Speccing the bylaws of a model DAC

OtonomosOtonomos Member Posts: 8
edited September 2014 in Projects
We are working on the spec of a model DAC and would like to use this discussion title to solicit input.

Think of the project as drafting the standard bylaws for the DAC. We believe this is doable for the following reasons:

1. Communality: We have all incorporated companies be it C-Corps or Ltds and have been charged (quite a lot) by lawyers or (a bit less) by formation agents for a print-screen version of the bylaws which are 99% common across companies. We believe the DAC bylaws too can be 99% communal irrespective of what business you envisage for your company, as they typically deal with relationships between shareholders and governance issues.
2. "Legal Commons": We also believe this should be an open-source project and that nobody should be charged to use the model DAC bylaws.
3. Finally, we believe that in Ethereum, for the first time we may have the engineering tools to build and host DACs, so once fully specified we hope to find people within the community to help us code our bylaws.

We envisage the DAC as the successor to the limited company: a fully digital company with shares issued on the blockchain and embedded with its bylaws and governance code. The way we want to go about speccing the DAC is by way of a little mind game: if God were to create the perfect DAC, how would it look like?

In broad terms, it should be a separate legal entity of its founders and shareholders that "IPOs from day one", crowdfunds itself through digital currencies, governs itself through smart (we probably prefer to the word "wise") shares and whose accounts, as result of it transacting only in digital currencies, are up-to-date and public at all times.

As a result of its genesis, funding, governance and accounting, the DAC should serve as a "vehicle for human ingenuity" in which founders, investors, customers and collaborators can all participate to realise the business purpose for which the company was set up.

In a follow-up post we will break down each of the issues that need to be solved for a DAC to become a workable alternative to "real world" , jurisidiction-specific company forms. These issues range from majority rules and choice of forum to governance mechanisms and the winding-up of the DAC. Our goal is to draft a set of bylaws that can ship, i.a.w. not a theoretical concept but a genuine new company structure that can stand on its own feet and lead to wide adoption, not just within the community but by start-ups generally and even mature businesses.

There are lots of questions to be answered and we look forward to receiving comments and contributions.


  • OtonomosOtonomos Member Posts: 8
    As per posting of 17-Sep, here is the TOC for a company along English law. We will look at each of these in subsequent posts.


    1. Defined terms
    2. Liability of members


    3. Directors’ general authority
    4. Shareholders’ reserve power
    5. Directors may delegate
    6. Committees

    7. Directors to take decisions collectively
    8. Unanimous decisions
    9. Calling a directors’ meeting
    10. Participation in directors’ meetings
    11. Quorum for directors’ meetings
    12. Chairing of directors’ meetings
    13. Casting vote
    14. Conflicts of interest
    15. Records of decisions to be kept
    16. Directors’ discretion to make further rules

    17. Methods of appointing directors
    18. Termination of director’s appointment
    19. Directors’ remuneration
    20. Directors’ expenses


    21. All shares to be fully paid up
    22. Powers to issue different classes of share
    23. Company not bound by less than absolute interests
    24. Share certificates
    25. Replacement share certificates
    26. Share transfers
    27. Transmission of shares
    28. Exercise of transmittees’ rights
    29. Transmittees bound by prior notices

    30. Procedure for declaring dividends
    31. Payment of dividends and other distributions
    32. No interest on distributions
    33. Unclaimed distributions
    34. Non-cash distributions
    35. Waiver of distributions

    36. Authority to capitalise and appropriation of capitalised sums


    37. Attendance and speaking at general meetings
    38. Quorum for general meetings
    39. Chairing general meetings
    40. Attendance and speaking by directors and non-shareholders
    41. Adjournment

    42. Voting: general
    43. Errors and disputes
    44. Poll votes
    45. Content of proxy notices
    46. Delivery of proxy notices
    47. Amendments to resolutions


    48. Means of communication to be used
    49. Company seals
    50. No right to inspect accounts and other records
    51. Provision for employees on cessation of business

    52. Indemnity
    53. Insurance
  • ranfordranford Member Posts: 25 ✭✭
    Great initiative @Otonomos!

    You asked what the prefect DAC would like and go on to say the following... As a result of its genesis, funding, governance and accounting, the DAC should serve as a "vehicle for human ingenuity" in which founders, investors, customers and collaborators can all participate to realise the business purpose for which the company was set up.

