want 00:30:45.259 --> 00:30:47.339 you to be going through this process at the moment 00:30:47.339 --> 00:30:49.720 but i totally understand why the question is 00:30:49.720 --> 00:30:54.299 being asked yeah and and it's it's just a matter 00:30:54.299 --> 00:30:56.400 of at this point trying to understand these entities 00:30:56.400 --> 00:31:00.759 like what what is um If they're not beneficiaries, 00:31:01.059 --> 00:31:05.220 but they are the ones who execute a vote on everything 00:31:05.220 --> 00:31:08.039 and they're the engine behind it, what happens 00:31:08.039 --> 00:31:09.660 if there is a conflict? Is there an amicable 00:31:09.660 --> 00:31:13.200 way to resolve that? Those are the things that 00:31:13.200 --> 00:31:15.900 are running through my head just as a natural 00:31:15.900 --> 00:31:20.140 thought thinking through this. Yeah, I mean, 00:31:20.160 --> 00:31:22.099 I think it's just important to know that, you 00:31:22.099 --> 00:31:24.880 know, DAO token holders are not, you know, not 00:31:24.880 --> 00:31:26.599 the members, not the shareholders, beneficiaries 00:31:26.599 --> 00:31:29.490 or directors of the foundation company. The Cayman 00:31:29.490 --> 00:31:31.109 Islands Foundation Company is managed by its 00:31:31.109 --> 00:31:33.650 board of directors who have the legal authority. 00:31:34.450 --> 00:31:36.750 But if the foundation companies operates under 00:31:36.750 --> 00:31:39.430 its charter and bylaws, that's Dow governance. 00:31:39.849 --> 00:31:44.329 And so it's they the the foundation companies 00:31:44.329 --> 00:31:46.170 there to, like I said, enact the will of the 00:31:46.170 --> 00:31:48.829 Dow. So community token holder voting happens. 00:31:48.890 --> 00:31:50.390 And then as a result of that, the foundation 00:31:50.390 --> 00:31:53.109 company enacts the will of the Dow. There isn't 00:31:53.109 --> 00:31:55.869 really a authority that is established other 00:31:55.869 --> 00:31:58.650 than the. directors have to act in compliance 00:31:58.650 --> 00:32:00.549 with the articles and so if the articles say 00:32:00.549 --> 00:32:03.029 that it's token holder voting on a particular 00:32:03.029 --> 00:32:05.829 topic for example the token holders by way of 00:32:05.829 --> 00:32:08.289 token holder vote have the ability to appoint 00:32:08.289 --> 00:32:11.109 and remove the supervisor then the directors 00:32:11.109 --> 00:32:14.789 cannot just go ahead and remove the supervisor 00:32:14.789 --> 00:32:17.069 by way of director resolution it has to go to 00:32:17.069 --> 00:32:21.809 a token holder vote so it can be enforced you 00:32:21.809 --> 00:32:24.730 know there is this link between the two and if 00:32:24.730 --> 00:32:27.410 the directors act in non -compliance with the 00:32:27.410 --> 00:32:30.470 memorandum and articles of association then the 00:32:30.470 --> 00:32:33.849 supervisor may bring enforcement action against 00:32:33.849 --> 00:32:38.049 the directors for breach of those for breach. 00:32:38.569 --> 00:32:40.750 basically, and saying, hey, you didn't act in 00:32:40.750 --> 00:32:43.329 compliance with a token holder vote, which said 00:32:43.329 --> 00:32:47.390 we wanted to remove the supervisor. And, you 00:32:47.390 --> 00:32:50.210 know, that would then follow on, you know, the 00:32:50.210 --> 00:32:52.210 process would then follow on because the supervisor 00:32:52.210 --> 00:32:54.349 has the ability to take the directors to court 00:32:54.349 --> 00:32:58.069 on behalf of the foundation company for those 00:32:58.069 --> 00:33:01.799 types of breaches. So there is that. mechanic 00:33:01.799 --> 00:33:04.640 in play where you have a sort of a supervisor 00:33:04.640 --> 00:33:09.559 which is like the enforcer um of um and counterbalances 00:33:09.559 --> 00:33:14.279 that director director authority got it okay 00:33:14.279 --> 00:33:17.059 thank you But there should be that clear that, 00:33:17.119 --> 00:33:19.240 you know, that clear drafting in the articles 00:33:19.240 --> 00:33:22.920 to reflect token holder governance, because then, 00:33:23.019 --> 00:33:27.099 you know, it's pretty easy. And, you know, then 00:33:27.099 --> 00:33:29.440 you've got something to point to to say, hey, 00:33:29.579 --> 00:33:31.819 you didn't comply. And in the articles, it says 00:33:31.819 --> 00:33:34.539 that you and this is the process you should have 00:33:34.539 --> 00:33:37.220 followed. And you are also under an obligation 00:33:37.220 --> 00:33:40.240 to comply with the articles of association. And 00:33:40.240 --> 00:33:42.960 you didn't in this instance. And therefore, the 00:33:42.960 --> 00:33:45.240 supervisor may take an action against it. directors 00:33:45.240 --> 00:33:49.059 for that. Got it. When we mentioned the director 00:33:49.059 --> 00:33:52.559 is a fiduciary, what is he or she a fiduciary 00:33:52.559 --> 00:34:03.619 of? It's a foundation. Okay, so my brain thought 00:34:03.619 --> 00:34:07.039 about parsing out the objects, the members, all 00:34:07.039 --> 00:34:09.760 sorts of classes. Is that just an unnecessary 00:34:09.760 --> 00:34:12.440 distinction or is it just foundation company? 00:34:13.440 --> 00:34:16.099 No other distinction need be made. I'm sorry, 00:34:16.199 --> 00:34:19.539 Lance, just say that again. My brain was parsing 00:34:19.539 --> 00:34:21.920 that out as, is there such a thing as it's fiduciary 00:34:21.920 --> 00:34:25.260 of the objects? It's fiduciary of the members? 