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Utah: First state to pass legislation recognizing the DAO

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DAO has been DAO ever since

Original Title: DAO Will Be DAO - Utah Passes Innovative DAO Act

Original author: Chao Wang, Empower Labs

On the afternoon of March 1, the United States time, the Utah Legislature narrowly passed H.B. 357, the Decentralized Autonomous Organization Amendment, after a heated discussion, which marked that the DAO as an organization form gained an independent legal status in the United States.

It is common for DAOs to have legal entities, and more DAOs are doing this (see theThe legal structure of the DAOI have also participated in Venture DAO, LLC registered in Delaware, USA. In addition to LLC, DAOs that do not involve investment business are more often represented by foundations, Lcas, UNA, special purpose trusts, cooperatives and other forms in order to conduct business and realize legal protection of DAO members. The DAO Act passed in Wyoming in 2021 also incorporated DAO into the LLC system for management.

So either of these forms is essentially a legal entity wrapped around the DAO in its existing form.In other words, DAO did not exist legally in the past. It was an LLC, a company, a cooperative, a foundation and a trust, but it chose to operate in the form of DAO organization.

This legislation, by marking that DAO does not need to be physically packaged,The DAO itself has become a unique form of organization recognized by Utah law. In addition, the DAO Act clarifies and protects the legal and tax responsibilities of DAO members, and supports the sharing of DAO members in the form of partnership.

Read through the bill yesterday, highlighting the following:

Organizational status and responsibilities

1.DAO has the legal person status and the right to carry out any lawful affairs;

2.DAO shall be a limited liability, and the liability limit shall be all assets of DAO;

3. Individual members shall not be liable, but if DAO does not obey the legal judgment and votes to disobey the judgment, individual members may be liable for the amount of compensation required in the judgment, and the liability shall be divided according to the voting power.

Formation of DAO

1.DAO shall have a natural person as the registrant and set up an open contact person;

2.DAO shall have organizational regulations;

3.DAO needs to be deployed on an unlicensed blockchain (public chain), have a decentralized governance system, open source code, and open address;

4. Daos need to have an authorized legal representative to handle transactions that cannot be completed on the chain. Individual legal representatives shall not be jointly and severally liable.

Member Definition and Responsibilities

1.DAO has no manager, and all members shall be regarded as joint managers;

2.Governance Token holders are treated as DAO members, effective in both cases.

a)Start holding Token (active holding);

b)On-chain interaction with DAO for the first time (passive holding such as gift and airdrop);

3. Members may not request the dissolution of a DAO on the grounds that it is unable to refund its financial contributions;

4. If it is used for tax purposes, it is executed in partnership mode by default, but the DAO can pay tax in the form of a company through public voting declaration;

5. In the default partnership, the DAO can share money with members, who pay personal income tax in the manner of partners.

After reading through, we can see that the scheme is relatively professional, and there is even a special chapter for the hard fork of blockchain network, which has strong practical. Many DAO businesses are entering the deep water over time, and Utah provides a good compliance framework.

The bill will take effect on January 1, 2024.