    I believe we could expand to .. serve as a vehicle for human ingenuity and the creation of shared value.

    My point is that one of the biggest flaws of the current world of business is that companies often behave as if they exist for the sole purpose of generating profits for their shareholders. If we can get beyond that limited view, to the point where a DAC is clearly understood to exist for purpose beyond shareholders profit, and to one of actually creating shared value to humanity and the world, this would be a great step forward, if that could be added to the spec in some form that would be good. Shared value would need to be defined, there was a seminal article by Harvard professor Michael Porter describing shared value (he is not the first, but he is a big name). The point is to include other metrics of value creation beyond financial, ie environmental and social for example. Coke for example creates financial value by selling drinks, but this is not creating shared value, in fact they are reducing shared value by damaging environment (at a financial cost well beyond the meagre profits they generate) and they are arguably causing massive social / health costs through their contributing to obesity epidemic and its associated health costs.

    I dont know how you would incorporate this into your spec, but I think that it will be a huge opportunity lost if the new world of DACs starts of under the same blinkered values that the old corporation models have institutionalised.

    The key maybe in the last sentence in the paragraph relating to business purpose. If the business purpose can be included in the encoding and if at the very least nothing more specific defined than a simple nod to a default position that states the company was setup to create shared value (not just financial) in X. Going beyond that referencing potential metrics by which shared value can be measured is probably required, and actually I believe cryptocurrencies may even emerge to make these often intangibles become more tangible.

    Anyway Great initiative, will be watching closely,

    BTW, I assume you are following Eris and project DOUG also?
  • OtonomosOtonomos Member Posts: 8
    Hi @ranford thanks for commenting. If I understand correctly, you want to bring in and quantify "externalities" and look at crypto currencies to make these more tangible. I could indeed envisage bylaws in which founders define "shared value" and try to take the externalities of their activities into account. One could for instance set up an automated mechanism in which people affected by a company's activities can be compensated more directly (instead of through crude redistributive mechanisms i.e. regulation) and micro-payments by way of digital currencies could make that possible (for instance neighbours of a polluting factory could receive a BTC/unit of pollution for the externality of polluting activity). For this it would be necessary to find a way to circumscribe rather precisely who is affected. For instance in the case of Coke, it would not be right to assume that everybody who is obese is obese because of drinking Coca Cola.
    Also, we would probably not want to take away the freedom of founders to define the purpose of their company as they see fit. If they want to limit their purpose to the narrow maximisation of shareholder profit, that should be their choice. However they may see their company is less favoured over competitors by doing so: they may not be able to attract staff with the right consciousness, they may repel certain customers, collaborators may not favour working for them etc. Hence limiting the company's purpose to the mere pursuit of profit may be self-defeating...but it is something we would want the founders to find out for themselves: the spec as its stands does not prescribe a DAC's purpose. It will be interesting to see how people fill out this blank! Please follow us on angel.co/otonomos for progress updates.
  • innovator256innovator256 Member Posts: 5
    Hey there, thank you for your help and spearheading this area. I have briefly browsed your site exploring the DAC blockhain option.

    Question why is it that you did not start with a DAO? basically a DAO is similar to a DAC but more of a collective group of entities working together loosely for a common cause. You could provide options to upload DAO bylaws

    You are ostracizing a lot of users by not providing for this structure, I know at least for groups interested in this rather than a DAC.

    Also how come you require credit card if there are ZERO add-ons involved?
  • DarleneSchmidtDarleneSchmidt Member Posts: 1
    Look here for more info
Sign In or Register to comment.