00:34:25.579 --> 00:34:30.019 Is that distinction unfit? Okay, yeah, no, I 00:34:30.019 --> 00:34:31.420 see what you're saying. So the director of the 00:34:31.420 --> 00:34:33.699 Cayman Foundation Company have fiduciary duties 00:34:33.699 --> 00:34:36.760 to the foundation company itself and the foundation 00:34:36.760 --> 00:34:39.119 stated purpose are set out in the memorandum. 00:34:39.119 --> 00:34:42.159 They do not have responsibilities and fiduciary 00:34:42.159 --> 00:34:45.139 obligations to the share, to token holders, members, 00:34:45.400 --> 00:34:48.559 beneficiaries. It's to the foundation company 00:34:48.559 --> 00:34:51.579 itself and, you know, duty of loyalty, duty to 00:34:51.579 --> 00:34:55.000 acting with reasonable skill, care and diligence, 00:34:55.059 --> 00:34:57.539 duty to act within its powers, which is the, 00:34:57.559 --> 00:35:00.760 you know, know, the objects in the memorandum, 00:35:00.760 --> 00:35:04.179 duty to avoid conflicts of interest, but they 00:35:04.179 --> 00:35:06.460 do not owe fiduciary duties to the DAO token 00:35:06.460 --> 00:35:08.940 holders directly. Their primary obligation is 00:35:08.940 --> 00:35:10.900 to carry out the foundation's mission, which 00:35:10.900 --> 00:35:12.920 often includes supporting a DAO or protocol, 00:35:13.159 --> 00:35:17.960 obviously. And then if the governance process, 00:35:18.079 --> 00:35:21.280 as I mentioned, is set out in the articles of 00:35:21.280 --> 00:35:26.380 association, the directors have a duty to consider 00:35:26.380 --> 00:35:31.420 those DAO uh votes um and is under an obligation 00:35:31.420 --> 00:35:34.159 to follow them through say for if it's you know 00:35:34.159 --> 00:35:38.099 uh contrary to cayman law or um is clearly not 00:35:38.099 --> 00:35:40.460 in the best interest of the company yeah i'm 00:35:40.460 --> 00:35:44.510 starting to hear the the same you're saying some 00:35:44.510 --> 00:35:46.230 of the same things and it's starting to connect 00:35:46.230 --> 00:35:50.769 now at least for me yeah yeah okay you know this 00:35:50.769 --> 00:35:55.650 this is this is um intricate complex uh inner 00:35:55.650 --> 00:35:59.710 workings of of how this all interacts so uh you 00:35:59.710 --> 00:36:03.690 know it requires repetition and in order to sort 00:36:03.690 --> 00:36:07.070 of uh to understand you know i've been doing 00:36:07.070 --> 00:36:10.550 this for sort of a few years now so um i've got 00:36:10.550 --> 00:36:12.269 i've got the hang of it myself but i appreciate 00:36:12.269 --> 00:36:14.150 coming looking in from the outside it's all a 00:36:14.150 --> 00:36:17.570 bit bamboozling yeah i think it took me reading 00:36:17.570 --> 00:36:23.469 all every page of the company the the the foundation 00:36:23.469 --> 00:36:27.710 company's law and the company for me to well 00:36:27.710 --> 00:36:30.949 i had to do it for my my professional job so 00:36:30.949 --> 00:36:32.829 it was just another set of body of regulations 00:36:33.630 --> 00:36:37.190 But it was, it got dense. It got, especially 00:36:37.190 --> 00:36:40.610 in the latter portions about the court, the remediation, 00:36:40.829 --> 00:36:46.150 all of that. I think it took, that's why I was 00:36:46.150 --> 00:36:49.110 so interested in you all coming on is to give 00:36:49.110 --> 00:36:53.510 some practicality to what am I reading? Yeah, 00:36:53.530 --> 00:36:55.530 yeah, totally, totally get it. I mean, that's 00:36:55.530 --> 00:36:58.289 our job, right? We know the law, we distill it 00:36:58.289 --> 00:37:01.090 and we can provide advice on particular areas. 00:37:02.489 --> 00:37:05.869 So, yeah, I'm happy to help. In Section 7 of 00:37:05.869 --> 00:37:08.789 the Foundation's Company Law, referencing Part 00:37:08.789 --> 00:37:11.389 3, Section 7, it said the Foundation Company 00:37:11.389 --> 00:37:14.030 has a duty to carry out the objects set out in 00:37:14.030 --> 00:37:18.190 its memo if and only if the memo declares and 00:37:18.190 --> 00:37:21.050 designates persons withstanding to enforce the 00:37:21.050 --> 00:37:22.969 duty against the Foundation Company. That read 00:37:22.969 --> 00:37:25.349 to me like the Foundation Company has a choice 00:37:25.349 --> 00:37:27.829 in carrying out its objects. Am I misreading 00:37:27.829 --> 00:37:32.429 that? uh sections i mean the way the objects 00:37:32.429 --> 00:37:35.309 work is that it sets out a scope right so it's 00:37:35.309 --> 00:37:39.289 saying that the foundation uh you know i mean 00:37:39.289 --> 00:37:41.530 i'm just gonna try to see if i can pull up uh 00:37:41.530 --> 00:37:45.349 you know just i can copy paste it in the chat 00:37:45.349 --> 00:37:47.820 as well if that helps oh that's that's useful 00:37:47.820 --> 00:37:50.719 but um yeah i mean the broad sort of you want 00:37:50.719 --> 00:37:52.460 to have like a broad and flexible scope but it 00:37:52.460 --> 00:37:55.500 might be that it's you know uh it's it's its 00:37:55.500 --> 00:37:58.219 objects are to um assist with the growth and 00:37:58.219 --> 00:38:00.500 support the development of a certain you know 00:38:00.500 --> 00:38:05.079 insert decentralized network and so really we 00:38:05.079 --> 00:38:07.480 provide we sort of suggest that they are quite 00:38:07.480 --> 00:38:11.280 broad because you don't want their directors 00:38:11.280 --> 00:38:13.639 or the foundation company to do something that's 00:38:13.639 --> 00:38:19.139 outside of its objects um and so uh and so yeah 00:38:19.139 --> 00:38:22.000 so so we make those we make those pretty pretty 00:38:22.000 --> 00:38:25.380 broad but uh and the directors you know must 00:38:25.380 --> 00:38:32.559 act in compliance with the objects yeah Okay. 00:38:32.559 --> 00:38:34.519 I think we brought it all full circle there. 