Can DAOs work legally in China?

The DAO is a specialized organizational document that uses smart contracts as the best statement to govern the performance of the entire DAO. There is no central government in the organization, everything is transparent and independent. So, can DAOs work legally in China? Today, Sister Sa's legal team will take this in terms of public debate.

Comparison of foreign DAOs and existing procedures

The first DAOs appeared in 2016. The so-called "DAO". At first it was just an ico investment tool. It is designed to raise funds in a reasonable manner and create a financially stable business environment. DAOs exchange their own DAO tokens for ETH. personal investment. Tokens represent market interests and the voting rights of holders in DAOs. However, in 2017, skepticism of the key contract led to the theft of ETH in the DAO contract by the protesters, and the DAO, which lost money, unable to control the operation, and the idea was abandoned. .

Over time the value of DAO has gradually increased and by the end of 2021 everything could be DAO. Krause HouseDAO, franchise of the team that wants to buy the USA, NBA. The world is so big that any team can create a DAO as long as they have the right needs and the right ideas.

Today, we start with the existing procedures and compare the differences between traditional and DAO companies to explore Chinese policy compliance.

(1) Comparison between the company and DAO

The business process is one of the greatest productions of modern enterprise, and according to "company law" the key documents of modern enterprises in our country are: limited liability companies and joint ventures. A feature of the enterprise system is that the enterprise has a wide range of investment capital, which enables large-scale production, the investor is solely responsible for the enterprise, the investment risk is reduced and the company is more freely involved in the assets. , to ensure the independence, continuity and continuity of company decisions. Integrity, separation of members and governance.

According to the definition of a company under article 3 of the "Company Law" of our country, a company is a company, has independent organizational assets and benefits from patrimonial organizations. The company is responsible for the expenses of the company as well as all of its assets. The owners of the company are responsible for all liability to the company up to the limit of their shareholding, and the owners of the companies are liable to the company up to the limit of the shares they have served.

Under US DAO law, DAO is a Limited Liability Company (LLC), compared to traditional corporations today. An important characteristic of LLCs and DAOs is that the members of the company have personal responsibilities and member management responsibilities. That is, these members are solely responsible for their own negligence and have no obligation to the company or any other member. The members of the LLC are not only the members of the company but also the members and employees of the LLC, all members have the same voting rights. However, there are situations where a board member with little administrative knowledge is elected by the board members.

The LLC's decision and voting rights depend on the proportion of its members, and generally all members have the same stakes, so the decision and voting are also the same. However, in some cases, the value of each member invested in the LLC also determines the percentage of assets held by the member, including ruling and voting equal to the percentage of shares held by that member. . The development of the current DAO has also shown a lot of fairness and decision-making power by the members represented.

DAO is a business model that combines unlimited liability and integration, and it can be said that it is easier than existing companies. Besides the differences between smart contracts and chartered companies, centralized management and corporate governance, DAO members speak more in organizations than in wisdom member companies, and often it is not due to capital. . Noise and loss of personal voice.

(2) Comparison of cooperation and DAO

The author personally believes that the partnership is a similar business model between our country and the current DAO. Concerning the definition of the joint venture and the liability of the partnership in the minor market, in accordance with the provisions of article 2 of the “Law on simple limited partnerships”, the term “simple limited partnership” in this law deals with collaborations and non-participation. China. Under this law, joint ventures, joint ventures by natural persons, legal persons and other organizations are formed by partners, and members of a joint venture have no restrictions on the costs of the joint venture. When there are specific provisions on the form of liability of the parties to this Code, compliance with these rules; The joint venture is limited to general and minor partners, and general partners have unlimited liability for the costs of the partnership. , and the minority partner recognizes its limitations of liability for minority liability.

The characteristics of LLCs and DAOs have already been covered, so I won't repeat them here. Question: Partners have equal rights to engage in business ventures. In accordance with the terms of the joint venture agreement or at the decision of each member, one or more members may submit the joint venture to an external party on behalf of the joint venture and the joint venture.

The DAO also respects this rule, all the members are owners of the DAO and are at the same time employees of the DAO. Before outsourcing management and policy management, all stakeholders could work together equally. , it is an implementation of the theory of "decentralization". The second is the tax administration, and according to article 6 of the Law on Trade Restrictions, the income of the members must be paid separately according to the law of the state for the proceeds of the establishment and the income of operations and other income of joint ventures. DAOs also tax a member's income rather than an organization's income.

