Legal - Part 1
Among the feedback we have and still are receiving, questions have been voiced about certain legal aspects of ICONOMI. As the Legal Lead of the ICONOMI project, it is my duty and pleasure to elaborate on these topics. My plan is to address the most debated matter first, and gradually progress through the questions in subsequent blog posts. Any feedback and discussion is greatly appreciated, as it gives me a clear indication which topics to cover first. That being said, familiarity with the Terms of Use, both of our whitepapers and published blog posts is assumed.
When we say we are the first fund management platform for the decentralised economy, we mean just that — we are literally the first entity of this kind. The problem with being the first in this day and age, and highly disruptive at the same time is that you most likely will not fit in into well-established moulds that are offered on a take-it-or-leave-it principle. It is not my opinion that this is bad in itself(1), it simply means a that project as ambitious as ICONOMI has to try its best to fill the moulds available in the beginning, and steadily reshape them through time and with cooperation until they emerge anew and fit perfectly. Being disruptive does not mean being destructive — others will start using our moulds, but the spoils of pioneering will be reaped only once.
On the legal form of ICONOMI and the role of Cashila OOD s.r.o.
In its truest form, ICONOMI would be best defined as being a sui generis entity(2). Even though our vision eludes a direct match with established corporate law, most of the conventional predispositions stand and numerous similarities can be found, as long as you allow yourself to look at them through the prism of the new economy. Even though I will be using several well-known terms, which bear their own (established) interpretations, please keep in mind that I am using them for illustrative purposes, as an aid to a better understanding of the subject matter.
ICONOMI — de lege ferenda
The owners of ICONOMI are the respective possessors of ICONOMI tokens (hereinafter referred to as “ICN”). Ideally, the ICONOMI Ethereum smart contract would be deployed through a governmental authority, a company registry, who would then track the finite amount of ICNs. Coupled with a respective tax authority, every transfer of ICNs could be monitored in real time, as well as every dividends payout, making the payment of taxes (if applicable) easy and tax avoidance non-existent.
Suddenly, we arrive at the next generation of corporate governance, one where a company’s equity structure is established on the Ethereum network. The need for a service operator disappears, as this company acquires personhood with the issuance of tokens.
ICONOMI — de lege lata
Even though the aspirations outlined in the previous section are being evaluated in several jurisdictions(3), there is no possibility of tracking or even mirroring ICN shareholding structure directly at this time. We believe this will soon change and we will restructure ICONOMI accordingly immediately.
In the meantime, ICONOMI is forced to exist in duality, with a service operator as an intermediary, who indirectly enables ICONOMI to manifest its actions through it. The ICONOMI whitepaper states: “Cashila OOD s.r.o. […] will serve as the first service operator of the ICONOMI platform.”
At this point I would like to clarify that for the sake of complete transparency and clear-cut separation, ICONOMI will seek its own juridical personality — Cashila OOD s.r.o. will only be providing a part of its substratum (economic element) to ICONOMI during the time it acts as a service operator, but not its legal personality (legal element). The partial substratum of Cashila OOD s.r.o., joined by additional elements (people, intellectual property and capital, for instance) will together form the substance of ICONOMI, which will acquire its own legal personality. Should the service operator be replaced at any time, its part (for example: people) in ICONOMI shall be replaced, while the rest (for example: capital, intellectual property) continue to exist unobstructed. Cashila OOD s.r.o. as a juridical person will have no ties to ICONOMI, other than ICONOMI using Cashila (cashila.com) for the processing of payments, completely equivalent to all other Cashila users.
A foundation (“Stiftung”) is broadly defined as “assets dedicated to serve a specific purpose”, which in turn translates to a set of dedicated assets acquiring legal personality with a specific purpose, outlined in the founding act. Since, as we have concluded, there is no viable option for ICONOMI to mirror its shareholding structure (based on ICN ownership) directly, it is best that the assets of ICONOMI gain legal personality on their own, while true ownership is managed internally.
We arrive at a two level structure, where at the moment a universally unrecognisable ownership structure and corporate governance are managed internally (through by-laws), while ICONOMI acts as a single, unified entity against the outside world. By definition, a foundation does not have owners, but founders — the assets themselves “live” their own “life” though a legal fiction, in accordance with a specific purpose, while the founders do not have any special rights if so stipulated in the founding act (as is the case with owners in other legal forms). Logically, should the service operator be replaced, there is no external change in ownership to be performed. The foundation is assigned new management, according to a vote among ICN token holders.
It goes without saying that ICONOMI needs to have a way to enter into contractual relationships and bear rights & obligations, especially as a gateway between the “old” and the “new” economies. The life of ICONOMI is continuously intertwined with duality — in its mission, in its governance and in its structure. Our team is already hard at work researching several options for incorporation in different jurisdictions across the globe. I am happy to say that at the moment of my writing, we are strongly favouring Switzerland(4), Liechtenstein, Luxemburg and the Netherlands, with several other jurisdictions in our due diligence process as well. The final decision will be made within weeks of the ICO ending.
(1) And it is the topic of numerous books, making it impossible and unnecessary to expand on it at this point.
(2) After all, the person who first flew an aeroplane did not have a pilot’s licence.
(3) Delaware to Seek Legal Classification for Blockchain Shares (coindesk.com; May 2, 2016); Swiss Industry Consortium to Use Ethereum’s Blockchain (cryptocoinsnews.com, September 11, 2016);
(4) Ethereum Foundation (Stiftung Ethereum) is based in Zug, Switzerland.