00:38:35.880 --> 00:38:43.280 Okay. And the founder role seems optional. Okay, 00:38:43.340 --> 00:38:46.300 let me say seems. It's in the template of the 00:38:46.300 --> 00:38:48.840 foundation company law, and it's not mentioned 00:38:48.840 --> 00:38:52.559 anywhere else. Sandbox has a founder's role. 00:38:52.800 --> 00:38:55.019 Star Atlas does not. I'm unsure about ApeCoin 00:38:55.019 --> 00:38:58.789 because I haven't been able to. I can't find 00:38:58.789 --> 00:39:01.070 their documents anywhere, so I'm not sure what 00:39:01.070 --> 00:39:03.269 their stance is on that. What are your thoughts 00:39:03.269 --> 00:39:06.630 on the founder's role? Well, the way we do it, 00:39:06.650 --> 00:39:10.329 you know, the way we operate at Walkers is that 00:39:10.329 --> 00:39:13.769 we have a memorandum and articles of association 00:39:13.769 --> 00:39:17.630 that... are director -led, so the powers vest 00:39:17.630 --> 00:39:19.869 with the directors, but you can have a situation 00:39:19.869 --> 00:39:23.849 where the founder, you have a founder position 00:39:23.849 --> 00:39:27.269 where they play sort of a crucial role in the 00:39:27.269 --> 00:39:30.429 ongoing control or ongoing governance of the 00:39:30.429 --> 00:39:36.369 foundation akin to, you know, akin to a director. 00:39:36.570 --> 00:39:40.829 I've seen articles where they have the founder 00:39:40.829 --> 00:39:43.630 concept built into it and it sets out the founder's 00:39:43.630 --> 00:39:47.679 rights. and the founder writes, and they can 00:39:47.679 --> 00:39:50.300 be pretty extensive. I haven't seen yours, but 00:39:50.300 --> 00:39:53.559 Sandbox is pretty extensive. It seems like they 00:39:53.559 --> 00:39:57.820 have near dictator powers, and it's extraordinary 00:39:57.820 --> 00:40:00.340 how much power the founder has to remove and 00:40:00.340 --> 00:40:02.780 appoint many, many positions, I think even the 00:40:02.780 --> 00:40:05.900 director. Yeah. Yeah. And I think typically this 00:40:05.900 --> 00:40:08.340 probably came around because you have like the 00:40:08.340 --> 00:40:10.639 founders of these projects and then wanting to 00:40:10.639 --> 00:40:15.260 retain control. Whereas, you know, if you're 00:40:15.260 --> 00:40:17.400 looking at decentralized token holder governance, 00:40:17.519 --> 00:40:22.099 then our view is that you have the we would set 00:40:22.099 --> 00:40:24.599 it up with like initial bylaws just to get the 00:40:24.599 --> 00:40:27.420 initial memorandum and articles of association 00:40:27.420 --> 00:40:30.239 to get the foundation could be incorporated and 00:40:30.239 --> 00:40:33.639 stood on its feet pretty quickly. the authority 00:40:33.639 --> 00:40:37.500 um with the directors so you can do that with 00:40:37.500 --> 00:40:41.659 the founder and then a later date You amend and 00:40:41.659 --> 00:40:45.320 restate the memorandum and articles of association 00:40:45.320 --> 00:40:48.139 to reflect the token holder governance. So then 00:40:48.139 --> 00:40:51.059 at that point, the founder role kind of disappears 00:40:51.059 --> 00:40:56.380 because it's not required. And the token holder 00:40:56.380 --> 00:40:59.179 governance may take over some of those rights, 00:40:59.260 --> 00:41:02.059 depending upon, you know, what the bylaws say. 00:41:03.980 --> 00:41:06.239 But you do have to have directors. So that is 00:41:06.239 --> 00:41:08.179 not something that just falls by the wayside. 00:41:08.260 --> 00:41:10.239 You have to have a minimum of one director of 00:41:10.239 --> 00:41:12.119 a Cayman Islands Foundation company. But the 00:41:12.119 --> 00:41:16.659 founder role is not required by law. It's preference. 00:41:16.880 --> 00:41:19.420 And this is, you know, a testament to the flexibility 00:41:19.420 --> 00:41:22.119 of a Cayman Islands Foundation company and what 00:41:22.119 --> 00:41:25.000 can be done with their constitutional documents. 00:41:25.480 --> 00:41:28.380 Is there something about the founder role that 00:41:28.380 --> 00:41:31.139 walkers, or at the very least, in your view, 00:41:31.260 --> 00:41:35.929 it's just not suitable? particularly I think 00:41:35.929 --> 00:41:38.650 I think it's maybe driven by like what clients 00:41:38.650 --> 00:41:41.889 are seeking to do so you know if you think about 00:41:41.889 --> 00:41:46.980 the decentralization um ethos um having the rights 00:41:46.980 --> 00:41:51.320 and obligations, sitting with one person or persons. 00:41:51.960 --> 00:41:55.099 But, you know, typically it might be a corporate 00:41:55.099 --> 00:41:58.260 entity or a particular person is against the 00:41:58.260 --> 00:42:01.179 decentralization ethos. And so I think we've 00:42:01.179 --> 00:42:03.460 just seen that clients are not really looking 00:42:03.460 --> 00:42:07.559 for that structure. But, you know, it depends 00:42:07.559 --> 00:42:11.869 because also if you think that. Like, I don't 00:42:11.869 --> 00:42:15.730 know about your DAO, Lance Sandbox DAO, but whether, 00:42:15.789 --> 00:42:18.190 you know, that the idea is that token holder 00:42:18.190 --> 00:42:22.590 governance is either in play or coming in shortly. 