Decentralised Autonomous Organisations (DAOs) are one of the biggest buzz words in tech these days – these organisations involve the utilisation of smart contracts and governance tokens to theoretically create a system that requires limited or no management to regulate itself.
From a legal perspective however, there is nothing new under the sun. These are simply a business structure formed by a contract and akin to either a general partnership or an unincorporated association. The use of a computer to make decisions based on the ownership of tokens does not really change the legal treatment. If the relationship is found to be a partnership there are numerous issues which potentially may arise, including each partner holding joint and several liability for the losses of the enterprise, partnership decisions needing to be unanimous and the partnership needing to be wound up if any of the partners die. At best this could mean that the purposes of the DAOs are frustrated, at worst it could mean a single partner may need to meet the bill for the majority’s bad decisions.
All these issues would be compounded if the DAO was to, for instance, run or own a business. This is not even dealing with the potential tax and Corporations Act minefield for raising capital and treatment of profits.
Legislation has been passed in Malta and Wyoming state in the United States to give these organisations legal personhood. In the recent Bragg Report, the Australian government was urged to prepare similar legislation for review.
This is certainly a good idea, both to ensure that legitimate DAOs can operate in Australia (and for our government to reap the potential corporate tax benefits that come with that) and to ensure that our people are subject to less DAO related scams.
