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Chapter 5 DAO specific provisions Chapter 5 acknowledges that DAOs present new opportunities but also challenges. These opportunities and challenges must be addressed explicitly in the Model Law, and therefore do not have a counterpart in traditional corporate law rules. We have included provisions on Contentious Forks in the underlying blockchain (Articles 3(6), 16), DAO restructuring (Article 17), and DAO failure events (Article 18). As to Article 16, unlike corporations which can act as one authoritative counterparty in their dealings by way of their separate legal personality, DAOs can experience Hard Forks pursuant to which multiple blockchain forks coexist, assets are duplicated and multiple instantiations of a DAO are created on different chains. During a Contentious Fork, there is an absence of an authority that makes a definitive choice of a chain and thus, there is a lack of an authoritative counterparty for a DAO. This is a particularly acute problem when dealing with Off-Ch...

Article 8. VOTING RIGHTS― The voting rights of Members will be distributed in the following manner: (1) The By-Laws must set out the distribution of voting rights of the classes of Members in a DAO. The method by which these voting rights are computed and distributed must be accurately set out in the By-Laws. Commentary Unlike modern corporations, DAOs do not need default voting rights because the distribution of voting rights must be proactively delineated when creating a DAO. Thus, there is there no need for a default rule for voting in the context of DAOs. Article 9. PROXIES― With respect to proxies: (1) The Members or Participants may represent themselves or be represented by a proxy. (2) Proxies may ask questions, vote and exercise all other rights of Members or Participants. 33 Commentary In contrast to the rule in some jurisdictions that equity holders, such as shareholders and cooperative members, cannot be represented by proxy, the Model Law embraces the contemporary practice ...

Article 1. NATURE— (1)The DAO is a legal entity that can be used for commercial, mutualistic, social, environmental or political purposes, the nature of which will be specified in its By-Laws. Commentary The aim of the Model Law is to allow a DAO that has not registered as a for-profit corporate entity or a non-profit entity to benefit from equivalent standing as a domestic limited liability company or limited liability cooperative. Most jurisdictions no longer require limited liability companies to have an object/purpose clause. Instead, many jurisdictions allow them to engage in any legal activity. The ultra vires doctrine has also fallen out of favor in several advanced corporate law jurisdictions. A common exception to this trend is charitable organisations, which 8 is regularly explained by their special tax status. The Model Law does not aim to secure any special tax status for DAOs and accordingly has not taken into account the prevailing requirement for charitable organisations...

New models of blockchain-based organizations, often referred to as Decentralized Autonomous Organizations (DAOs), face significant legal uncertainty that can be detrimental to their development and utilization. This Model Law (ML) aims to create uniformity and legal certainty, while, unlike other regulatory frameworks for DAOs, still accommodating flexibility for further innovation by not imposing formal registration requirements. The drafters and contributors to the ML have sought to consciously address the vertical (principal-agent), horizontal (majority-minority principals) and firm-stakeholder agency problems that can be seen in corporate entity forms irrespective of jurisdiction, while still being sensitive to, and retaining, the particular features of DAOs and crypto-economic systems that make these forms of organization and coordination unique and valuable as emergent social and commercial vehicles. States are encouraged to adopt or transpose the ML’s provisions into their domes...