00:42:23.449 --> 00:42:25.849 It might just be, OK, well, quickly, we'll get 00:42:25.849 --> 00:42:27.889 it incorporated. We'll use the standard documents. 00:42:28.190 --> 00:42:30.369 Yeah, it has found a power, but we know they're 00:42:30.369 --> 00:42:32.530 going to change because we're going to have bylaws 00:42:32.530 --> 00:42:34.429 which set out token holder governance. So when 00:42:34.429 --> 00:42:36.550 we amend and restate the memorandum and articles 00:42:36.550 --> 00:42:40.730 of association, it will have found a power. Now, 00:42:40.789 --> 00:42:45.570 OK, now it's coming together. Our DAO leadership 00:42:45.570 --> 00:42:48.110 has frequently talked about progressive decentralization 00:42:48.110 --> 00:42:51.090 and the end goal being what I now know to be 00:42:51.090 --> 00:42:54.309 called token holder led. This must be the precursor 00:42:54.309 --> 00:42:57.190 to that then. OK. Yeah, yeah, yeah, exactly. 00:42:57.550 --> 00:42:59.969 OK. And I've seen that. That's often the case. 00:43:00.050 --> 00:43:03.030 So progressive decentralization is incredibly 00:43:03.030 --> 00:43:07.489 popular. And, you know. Do we have you to think 00:43:07.489 --> 00:43:11.860 for that? Is that you and Mel? No, it's client 00:43:11.860 --> 00:43:14.559 driven. I have to admit, it's what do you want? 00:43:14.619 --> 00:43:18.300 You know, we're saying to clients, if they have 00:43:18.300 --> 00:43:20.440 their token holder governance sorted, right, 00:43:20.519 --> 00:43:22.519 if they're already coming to us and they've got 00:43:22.519 --> 00:43:25.639 a DAO, they've got tokens and now they want a 00:43:25.639 --> 00:43:28.559 foundation company, then we might say, hey, well, 00:43:28.659 --> 00:43:30.519 you're all ready to go with your token holder 00:43:30.519 --> 00:43:33.380 governance and you've got bylaws, then we can 00:43:33.380 --> 00:43:35.159 incorporate it with token holder governance from 00:43:35.159 --> 00:43:38.420 the outset. But most clients come to us where 00:43:38.420 --> 00:43:42.510 they're, you know, pre that uh level of sort 00:43:42.510 --> 00:43:45.469 of sophistication and so they would say okay 00:43:45.469 --> 00:43:47.210 well we'll incorporate the foundation and we 00:43:47.210 --> 00:43:50.670 just happen to do it where it's director um director 00:43:50.670 --> 00:43:52.769 led so the authority and the power vests with 00:43:52.769 --> 00:43:55.449 the directors but i've seen it where it's vests 00:43:55.449 --> 00:43:58.210 with the founders um but that that will change 00:43:58.210 --> 00:44:00.429 when you amend and restate your articles if you 00:44:00.429 --> 00:44:02.369 have bylaws which set out token holder governance 00:44:02.369 --> 00:44:04.230 that are going to be implemented into the articles 00:44:04.230 --> 00:44:08.809 so it will then reflect across the two documents 00:44:09.389 --> 00:44:14.989 Okay. And switching gears to the interaction 00:44:14.989 --> 00:44:17.750 between the roles, subscriber, director, secretary, 00:44:17.849 --> 00:44:20.570 supervisor, at the beginning of when a foundation 00:44:20.570 --> 00:44:24.030 company is contemplated, how do those roles play 00:44:24.030 --> 00:44:28.269 out with each other? Sure, sure. So maybe if 00:44:28.269 --> 00:44:33.909 we take the first role, so directors, I think 00:44:33.909 --> 00:44:36.250 probably is a good place to start. So there must 00:44:36.250 --> 00:44:40.530 be one director. And they do not have to be Cayman 00:44:40.530 --> 00:44:42.909 Islands resident, but lots of clients opt for 00:44:42.909 --> 00:44:46.869 that, given sort of tax position and interactions 00:44:46.869 --> 00:44:49.590 with the US, particularly in having US people 00:44:49.590 --> 00:44:53.719 on the board. They're similar to a traditional 00:44:53.719 --> 00:44:55.659 company. The business and affairs of the foundation 00:44:55.659 --> 00:44:58.079 will be managed by or under the control of those 00:44:58.079 --> 00:45:01.519 directors. As we said, we've spoken about investing 00:45:01.519 --> 00:45:05.380 the powers of the directors initially. And they 00:45:05.380 --> 00:45:07.360 have that duty to act in the best interest of 00:45:07.360 --> 00:45:10.179 the foundation company. They must always act 00:45:10.179 --> 00:45:11.840 in accordance with the foundation's company's 00:45:11.840 --> 00:45:14.639 memorandum and articles of association, as well 00:45:14.639 --> 00:45:16.619 as any bylaws adopted by the foundation company 00:45:16.619 --> 00:45:19.980 from time to time. So there will always be a 00:45:19.980 --> 00:45:23.039 director from incorporation. basically and they're 00:45:23.039 --> 00:45:25.260 they're taken in first they're the first ones 00:45:25.260 --> 00:45:29.300 to be identified well they you have to have a 00:45:29.300 --> 00:45:32.260 all there's sort of three roles right so you've 00:45:32.260 --> 00:45:34.599 got to have a secretary who's licensed under 00:45:34.599 --> 00:45:36.639 the companies management act in the cayman islands 00:45:36.639 --> 00:45:39.000 and they typically provide the registered office 00:45:39.000 --> 00:45:41.579 for the foundation company you can't incorporate 00:45:41.579 --> 00:45:43.679 without a secretary you can't incorporate without 00:45:44.079 --> 00:45:47.460 um directors um and