Legal structure
Last updated
Last updated
A Purpose Trust (PT) is a legal structure typically used to hold and manage assets for a specific purpose or set of purposes. In the case of Reform, the particular purpose of the trust is to own the shares of the LTD, and therefore by extension ultimately holds the assets of the company for and on behalf of the DAO.
A traditional trust is a fiduciary relationship in which one party, typically known as a settlor, transfers the legal title of something to another party, the trustee. The trustees are mandated under the terms of the trust to hold the assets for and on behalf of the described beneficiaries. A PT is an evolution of the traditional trust which enables a trust to be established for a particular purpose (typically advancing some non-charitable purpose(s)) instead of having beneficiaries. A trust deed governs this relationship between the trustees and the purpose. The Reform PT will have as its purpose to hold all the shares of HFL for the DAO.
Reform, as its name suggests, is a DAO where token holders collectively make decisions regarding the organization's operations. Currently, the legal recognition of DAOs varies by jurisdiction, and in some cases, existing structures do not fully support decentralization. However, various structures are being used to maintain decentralization while always complying with the respective legal requirements.
To operate efficiently and effectively, the DAO must be structured in a way that preserves token holders' rights and allows for the management of day-to-day operations by external entities. It is crucial that this structure does not compromise the security or decentralization of the organization. The proposed legal structure of the DAO is further detailed below.
HFL will work with the Core Contributors and external subcontractors to do the daily operations and ensure it can act in accordance with the constitution. As a legal entity, it can open accounts on behalf of the DAO and hold assets on behalf of the DAO (such as tokens, equity, and IP). The DAO will permit HFL to handle its official social activities and channels. HFL will be requested to handle all relevant accounts on behalf of the DAO. It has permission to use these accounts in collaboration with other DAO Contributors to produce content on behalf of the DAO. Furthermore, they shall manage and structure the channels on behalf of the DAO. The DAO will at all times retain full ownership of all accounts. It can revoke the permission to use all or any of these accounts at any time. It may also permit other parties to use the accounts in a specific way. The shares in HoFiDa Limited will be held by the trustee.
Constitution
Within the legal structure of a DAO, a constitution serves as the foundational document that outlines the organization's rules, principles, and governance mechanisms. It establishes the framework for decision-making processes, member rights and responsibilities, and the distribution of power and authority within the organization. If anything needs to be changed it can be proposed on gov.reformdao.com and if enough validated voted upon through vote.reformdao.com.
Trustee
In a purpose trust legal framework, a trustee is an individual, group, or entity responsible for ensuring that the objectives outlined in the trust deed are properly executed. The trustee possesses the authority to remove directors of HoFiDa Limited if they act maliciously or inconsistently with the DAO's constitution.
Unlike traditional trusts, a PT is required to have an enforcer whose duty it is “to ensure that the trustees act in accordance with their duties and always having regard to the purpose.” This involves monitoring the activities of the trustees and being prepared to bring the trustees before the court if necessary, for instance, where there is concern that trust funds are not being used properly. The duties of the enforcer are usually described in terms of the trust instrument so that the enforcer is certain about what he is required to do to fulfill his role.
