Kleros’ Legal Structure, Explained

A French cooperative to change the world…

By Federico Ast and William O’Rorke

In the late 1940s, after the end of World War 2, France passed a law for the creation of a new type of legal entity called Société Coopérative d’Intérêt Collectif (SCIC). It was mostly targeted at agricultural cooperatives, groups of people pooling their resources together with the intent of growing crops or other agricultural produce.

In most aspects, a SCIC works exactly as a regular company, with some specific intricacies: a social and cooperative purpose, a democratic governance system, and a profit reserve.

These characteristics are compatible with most blockchain projects, and in particular, with the spirit of Kleros. This is why we have decided to incorporate it as a SCIC under French law. The name of the entity is Coopérative Kleros.

Let’s review the advantages of this type of entity.

Social and cooperative purpose

Kleros is an open source project with the goal of creating a decentralized organization to adjudicate disputes. The social goal is to bring transparent, affordable, and fast arbitration to a large number of disputes. As we sometimes say, as cryptocurrencies are bringing banking to the unbanked, Kleros will bring justice to the unjusticed.

Democratic governance

Coopérative Kleros is collectively owned by its members. They all have shares in the cooperative.

In the SCIC, individual members are organized in three guilds or colleges: Founders, Employees/Producers, and Users.

Founders includes the founding team. The Employees/Producers category includes developers and other persons or entities contributing to the project. The Users category includes jurors, end-users, and intermediary users such as other platforms that will build on top of Kleros.

At the beginning, the Founder College will hold 50% of the voting rights. The Employees/Producers College will hold 25% and the User College will have 25%. Within each of these categories, individual members have equal voting rights.

The Founder College will voluntarily reduce its voting rights by at least 10% every 5 years, until the moment comes when it reaches zero voting power (in 10 years, the maximum voting rights of the Founder College would be 30%. In 25 years the Founder College will be completely removed).

Tax benefits

SCIC entities enjoy a special tax treatment. Funds kept as a reserve in the cooperative incur zero corporate tax fees. As Kleros’ team has pledged to put 100% of the token sale revenue as undistributable reserve, this means that Coopérative Kleros will pay no corporate tax.

Those funds can only be used for achieving the purpose of the cooperative: developing the Kleros platform and fostering its adoption. Funds in the token sale cannot be distributed to members of the team as dividends nor be used for any other application not connected to the purpose of the cooperative.

Joining the SCIC

As an open source, collaborative project, Kleros encourages the community to get on board. Members of the community can join the SCIC in the User College and gain voting rights.

Should you want to apply to be a member of the User College, fill in the details in this form.

Each member is required to deposit the sum of €50 in order to join the cooperative as a partner. Members are entitled to a full refund should at any point they decide to leave the SCIC.

France is a country with a long history of stable governance and rule of law. In 1789, it became a symbol of change. It was about decentralized governance back then and it is about decentralized governance now.

Federico Ast. CEO.

William O’Rorke. Legal Advisor.

“Liberty Leading the People” by Eugène Delacroix. 1830. Musée du Louvre.

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