where a foundation company 00:45:47.460 --> 00:45:50.900 doesn't have members then a supervisor must be 00:45:50.900 --> 00:45:53.639 appointed and as i kind of explained like we 00:45:53.639 --> 00:45:55.739 incorporate foundation companies so that they 00:45:55.739 --> 00:46:00.300 are memberless and so a supervisor is also um 00:46:01.019 --> 00:46:02.559 you know in conjunction with the appointment 00:46:02.559 --> 00:46:06.820 of the directors and the secretary um from incorporation 00:46:06.820 --> 00:46:09.739 and so it all kind of happens together lance 00:46:09.739 --> 00:46:12.139 like you've got you've got documents where it's 00:46:12.139 --> 00:46:15.480 you see you know um you see this interaction 00:46:15.480 --> 00:46:20.239 the subscriber has to subscribe um uh that it 00:46:20.239 --> 00:46:24.019 will um it will pay that amount that that one 00:46:24.019 --> 00:46:27.139 dollar amount that we discussed um if upon a 00:46:27.139 --> 00:46:29.440 wine on the winding up of the foundation company, 00:46:29.679 --> 00:46:32.380 and then their liability to pay that is extinguished 00:46:32.380 --> 00:46:34.139 once the foundation company is incorporated. 00:46:34.820 --> 00:46:37.239 And the subscriber appoints the directors and 00:46:37.239 --> 00:46:39.980 the secretary, but it all happens together. None 00:46:39.980 --> 00:46:42.059 of this comes together without those roles being 00:46:42.059 --> 00:46:45.940 in place. And so when we're incorporating, we 00:46:45.940 --> 00:46:47.980 will ask, okay, who have you decided are going 00:46:47.980 --> 00:46:49.820 to be your directors? Who's going to be your 00:46:49.820 --> 00:46:52.539 supervisor? Who's going to be your secretary? 00:46:52.980 --> 00:46:55.119 And then we draft all the documents. It's all 00:46:55.119 --> 00:46:57.380 reflected and all happens on the... same day. 00:46:57.760 --> 00:47:00.599 And so the supervisor, I'm sorry, the secretary 00:47:00.599 --> 00:47:04.079 must be licensed by SEMA. Does the director need 00:47:04.079 --> 00:47:06.119 to be licensed by SEMA? And I'm not talking about 00:47:06.119 --> 00:47:10.440 ones that are under the jurisdiction of Securities 00:47:10.440 --> 00:47:14.239 Investment Business Act and all of that. Just 00:47:14.239 --> 00:47:19.920 the regular, regular director? I think Avi at 00:47:19.920 --> 00:47:25.349 Walker's is yes. Yeah. I think. And then we've 00:47:25.349 --> 00:47:27.750 also, you know, you've got the supervisor. The 00:47:27.750 --> 00:47:29.530 supervisor and the director can actually be the 00:47:29.530 --> 00:47:33.210 same person. And they have kind of the voting 00:47:33.210 --> 00:47:37.030 rights. at general meetings, which are really 00:47:37.030 --> 00:47:39.630 like, it's a non -thing really for foundation 00:47:39.630 --> 00:47:43.170 companies. They have the rights to access some 00:47:43.170 --> 00:47:44.889 of the accounts, the records or information of 00:47:44.889 --> 00:47:47.650 the foundation company. And they may bring an 00:47:47.650 --> 00:47:49.469 action in the name or behalf of the foundation 00:47:49.469 --> 00:47:51.809 company, the enforcement of duties of the directors. 00:47:52.210 --> 00:47:55.170 So they have a really crucial role, but it's 00:47:55.170 --> 00:47:57.349 in the day -to -day running and operations of 00:47:57.349 --> 00:47:59.130 the foundation company. Their role is typically 00:47:59.130 --> 00:48:03.050 quite passive. The supervisor you're referring 00:48:03.050 --> 00:48:08.050 to? the supervisor okay so you can make the supervisor 00:48:08.050 --> 00:48:11.170 have like greater rights and powers and set those 00:48:11.170 --> 00:48:15.710 out in the articles but um the way that we see 00:48:15.710 --> 00:48:18.730 have seen this structure work and what we've 00:48:18.730 --> 00:48:21.150 worked on is that the supervisor role takes it 00:48:21.150 --> 00:48:24.730 is a very passive role um but there are like 00:48:24.730 --> 00:48:30.199 you know um they have sort of statutory Or, you 00:48:30.199 --> 00:48:32.179 know, there are things laid out in the Foundation 00:48:32.179 --> 00:48:34.639 Companies Act where they have the right to access 00:48:34.639 --> 00:48:37.079 the accounts, records and information of the 00:48:37.079 --> 00:48:40.760 foundation company. But it's a very, very passive 00:48:40.760 --> 00:48:43.280 role typically. And the supervisor and director 00:48:43.280 --> 00:48:46.400 being the same person, there's no concern there 00:48:46.400 --> 00:48:51.199 of conflict? Very good question. I mean, I think 00:48:51.199 --> 00:48:55.719 so. I think they have the right. uh to bring 00:48:55.719 --> 00:48:57.380 action are they really going to bring it against 00:48:57.380 --> 00:49:00.360 themselves but um and we've seen the market evolve 00:49:00.360 --> 00:49:03.239 over time there's no there's no uh it's not against 00:49:03.239 --> 00:49:05.460 the law for them to be the same person you know 00:49:05.460 --> 00:49:07.900 it's not that they explicitly they can be the 00:49:07.900 --> 00:49:11.579 same person um but um we've seen the market evolve 00:49:11.579 --> 00:49:14.860 on this and we're now often seeing uh foundation 00:49:14.860 --> 00:49:16.900 companies where they you have that separation 00:49:16.900 --> 00:49:21.940 got it that makes sense and so a director is 00:49:21.940 --> 00:49:26.369 licensed by sema Just as a secretary, yes. They 00:49:26.369 --> 