The paper discusses whether and to what extent the key constituencies of a ‘typical’ DAO can be qualified as a partnership under English law. It explores the defining features of a ‘typical’ DAO and its key constituencies; gives a brief overview of the various types of business organization available under English law; addresses the question of private international partnership law; and then analyses whether the key stakeholder constituencies in a DAO meet the conditions set out in the Partnership Act 1890 for qualifying as a partnership.
Dirk Andreas Zetzsche, Linn Anker-Sørensen, Maria Lucia Passador, Andreas Wehrli
Financial law and regulation have, to date, assumed that regulated activities and functions are concentrated in a single legal entity responsible and accountable for operations and compliance. Even with regard to financial market infrastructure where the regulatory perspective acknowledges the need for interoperability of many entities as a system, each entity is subject to its own rules and regulations, and can thus meet its own compliance requirements independent of other system participants. The entity-focused regulatory paradigm is under pressure in the world of DLT-based payment arrangements where some ledgers, and thus the performance of the services as such, are distributed. DLT arrangements could provide an alternative to the traditional reliance on a mutually trusted central entity to transfer funds and enable the creation of new foundational infrastructures by distributing technical functions or linking existing systems. As such, we identify and outline concepts for use cases where DLT is potentially improving the efficiency of cross-border payments, namely a Best Execution DLT, a DLT application for a Network of Central Banks, a DLT as an AML/KYC utility, as well as DLT arrangements for an Identity Platform, a Small Payments Platform and, finally, an Interoperability Platform connecting multiple closed-loop and proprietary banking systems. Despite the wide-ranging interest in DLT-based payment systems, research so far has focused on technical concepts and lacked legal details. This article seeks to fill this gap by providing an initial analysis of the legal challenges related to DLT-based payment systems. From a legal perspective, the distribution of functions in DLTs comes with new risks created from the joint performance of services and functions as main characteristic of a distributed ledger, and the need for additional agreements, ongoing coordination across, and governance arrangements among the nodes. Further, in a cross-border context, multiple regulators and courts of various countries (asking for compliance with their own set of rules and regular reporting) will be involved. All of these must decide whether for compliance with any single rule they look at the DLT as a whole (herein called ‘the ledger perspective’) or each individual node (that is each institution participating in the DLT, herein called ‘the node perspective’). Moreover, financial and private law must provide for risk allocation, liability, responsibility and accountability for all legal obligations related to each function and activity. This article examines the extent to which the ledger perspective or the node perspective should prevail against the backdrop of a range of DLT use cases, resulting in policy recommendations for regulators. In this article, we propose the adoption of what we call an enabling approach for payment systems: ledger operators must specify in a Plan of Operations subject to regulatory approval to which rights and obligations the ledger perspective applies; in the absence of such a stipulation, rules apply based on the node perspective. However, for systemic risk controls, AML/CFT, data protection and governance, as well as DLT governance, we propose a reversed default rule in which the ledger perspective prevails in the absence of rules stipulating that the node perspective applies. Finally, in private law matters, we propose protecting consumers and SME clients through a standardised payment services contract structure, without mandating details.
Abstract This chapter explores the English law as an example of a particular model for the analysis of intermediated securities. It analyzes the rights of investors through the lens of trust law rather than through bailment and highlights the advantages and disadvantages of the no-look-through model. It also reviews cases where individuals hold a relatively small number of securities through a financial service provider, including the Duomatic principle that gives license to the court to override the formal requirements for shareholder decisions contained in the Companies Act. The chapter demonstrates why the intermediated holding structure that has evolved across the world does not sit comfortably with English law. It cites the recent scoping study conducted by the UK Law Commission combined with the UK Government’s ambition to attract a global pool of investors, which suggests that the UK Government is motivated to address the problem with the English law.
The decentralized structure and automated operations of decentralized autonomous organizations (DAOs) raise complex questions about the determination of applicable law, corporate status, and external actions that cannot be adequately answered using classical theories. This article draws up the different current legal possibilities for structuring DAOs.
Blockchain applications begin to transform both companies and company law. At Member State level, for example, the German government has recently commissioned a study to examine the suitability and need for reform of company law in view of blockchain applications. The European Commission also takes a close look at the intersection of blockchain and company law, and is currently considering “additional company law measures to facilitate cross-border expansion and scale-up by SMEs”. At the same time, the High-Level Forum on Capital Markets Union is discussing company law measures to make internal company processes more efficient with the help of distributed ledger technologies. Digitalization is likely to trigger further reform steps under company law, and blockchain and distributed ledger technologies represent fundamental challenges for this field of law. The present paper therefore tries to shed some light on the intersection of blockchain and corporate law. A brief explanation of the technology lays the ground for measuring the potential for its use in company law practice.
The digital economy has had a profound impact on society, including the global business landscape and market dynamics. New phenomena such as online platforms, social media, distributed ledger technology (such as blockchain), big data and online service providers affect business models and our understanding of what a “business” is. The links between digitalisation and Responsible Business conduct (RBC) are manifold. New digital tools can help firms accelerate their contribution to sustainable development, and enable businesses to strengthen their efforts to meet standards of RBC. At the same time, digitalisation can also cause business to violate human rights, or contribute to social and environmental harms in new ways. This paper discusses the links between RBC and digitalisation. It aslo summarises the key issues and findings emerging from the stocktaking and analysis of current initiatives.
Most of the applications and uses of digital assets are improved and expanded with well-functioning and well-governed DAOs. The article evaluates the technical and internal governance solutions promulgated by DAO projects. Particular emphasis is placed on the duality of feedback effects between internal DAO governance and external DAO legal designs.
