[NEWS] LDP Web3 Project Team Announces Proposal for Realizing "Limited Liability Company-Type DAO"

On the 24th, the LDP Digital Society Promotion Headquarters and the Web 3.0 Project Team (PT, chaired by House of Representatives member Masaaki Taira) held a joint meeting and announced that the PT had compiled a proposal after reviewing the "DAO Rulemaking Hackathon" held at the end of last year. The proposal was approved by the LDP Policy Research Council on the same day.

In a statement, Taira said, "This proposal is a proposal to resolve deficiencies in laws, regulations, taxes, accounting, etc., and promote the spread of DAOs, as DAOs based on blockchain technology are beginning to achieve results all over Japan as an organizational form that contributes to regional revitalization and solving social issues."

He continued, "Our basic stance is to immediately implement anything that can be addressed by amending or implementing ministerial ordinances, such as amending Cabinet Office ordinances so that tokens are not subject to the relatively strict business and disclosure regulations under the Financial Instruments and Exchange Act, in order to realize DAO LLCs, and to further consider and gradually implement anything else."

Aiming to amend the law to realize a "limited liability company type DAO"

In the "DAO rule-making proposal" announced, it was mentioned that many of the participating organizations in the DAO rule-making hackathon requested that DAOs be granted corporate status. In response to this request, the proposal aims to amend the law to realize a "limited liability company type DAO" that would be established and operated as a limited liability company.

It is said that a limited liability company type DAO can achieve the following: "granting corporate status to DAOs," "clarifying the limited liability of DAO members," "relatively flexible organizational management through self-governance in the articles of incorporation," and "clarifying tax matters for DAOs and DAO members."

As for the anonymity of DAO members, a limited liability company is registered as an executive member, which is unavoidable under current law, but by clarifying that general DAO members who participate in decision-making are treated as non-executive members, anonymity can be ensured by listing their names and addresses in the articles of incorporation or in the employee register as part of the articles of incorporation, and then restricting access to the articles of incorporation and employee register.

In addition, if a limited liability company DAO issues membership tokens, under the current law, it is considered an electronic record transfer right, and as a security, it is subject to strict business and disclosure regulations under financial instruments exchange. However, if certain requirements are met, it will not be subject to this and will be subject to more lenient regulations. The Cabinet Office Ordinance will be revised promptly to include exceptions.

In addition, to ensure anonymity in DAOs, it is stated that a KYC-certified wallet that meets certain requirements will be listed in the electronic articles of incorporation. In this case, since a different person may become a member by transferring the wallet, the transfer of the wallet will be prohibited. In the event of theft, a service will be introduced to restore the name of the wallet, and measures will be considered to ensure that transactions using the wallet after theft are not taxed.

In the future, the plan is to clarify the criteria for determining whether or not a DAO is eligible for certification in order to promote the introduction of DAOs by NPOs. For example, it will request clarification on matters such as limiting communal activities to less than 50% and not giving special benefits to officers.

In terms of taxation, a limited liability company DAO is the same as a limited liability company, so it will be treated as an ordinary corporation. They are considering treating DAOs the same as public interest corporations when they are used for non-profit purposes.

If this proposal is officially approved and legal reform proceeds, it will likely spur the spread of various businesses that utilize DAOs.

Reference:Proposal
Image: Shutterstock

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