00:49:30.309 don't have to be licensed, but they, you know, 00:49:30.329 --> 00:49:33.750 our view is that the company, if they're providing 00:49:33.750 --> 00:49:35.809 direct ship services, then they should have a 00:49:35.809 --> 00:49:40.909 company's management license. And again, the 00:49:40.909 --> 00:49:43.489 market has shifted on this over time. And now 00:49:43.489 --> 00:49:45.389 most service providers in the Cape and Islands 00:49:45.389 --> 00:49:49.829 will have the company's management license. But 00:49:49.829 --> 00:49:53.090 there is that sort of. hesitant is because there's 00:49:53.090 --> 00:49:56.989 like varying views on this um but but yeah that's 00:49:56.989 --> 00:49:59.190 typically where where we've aligned ourselves 00:49:59.190 --> 00:50:01.909 we want them to be providing those services through 00:50:01.909 --> 00:50:05.789 a regulated uh a body that has the company's 00:50:05.789 --> 00:50:08.690 management license got it as i was reading through 00:50:08.690 --> 00:50:10.469 all of the the laws i think that one was the 00:50:10.469 --> 00:50:12.769 most obscure to me which is does the director 00:50:12.769 --> 00:50:16.949 need to be licensed or not it seems like yes 00:50:16.949 --> 00:50:19.489 when you've crossed this very obvious threshold 00:50:19.489 --> 00:50:22.360 but then there's this area of What about those 00:50:22.360 --> 00:50:25.920 that are not in that area and couldn't make heads 00:50:25.920 --> 00:50:28.219 or tails of it, but thank you. I appreciate that. 00:50:28.239 --> 00:50:33.320 You're welcome. Just briefly on the terminology, 00:50:33.619 --> 00:50:37.659 I found some terms that applied one, didn't apply 00:50:37.659 --> 00:50:41.420 in others. They seem to be substituting words. 00:50:42.139 --> 00:50:47.599 Is that a big deal or is there something meaning 00:50:47.599 --> 00:50:52.150 there that I'm missing? You mean, sorry, just 00:50:52.150 --> 00:50:54.969 to... Like the terminology variation between 00:50:54.969 --> 00:51:01.329 all the acts. Yeah, I mean, you know, the acts 00:51:01.329 --> 00:51:04.849 will have sort of clear definitions within them 00:51:04.849 --> 00:51:07.940 that set out. what it is they're referring to 00:51:07.940 --> 00:51:09.820 and if you think about the foundation companies 00:51:09.820 --> 00:51:12.699 act the act that applies to that and should really 00:51:12.699 --> 00:51:14.320 be read in conjunction with that is the companies 00:51:14.320 --> 00:51:18.139 act so that's crucially important and then any 00:51:18.139 --> 00:51:21.559 kind of regulatory um overlay sort of the virtual 00:51:21.559 --> 00:51:24.219 asset service providers legislation needs to 00:51:24.219 --> 00:51:27.820 be read in the context of a standalone um uh 00:51:27.820 --> 00:51:31.599 statute uh but the foundation companies in the 00:51:31.599 --> 00:51:34.039 companies act has an interplay and the foundation 00:51:34.039 --> 00:51:37.550 company um so it incorporates the Companies Act. 00:51:37.829 --> 00:51:40.110 And then there are certain provisions which are 00:51:40.110 --> 00:51:43.989 carved out of the Companies Act. So if you looked 00:51:43.989 --> 00:51:45.550 at the foundation company, there's a schedule 00:51:45.550 --> 00:51:47.250 at the back. I'm just flicking through it myself, 00:51:47.650 --> 00:51:51.269 which says that these are excluded provisions 00:51:51.269 --> 00:51:55.409 from the Companies Act. And then modifications. 00:51:56.250 --> 00:51:58.030 provisions of the Companies Act for foundation 00:51:58.030 --> 00:52:01.289 companies. So it's quite interesting. And whenever 00:52:01.289 --> 00:52:04.570 I'm looking at a particular piece of law, you 00:52:04.570 --> 00:52:08.349 know, and I'm thinking about the Companies Act, 00:52:08.590 --> 00:52:10.510 I'll just flick to the back of here and just 00:52:10.510 --> 00:52:12.750 to make sure that actually is it excluded or 00:52:12.750 --> 00:52:15.070 is it a modified provision for the purposes of 00:52:15.070 --> 00:52:17.670 a foundation company, just to ensure that I'm 00:52:17.670 --> 00:52:20.650 covering, making sure that's, you know. That's 00:52:20.650 --> 00:52:23.269 the nuance I missed. Got it. Yeah, I mean, have 00:52:23.269 --> 00:52:24.710 a look at it. It's in Schedule 1 of the Foundation 00:52:24.710 --> 00:52:27.429 Companies Act, if you are interested. I am very 00:52:27.429 --> 00:52:31.789 interested. I will look at that. Schedule 1, 00:52:31.869 --> 00:52:33.809 I'm looking for excluded provisions. And what 00:52:33.809 --> 00:52:36.550 was the other term? Modifications to certain 00:52:36.550 --> 00:52:39.409 provisions in the Companies Act that are applicable 00:52:39.409 --> 00:52:44.130 to foundation companies. Applicable to... That 00:52:44.130 --> 00:52:47.210 is fascinating. Okay, I will take a look at that. 00:52:47.349 --> 00:52:51.010 And when I run across modifications to... certain 00:52:51.010 --> 00:52:53.630 provisions applicable to the foundation company 00:52:53.630 --> 00:52:58.630 how how do i how do i read that it's it's not 00:52:58.630 --> 00:53:02.849 an excluded provision um no they're just modifying 00:53:02.849 --> 00:53:06.250 like that in parts of the companies act um okay 00:53:06.250 --> 00:53:09.130 so it will point you in the direction of you 00:53:09.130 --> 00:53:12.369 know uh like for example one of the modifications 00:53:12.369 --> 00:53:16.389 in section 89 there's like