The article focuses on whether it is possible to use new technologies such as distributed ledger technology (DLT) in shareholder ledger maintenance systems. The article uses Estonia as an example to describe the shortcomings of shareholder ledger maintenance regulation and possible suggestions for reform and applies the principle of technology-neutrality to the subject matter to assess whether the regulation allows the adoption of new technologies, such as DLT, in ledger maintenance. The aim of the principle of technology-neutrality is to secure that the regulator does not create regulation that prefers any particular technology and discriminates against other technologies. Any regulation that is built around a pre-existing technology could suffer from preferring the use of that particular technology and consequently hinder innovation. In the article it is examined whether the ledger maintenance models used in Estonia are benefitting or suffering from the non-existence of technology-neutral technical standards for ledger maintenance and whether the differentiation of treatment of shareholder ledger administrators is justified on the basis of the principle of technology-neutrality.
In honor of the seventy-fifth anniversary of The Business Lawyer (TBL), we reviewed the roughly 400 papers published in TBL on secured transactions since inception, in 1946. We find that, while TBL has always provided excellent coverage of secured credit, earlier works were more likely to focus on questions of policy than those published more recently, which tend to be more technical. This is curious, both because secured transactions have been the subject of sometimes ferocious academic debates in other journals about their distributive effects, and because TBL often includes policy-oriented scholarship in other business-law fields (e.g., corporate governance). We argue that TBL should actively seek papers on secured credit policy, in part because technologies like distributed ledgers may threaten to render all secured transactions . .. academic.
Blockchain, the distributed ledger technology underlying cryptocurrencies like Bitcoin, is poised to revolutionize industries and processes across disciplines. In particular, government agencies and companies are looking for ways to leverage blockchain’s efficiencies to facilitate safe record-keeping. Municipalities are employing blockchain-issued deeds to accurately record property ownership. Progressive legal professionals are employing blockchainissued “smart-contracts” to more accurately record contract terms. Intellectual property attorneys and related government agencies are researching blockchain-issued copyrights and patents. This Note examines how utilizing blockchain technology in securities trading to maintain accurate stockholder ledgers will allow for current market forces to be reflected in stockholder voting. Further, this Note seeks to address how blockchain-issued shares of stock could affect stockholder approved mergers and the exercise of appraisal rights. This Note posits that accurate stockholder ledgers will lead to an increase in stockholder approved mergers, but will not have an effect on the exercise of appraisal rights.
Relationships of parent and subsidiary (one corporation owns all or a controlling amount of stock in another) and common ownership (the same individual, entity, or cohesive group owns a controlling interest in a number of corporations) create what are commonly referred to as corporate groups or affiliated corporations. Laws in numerous fields, including, of course, corporate law, as well as bankruptcy,1 civil procedure,2 tax,3 financial reporting,4 antitrust,5 employment,6 bank regulation,7 and the like, confront issues raised by corporate groups. An attempt to present the law governing corporate groups in the United States covering all these fields is hampered by the fact that there is no cohesive law of corporate groups in the United States. Each area of law has its own definition of the ties between corporations necessary to trigger various rules. In some instances, as for example with the corporate laws protecting minority shareholders or creditors, triggering rules relevant to parent or controlling shareholder status involves a fact-intense, case-by-case evaluation of actual control over the board or company.8 In other instances, as for example under the Internal Revenue Code provisions entitling affiliated corporations to file consolidated federal income tax returns,9 statutes set bright-line numerical tests based upon ownership of a set percentage of voting power and value of stock by one corporation in another.10 Moreover, the impact of triggering rules applicable to groups of companies in any given area of law depends upon the particular rule and area of law involved. Hence, allowing affiliated corporations to file consolidated income tax returns does not mean the corporations are liable for each other’s debts. Nor, given the disparate concerns and policies raised by corporate groups in these different areas of law, should the same criteria or impacts necessarily apply. The lack of any cohesive law of corporate groups in the United States means that attempting to cover the treatment of corporate groups under all of the various potentially relevant laws in the United States would entail either writing a treatise11 or settling for an unhelpful exercise in superficiality. Accordingly, this Report takes a narrower approach, which focuses on two central challenges presented by corporate groups. A minimum goal for corporate law is to prevent parties controlling a corporation from misappropriating the company’s earnings and assets (“tunneling”12) or otherwise taking advantage of minority shareholders. The often-abused power of parents and controlling shareholders to exploit subsidiaries and controlled corporations in corporate groups and the minority shareholders in such companies create particular hazards in this regard. A second minimum goal for corporate law is to prevent the abuse of limited liability through tunneling, deception of creditors, and excessive externalization of risk. Again, corporate groups, with their prospect for isolating liabilities in some companies in the group and assets in others, create particular hazards in this regard. These two concerns provide the focus for this Report. Unlike the law in some nations, corporate laws in the United States—which are largely state, not federal, law, and consist of corporation statutes and judicially developed (common law) doctrines—generally do not have statutory provisions or judicial doctrines designed especially for corporate groups. In terms of corporate governance, this means that parent corporations and controlling shareholders have no specific authority to on or their subsidiaries or controlled corporations. their power as a of their voting control over the on the subsidiary or controlled board of which has the statutory power to the this same lack of specific provisions for corporate groups, corporate in the United States minority shareholders and from the by corporate groups through the of to shareholders in parent corporations from through statutes in the United States subsidiaries from voting stock own in their parent companies and other controlling shareholders in corporate groups a of corporate earnings and assets to the of minority shareholders through with the corporation or by the stock of minority shareholders in their to prevent parent corporations and other controlling shareholders from misappropriating income or assets through with their subsidiaries or controlled corporations. 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