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Legal Status and Corporate Governance of Decentralized Autonomous Organizations

For the last couple of years legal aspects of blockchain technology have been a hot topic in academic circles. The focus has slowly shifted from cryptocurrencies to its other applications. One of the most important ones is a Decentralized Autonomous Organization (DAO). A DAO is an organization in the form of computer programs – smart contracts – which are coded on blockchain and upheld by a peer-to-peer network. The participants of a DAO interact in accordance with a set of predefined rules without a central authority or extraneous influences. While a DAO can serve various purposes, it usually operates a business. In exchange for their contribution, a DAO’s participants receive governance tokens which enable them to vote and to receive dividends. The tokens are traded on a secondary market. The law is unsure how to approach a DAO. It is not easy to pin down a DAO’s exact legal status. Its organizational structure often resembles that of a company. Nevertheless, a DAO is usually is not registered as a company and it has no legal personality. In most legal systems a DAO is seen as a general partnership. If a DAO is a partnership, this opens many questions in regard to its establishing, membership, management and relationship with third persons. Perhaps most importantly, a DAO’s participants could be jointly and severally liable for its obligations.

decentralized autonomous organization ; general partnership ; smart contract ; governance token

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