Last month, the DAO passed a proposal funding the Nouns Foundation with sufficient resources to establish a Wyoming DUNA and fund its first year of operations. Since the passing of the proposal, the Foundation has continued working with its advisors to prepare to launch the DUNA, including drafting the attached DUNA Bylaws.
This proposal is a referendum on the enactment of the Bylaws, which as discussed further below will provide some of the internal governance rules of the DUNA. If the proposal passes, we will move forward with: (i) winding up and liquidating the Nouns DAO Foundation, (ii) launching the Wyoming DUNA, (iii) contributing the assets and liabilities of the Foundation to the DUNA and (iv) electing an Administrator to fulfill the duties described below. The Bylaws will be implemented in conjunction with the launch of the DUNA, which we anticipate taking place approximately three weeks after this proposal passes.
DUNA Governance Overview
It's important to note that the DAO's smart contract code would continue to supply the primary internal governance rules of the Nouns DAO DUNA entity. We believe that the DAO's smart contract code provides a robust governance framework and should be the definitive starting point for determining the legality of DAO members' actions (after accounting for applicable laws and regulations), and the Wyoming DUNA is unique among legal entity structures in accommodating this incorporation of a DAO's decentralized governance into the legal entity itself. The smart contract code will follow only the Wyoming DUNA statute and other applicable law in the ordering authority of the entity's governing principles. Accordingly, the Bylaws would act to supplement the code and statute, to the extent there are gaps that are not addressed otherwise.
In practice, this means that if a dispute were to arise about the governance of the DUNA, a court would look to the onchain rules that were determined through democratic DAO governance processes and enshrined in the DAO's smart contract code before looking to the Bylaws. It also means that if the DAO elects to update its smart contract code, the changes would be automatically incorporated into the DUNA under the eyes of the law without requiring further action. This is a stepwise improvement vis-à-vis the Nouns Foundation structure, under which the smart contract code and other onchain DAO actions had no direct bearing on the governing principles of the Nouns Foundation.
DUNA Bylaws Overview
- As noted above, the Bylaws explicitly and formally incorporate the smart contract code of the DAO into the DUNA's governing principles. The Bylaws do so in Article I: "In the event of a conflict between the Code and the Bylaws, the Code shall supersede the Bylaws and otherwise control the Governing Principles."
- The Bylaws authorize an "Administrator" to serve as a type of Chief Compliance Officer for the DAO, responsible for (i) reviewing DAO proposals for compliance with various laws (ii) taking certain legal compliance actions such as filing taxes and (iii) enacting DAO proposals which require a legal entity or natural person, such as executing contracts or opening a bank account. The Administrator can only be elected through a DAO proposal and will have no authority to act on behalf of the DUNA absent the specific authorization of the DAO. This is an additional unique feature of the DUNA which caters to principles of decentralization and differentiates the Administrator from a director or manager of other types of legal entities, who normally have implicit or explicit agency to act on such entity's behalf.
- Enacting the Bylaws will allow us to move forward with the DUNA launch and therefore progress the DAO towards legal compliance. Moreover, once enacted, the Bylaws can be further updated through a proposal passed by majority DAO vote (like any other update to the DAO's governance). Given this flexibility on a go-forward basis and the fact that we believe that the DUNA is imperative to mitigating significant legal risks to the DAO and its members, unless the community identifies existential risks or otherwise raises significant objections, we recommend adopting the current draft.
We believe that the DUNA structure will allow Nouns DAO to unlock its full potential in a legally compliant manner and are hoping that the community agrees to move forward with this proposal.
NOUNS DAO DUNA BYLAWS v1.0
ARTICLE I
CORPORATE AUTHORITY AND GOVERNING PRINCIPLES
Section 1.1. Name. The name of the Wyoming Decentralized Unincorporated Nonprofit Association is “Nouns DAO” (the “<ins>DAO</ins>”).
Section 1.2. General. The purposes for which the DAO is organized are to exclusively promote and carry on any purposes and activities for which a Wyoming Decentralized Unincorporated Nonprofit Association (a “<ins>DUNA</ins>”) may be organized and operated under the Wyoming Decentralized Unincorporated Nonprofit Association Act (the “<ins>Act</ins>”).
Section 1.3. Governing Principles.
- <ins>a) Ordering Authority.</ins> The Governing Principles (as defined below) of the DAO shall be determined, in order, by:
- <ins>i.</ins> the statutory requirements of the Act;
- <ins>ii.</ins> the smart contract code (the “<ins>Code</ins>”) of the DAO:
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- <ins>iii</ins> and these bylaws (the “<ins>Bylaws</ins>”, and collectively with the Act and the Code, the “<ins>Governing Principles</ins>”).
In the event of a conflict between the Code and the Bylaws, the Code shall supersede the Bylaws and otherwise control the Governing Principles.
- <ins>(a) Amendment; Waiver.</ins>
- <ins>i.</ins> The Code may be amended or waived in accordance with the rules set forth thereto.