a definition where 00:53:16.389 --> 00:53:18.210 they've slightly tweaked it in the foundation 00:53:18.210 --> 00:53:22.190 companies act um so it's it's things like that 00:53:22.190 --> 00:53:24.150 where you would look at it and be like oh okay 00:53:24.150 --> 00:53:27.090 they've they've changed it to mean this um and 00:53:27.090 --> 00:53:28.969 so then the foundation companies act needs to 00:53:28.969 --> 00:53:30.650 be that's why i said they need to be read in 00:53:30.650 --> 00:53:32.929 conjunction with one another because it implements 00:53:32.929 --> 00:53:35.769 all of the companies act safe for any excluded 00:53:35.769 --> 00:53:38.550 provisions in the back or modifications to provisions 00:53:38.550 --> 00:53:41.489 in the companies act okay um so there's like 00:53:41.489 --> 00:53:43.710 a definite nexus and you know interplay between 00:53:43.710 --> 00:53:48.369 those two statutes okay no that makes that makes 00:53:48.369 --> 00:53:52.750 sense to me Oh, that's awesome. That is awesome. 00:53:53.849 --> 00:53:57.469 We are almost through all the questions. I loved 00:53:57.469 --> 00:54:00.949 that we just went right through that. The last 00:54:00.949 --> 00:54:06.429 one I had was the flow chart. But I think you 00:54:06.429 --> 00:54:09.429 may have answered quite a bit of that since it's 00:54:09.429 --> 00:54:13.489 done all at the same time. when yeah it was difficult 00:54:13.489 --> 00:54:17.329 looking at this I was yeah I wanted to like maybe 00:54:17.329 --> 00:54:19.650 expand upon that slightly for your listeners 00:54:19.650 --> 00:54:23.849 um but but yeah it's it's it's it's sort of difficult 00:54:23.849 --> 00:54:25.650 to have a flow chart in lots of ways because 00:54:25.650 --> 00:54:31.260 of the uh how it kind of operates but um yeah 00:54:31.260 --> 00:54:34.199 you've got the you know if we're in the context 00:54:34.199 --> 00:54:36.900 of like there is already a DAO in place then 00:54:36.900 --> 00:54:39.699 yeah you know the DAO wants to have a legal wrapper 00:54:39.699 --> 00:54:44.070 and so then They could definitely approach law 00:54:44.070 --> 00:54:48.349 firms and ask for sort of recommendation or go 00:54:48.349 --> 00:54:51.369 to different service providers. Yeah, a selection 00:54:51.369 --> 00:54:54.070 of service providers prior to incorporation. 00:54:54.090 --> 00:54:56.389 So to fulfill those roles that we spoke about, 00:54:56.469 --> 00:54:58.989 which are, you know, the director, director role, 00:54:59.170 --> 00:55:02.929 supervisor role and the secretary who provides 00:55:02.929 --> 00:55:06.929 the registered office role. Selecting legal providers 00:55:06.929 --> 00:55:10.809 like all of that is, yeah, like. um prior typically 00:55:10.809 --> 00:55:14.889 prior to incorporation um and then when we say 00:55:14.889 --> 00:55:17.230 the director provides corporate services i think 00:55:17.230 --> 00:55:20.090 you know they provide director services um i 00:55:20.090 --> 00:55:22.010 guess it is a kind of corporate service but to 00:55:22.010 --> 00:55:25.869 be more explicit um yeah i pulled that directly 00:55:25.869 --> 00:55:28.670 from the act itself so i because i wasn't sure 00:55:28.670 --> 00:55:30.650 that was the terminology thing i was discussing 00:55:30.650 --> 00:55:34.650 earlier yeah yeah yeah like that's like obviously 00:55:34.650 --> 00:55:37.610 they are they form part of like a corporate services 00:55:37.610 --> 00:55:41.949 banner And then on incorporation. You know, as 00:55:41.949 --> 00:55:43.869 part of the incorporation process, obviously, 00:55:43.889 --> 00:55:46.030 you have the memorandum and articles of association, 00:55:46.150 --> 00:55:48.269 which are those core constitutional documents 00:55:48.269 --> 00:55:50.610 that are drafted at the point of incorporation. 00:55:50.670 --> 00:55:54.449 So everything is drafted. You have the, you know, 00:55:54.469 --> 00:55:56.789 all of the requisite documents to appoint those 00:55:56.789 --> 00:55:59.550 service providers. You have the memorandum and 00:55:59.550 --> 00:56:02.449 articles of association. And then, you know, 00:56:02.449 --> 00:56:05.250 that then is and then the foundation company 00:56:05.250 --> 00:56:08.070 is incorporated and then has all of those roles 00:56:08.070 --> 00:56:11.800 fulfilled. um and then optional bylaws i would 00:56:11.800 --> 00:56:15.019 agree with that like bylaws you can You don't 00:56:15.019 --> 00:56:16.960 have to have bylaws. And if there isn't token 00:56:16.960 --> 00:56:18.639 holder governance, then there wouldn't be any 00:56:18.639 --> 00:56:21.320 bylaws. Even if there is token holder governance, 00:56:21.400 --> 00:56:27.340 sometimes the bylaws are not introduced and the 00:56:27.340 --> 00:56:29.800 DAO provide kind of ad hoc instructions to the 00:56:29.800 --> 00:56:31.860 foundation company. It's not the way we do it 00:56:31.860 --> 00:56:35.760 at Walkers. So I can't really speak too much 00:56:35.760 --> 00:56:37.980 more on that. But typically where we've got token 00:56:37.980 --> 00:56:41.440 holder governance, that governance process is 00:56:41.440 --> 00:56:44.599 set out fully in the bylaws. Okay. So in the 00:56:44.599 --> 00:56:47.719 procession of things, a DAO, whether or not they're 00:56:47.719 --> 00:56:52.079 firmly formed or they have an idea of a DAO, 00:56:52.199 --> 00:56:57.460 they come to – they can do it in any order they'd 