- <ins>ii.</ins> The Bylaws may be amended or waived by a DAO Proposal (as defined in the Code) which is approved in accordance with the rules set forth in the Code.
ARTICLE II
THE ADMINISTRATORS
Section 2.1. Number, Qualifications and Tenure. The Administrators shall be comprised of Compliance Administrator(s), Reserve Administrator(s), and Veto Administrator(s) (collectively, the “<ins>Administrators</ins>”), the number of which may be determined from time to time by a DAO Proposal that is approved in accordance with the rules set forth in the Code.
- (a) Each Administrator shall be elected in accordance with a DAO Proposal that is approved in accordance with the rules set forth in the Code.
- (b) Each Administrator shall retain the Administrator position following his or her election until his or her resignation, death, or removal in accordance with a DAO Proposal that is approved in accordance with the rules set forth in the Code.
Section 2.2. General Powers. The Administrators shall fulfill certain administrative or operational tasks required by the DAO by exercising only the powers, rights, and privileges as specifically enumerated in the Governing Principles or a DAO Proposal which is approved in accordance with the rules set forth in the Code.
- <ins>(a) Compliance Administrator Responsibilities and Powers.</ins>
- <ins>i.</ins> The Compliance Administrator(s) shall be responsible for reviewing each DAO Proposal for compliance with applicable laws or regulations (the “<ins>Compliance Laws</ins>”), including but not limited to those laws and regulations enumerated in Sections 2.2(a)(i). In the event a Compliance Administrator determines that a DAO Proposal may violate the Compliance Laws, such Compliance Administrator shall promptly (i) notify the Veto Administrator(s) and (ii) notify the DAO.
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- Tax Compliance. The Compliance Administrator(s) shall (i) implement procedures on the advice of tax advisors to evaluate the direct and indirect tax impact of each DAO Proposal and (ii) take such other action to ensure compliance with the tax laws as may be authorized by a DAO Proposal that is approved in accordance with the rules set forth in the Code.
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- Sanctions Compliance. The Compliance Administrator(s) shall (i) implement procedures on the advice of legal counsel to ensure that the DAO is in compliance with applicable sanctions laws and regulations, including without limitation procedures to ensure that any wallet which interacts with any aspect of the Code is not listed on the Sanctions List Search administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control and (ii) take such other action to ensure compliance with sanctions laws as may be authorized by a DAO Proposal that is approved in accordance with the rules set forth in the Code.
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- Governing Principles Compliance. The Compliance Administrator(s) shall ensure that each DAO Proposal complies with the Act, the Code, and these Bylaws.
- ii. The Compliance Administrator(s) shall be responsible for taking the following actions as required by the Compliance Laws (“<ins>Compliance Actions</ins>”) in accordance with the parameters set forth below.
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- Tax Compliance Actions. The Compliance Administrator(s) shall (i) engage tax advisors and implement a tax compliance program to ensure that all information required to comply with the tax laws is collected and maintained; (ii) engage a service provider to prepare the DAO’s taxes; (iii) take such other action to ensure that the DAO is fulfilling its tax obligations under all relevant tax laws and regulations.
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- Privacy and Information Security Compliance. The Compliance Administrator(s) shall ensure that the DAO (i) only process personal information in compliance with applicable privacy and cybersecurity requirements, including but not limited to, the California Consumer Privacy Act and other applicable U.S. state and federal and international privacy and information security requirements (“<ins>Data Protection Requirements</ins>”); and (ii) adopts a written information security program consisting of administrative, technical, and physical controls designed to protect the confidentiality of nonpublic personal information and sensitive company information (including but not limited to personal information relating to DAO Members (as defined in the Code)) in accordance with Data Protection Requirements and Section 2.3(c).
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- Other Compliance Actions. In the event a Compliance Administrator determines that the Compliance Laws require additional action beyond that which is authorized in Section 2.2(a)(ii), such Compliance Administrator shall have the authority to take all necessary action to ensure compliance with such applicable laws or regulations, including but not limited to notifying the DAO of the regulatory or legal risks, notifying the Veto Administrator(s), engaging outside legal counsel and advisors, or reporting activity to law enforcement or regulatory authorities. The Compliance Administrator(s) may also take any Compliance Action as may be authorized by a DAO Proposal that is approved in accordance with the rules set forth in the Code.
- iii. The Compliance Administrator(s) shall be responsible for the legal enactment of any DAO Proposals passed by the DAO (“<ins>DAO Enactments</ins>”), including without limitation the execution of contracts or agreements, the opening of bank accounts, or the payment of DAO debts or liabilities. Absent the specific authorization through a DAO Proposal that is approved in accordance with the rules set forth in the Code (and except as otherwise set forth in the Governing Principles), the Compliance Administrator(s) shall have no authority to bind the DAO to legal agreements or to otherwise act on the DAO’s behalf.
- iv. Each Compliance Administrator shall refrain from voting on any DAO Proposals during such time they hold the Compliance Administrator position; provided, that, a Compliance Administrator may delegate his or her voting power in accordance with the rules set forth in the Code.
- <ins>(b) Reserve Administrator(s) Responsibilities and Powers.</ins>
- <ins>i.</ins> Each Reserve Administrator shall be elected to serve as the alternate for a Compliance Administrator during periods that the Compliance Administrator is unavailable. Each Compliance Administrator shall cooperate with their corresponding Reserve Administrator to ensure that one of them is available to fulfill the duties and responsibilities of the Compliance Administrator at all times.
- <ins>ii.</ins> Upon a Compliance Administrator’s request, a Reserve Administrator may advise such Compliance Administrator on matters related to the Compliance Administrator’s duties and responsibilities.
- <ins>iii.</ins> Each Reserve Administrator shall refrain from voting on any DAO Proposals during such time they hold the Reserve Administrator position; provided, that, a Reserve Administrator may delegate his or her voting power in accordance with the rules set forth in the Code.
- <ins>(c) Veto Administrator(s) Responsibilities and Powers.</ins>
- i. The Veto Administrators shall have the authority, but not the obligation, to veto DAO Proposals in extraordinary circumstances where material legal or existential risks to the DAO may be present.
- ii. The Veto Administrators may be elected or removed from office pursuant to a DAO Proposal that is approved in accordance with the rules set forth in the Code. Any such DAO Proposal may be vetoed by the Veto Administrators in accordance with Section 2.2(c)(i).
Section 2.3. Member Information Rights.
- (a) To the extent permitted by law and subject to the restrictions set forth in Sections 2.3(c) hereof, on an ongoing basis, the Administrators shall make available to DAO Members all information regarding the DAO’s activities, financial condition, and other circumstances, including without limitation:
- i. Compliance Actions;
- ii. DAO Enactments;
- iii. Information Requests and Information Responses (as each are defined below);
- iv. Any other types of specific information identified by DAO Members through a DAO Proposal which is approved in accordance with the rules set forth in the Code.
- (b) <ins>Information Requests</ins>. On reasonable notice and upon proving their membership in the DAO by presenting evidence of ownership of their Noun, a DAO Member may request from the Administrators any information maintained by the Administrators regarding the DAO’s activities, financial condition, and other circumstances (“<ins>Information Requests</ins>”) that is not otherwise publicly available. To the extent the information is material to the member’s rights and duties, and subject to Section 2.3(c) hereof, the Administrator shall provide such information to the DAO Member in a timely manner (“<ins>Information Responses</ins>”).
- (c) <ins>Reasonable Restrictions on Information Requests</ins>. Before disclosing information in response to Information Requests, the Administrators shall redact personal information in accordance with Data Protection Requirements and such other information that the Administrators determine necessary to restrict from disclosure to comply with applicable law, including but not limited to residential address, telephone number, Social Security number, foreign tax identification number, electronic signature, nonpublic financial information, and other personal information which could pose a risk of identity theft. <br />
Notwithstanding the foregoing restrictions in Section 2.3(c) or anything herein to the contrary, the Administrators may disclose information related to the DAO or its Members if compelled by law, regulation, court order, or other legal processes.
Section 2.4. Administrator Compensation and Reimbursement.
- (a) Administrators shall be compensated and reimbursed in accordance with DAO Proposals which are approved in accordance with the rules set forth in the Code.
Section 2.5. Administrator Indemnification.
- (a) The DAO shall indemnify and hold harmless, to the fullest extent permitted by applicable law, including without limitation, the Act, as it presently exists or may hereafter be amended, all Administrators for any debt, obligation or other liability incurred in the course the Indemnified Person’s activities on behalf of the DAO.
ARTICLE III
MEMBER RIGHTS
Section 3.1. Prohibitions on Distributions. Except as provided in this Section 3.1, the DAO may not pay dividends or distribute any part of its revenue or profits to its Members, Administrators or persons outside the DAO.
- (a) The DAO may:
- i. Pay reasonable compensation or reimburse reasonable expenses to its Members, Administrators and persons outside the DAO for services rendered, including services with respect to the administration and operation of the DAO. Any such services, reasonable compensation, and reasonable expenses must be authorized by the Code, these Bylaws, or a DAO Proposal that is approved in accordance with the rules set forth in the Code.
- ii. Disburse grants (“<ins>Grants</ins>”) to DAO Members, Administrators, or persons outside the DAO pursuant to a DAO Proposal that is approved in accordance with the rules set forth in the Code. Grants must be made in the normal course of business and in furtherance of the purpose of the DAO. DAO Members may not consider the Membership or Administrator status of a grantee when voting on a DAO Proposal.
- (b) If on the winding-up or dissolution of the DAO there remains surplus assets after the satisfaction of its debts and liabilities, such property shall be paid or transferred to a charitable object with a similar mission and intent to that of the DAO. Notwithstanding anything in the Act, the Code, or these Bylaws, under no circumstances may any assets of the DAO be assigned, transferred or otherwise returned to (i) the Members or Administrators of the DAO (or any affiliate thereof) or (ii) any entity or person(s) that originally assigned, transferred or otherwise contributed such assets to the DAO.