00:56:57.460 --> 00:56:59.539 like in terms of if they come to Walker's first 00:56:59.539 --> 00:57:05.340 or if they go to a director's management company 00:57:05.340 --> 00:57:09.739 first. It kind of all comes – it kind of all 00:57:09.739 --> 00:57:13.530 – loops back around to itself in the end because 00:57:13.530 --> 00:57:15.570 you have to do everything all at once in terms 00:57:15.570 --> 00:57:18.510 of who's the director who is the exactly the 00:57:18.510 --> 00:57:22.250 yeah yeah the thing is like if it comes to somebody 00:57:22.250 --> 00:57:24.869 in cayman the likelihood is you know it's gonna 00:57:24.869 --> 00:57:27.570 hit a few different uh service providers well 00:57:27.570 --> 00:57:31.369 it definitely will all in georgetown yeah exactly 00:57:31.369 --> 00:57:33.809 in georgetown so it will be the case of like 00:57:33.809 --> 00:57:36.150 you know it might get it might go to walkers 00:57:36.150 --> 00:57:38.969 or one of the other law firms initially it might 00:57:38.969 --> 00:57:40.610 not it might come from one of the direct ship 00:57:40.610 --> 00:57:42.610 shops he's got a good relationship with somebody 00:57:42.610 --> 00:57:45.710 who's like hey i'm looking to set up a dow um 00:57:45.710 --> 00:57:48.710 but it will filter across you know you will get 00:57:49.519 --> 00:57:52.019 These positions have to be fulfilled prior to 00:57:52.019 --> 00:57:55.280 incorporation. So, or certainly in conjunction 00:57:55.280 --> 00:57:58.659 with incorporation. So it will all sort of come 00:57:58.659 --> 00:58:01.159 to fruition once the foundation is incorporated. 00:58:02.300 --> 00:58:05.079 Makes sense. I think it's all come together quite 00:58:05.079 --> 00:58:07.920 nicely now. And so, like you said, the market 00:58:07.920 --> 00:58:13.780 evolves and I'm sure as different, I think in 00:58:13.780 --> 00:58:15.519 America we call it case law. Do you call it something 00:58:15.519 --> 00:58:19.469 similarly? Where judgments are ruled and then 00:58:19.469 --> 00:58:22.230 the market will evolve based on judgments. Yeah, 00:58:22.289 --> 00:58:24.690 yeah, yeah. I mean, that's absolutely right. 00:58:24.829 --> 00:58:26.610 Yeah, we call it case law over here. It kind 00:58:26.610 --> 00:58:29.170 of operates in the same way as this common law 00:58:29.170 --> 00:58:32.630 jurisdiction. So we sort of follow the United 00:58:32.630 --> 00:58:37.650 Kingdom or sort of precedent and case law. Got 00:58:37.650 --> 00:58:41.349 it. That is everything I wanted to go over in 00:58:41.349 --> 00:58:44.599 terms of on the... prepared questions did you 00:58:44.599 --> 00:58:46.420 have anything that you wanted to go over any 00:58:46.420 --> 00:58:48.920 other topics you wanted to cover before we conclude 00:58:48.920 --> 00:58:54.039 no i'm just delighted to to be part of this lance 00:58:54.039 --> 00:58:57.139 and thank you again for um contacting me and 00:58:57.139 --> 00:58:59.780 letting me letting me be part of this podcast 00:58:59.780 --> 00:59:03.380 and talk and about things something i'm incredibly 00:59:03.380 --> 00:59:05.139 passionate about which is foundation companies 00:59:05.139 --> 00:59:08.960 and our structures and you know uh it's great 00:59:08.960 --> 00:59:11.360 to be at the forefront of it while it's still 00:59:11.360 --> 00:59:16.559 um In its infancy. It's certainly in its infancy 00:59:16.559 --> 00:59:20.179 in terms of a lot of the DAOs over here. Yeah. 00:59:20.280 --> 00:59:22.920 So many of us didn't even know what this was 00:59:22.920 --> 00:59:27.219 until like last year. I'd say it still hasn't 00:59:27.219 --> 00:59:31.179 hit mainstream. But the more DAOs are starting 00:59:31.179 --> 00:59:34.840 to take hold of Web3, and they are. They're happening 00:59:34.840 --> 00:59:38.539 quite quickly. The familiarity with DAOs. Foundation 00:59:38.539 --> 00:59:42.590 companies are like almost... almost a paired 00:59:42.590 --> 00:59:47.030 word now so great success when it comes to the 00:59:47.030 --> 00:59:50.489 cayman islands business framework being being 00:59:50.489 --> 00:59:54.429 applied to dow's i i think they they almost go 00:59:54.429 --> 00:59:57.719 hand in hand yeah almost great Yeah, I agree. 00:59:57.840 --> 01:00:01.119 I agree. It's an incredible vehicle, really, 01:00:01.239 --> 01:00:04.159 and a vehicle of choice for people in this space 01:00:04.159 --> 01:00:07.000 and for DAOs, you know, for the reasons we've 01:00:07.000 --> 01:00:09.820 discussed on this podcast. So long may it continue 01:00:09.820 --> 01:00:12.619 is all I can say from my perspective. Long may 01:00:12.619 --> 01:00:16.659 it continue. Carolyn, thank you so much for your 01:00:16.659 --> 01:00:19.239 time. I appreciate you giving us your expertise 01:00:19.239 --> 01:00:22.940 and not legal advice, but also your perspective 01:00:22.940 --> 01:00:26.360 and helping us try and... piece this together. 01:00:26.500 --> 01:00:30.019 I think we have quite a clear picture now that 01:00:30.019 --> 01:00:33.260 we can draw from how foundation companies support 01:00:33.260 --> 01:00:36.539 DAOs. Well, you're more than welcome anytime, 01:00:36.900 --> 01:00:40.059 Lance. And yeah, hopefully I'll see you again 01:00:40.059 --> 01:00:43.480 soon on another interesting topic on this podcast. 01:00:43.880 --> 01:00:47.639 I'd love to. I'd love to. Thank you, Carolyn 01:00:47.639 --> 01:00:49.820 and everyone else. Thank you.