The biggest difference between the two is the difference in the responsibilities of the paper. In the case of Korean domestic cooperation, all cooperative members are responsible for liability not limited to cooperation costs. The company has the responsibility not to be immune from all liability, but the company has no obligation to participate in the operation and management of the partnership.

By comparing partnerships, business systems, and DAOs (LLCs), we can determine if DAOs are in fact joint ventures. As a small and medium business owner on the one hand, if you disagree, there are no restrictions on joint ventures for expenses such as small partnerships and must be protected. you are not directly concerned. In business, a firm is like the owner of a general corporation, but doing business is like a partner. Hope you can get involved, DAO (LLC) seems like the best choice for you. It is unfortunate that our country has not yet implemented an LLC system.

Can DAO work legally in my country?

Under the current law, it is very difficult, but the important thing is that Korea does not have a particular economic model. It is now a “fish and bear paw” issue where all members want to be protected from liability when the right to work is the same as cooperation. The reason why the participant is not responsible for the partnership is that the partnership is not a “person” within the meaning of the law, because it does not have the status of a legal person.

The business itself is at the heart of the limited liability system, what a lot of people misunderstand is that the business has unlimited liability. In fact, this is not always the case. As a legal entity with independent ownership, the limited liability company itself bears unlimited liability and multiple liability for its liability. If a business is not legitimate, it has no rights, no assets and no capacity to incur personal responsibilities.

Therefore, the costs of the joint venture are borne by the members, and the members are represented by unlimited liability.

Let's talk about the legal representative of the company, this course is written by law as a "person" who can own his property (the capital engages the company and no longer the investors). You can guarantee rental liability alone. Therefore, the unlimited liability of the trader is borne by the legal persons of the company. Since a minority of joint ventures does not have legal entity status, the liability of a minority of joint ventures must be ensured through a limited partnership. It is also a decision of the law to protect the interests of borrowers.

Thus, no liability is required for DAO in Korea. In accordance with the “Company Policy” and the “Corporate Governance of the Management Limited Company of the Management Company of Business Administration”, the registration process can be agreed to receive participants in Korea. In other words, the key to obtaining legal identity is to wait for registration from the Ministry of Commerce and Industry. Since the DAO outside the law is invalid, it is likely that the DAO will be considered a member of the DPRK.

Criminal law risks of DAO operations in our country

All organizations are inextricably linked with the prerequisites for raising capital (capital) for regular operations, and DAOs are no exception. Since DAO smart contracts are the commercial products of blockchain technology, they are associated with virtual reality, NFTs, etc. And in fact, most DAOs make money for their businesses by issuing their own ICOs or selling NFTs and other hardware. Additionally, most of the DAO organization's revenue is from virtual currencies of all kinds, especially Ethereum.

Therefore, if the DAO adopts the foreign trade model, the law carries a high risk if it operates at home. Needless to say, the issuance of ICO tokens On September 4, 2017, 7 ministries / committees pointed out that the ICO is indeed a criminal and illegal public financial law without any other illegal and criminal laws.ICO cannot be discussed in our country.

If you are looking to raise money on NFTs like CityDAO, at this point managers can: yes. special tolerance.

However, providing NFTs for seed funding and DAO membership is not recommended. Monitor the behavior of "coin payments" and the behaviors of the ICO by the board of directors, thus createdFinancial fraud, commercial fraudother rates. At the same time, it will affect the status of NFTs and become financial instruments that we have always tried to avoid.

In addition, the right to share virtual resources with the capital of DAO is not waived under the law in force in our country. According to Report 924, the virtual real estate market is a financially illegitimate business. Providing brokerage information and billing services for fiat and virtual currency exchanges, virtual currency exchanges and virtual currency trading as a central counterparty for virtual currency trading, token trading, trading of virtual currency derivatives and other virtual profits related to the illegal sale of tokens and banknotes, does not allow the public to ensure security, future business illegal trading, financial fraud laws and d Other activities suspected of financial misconduct are strictly prohibited by law and are prohibited. Examine the liability required by law for carrying out illegal financial activities necessary to break the law.

In addition, it is difficult to legislate according to Korean DAO in foreign standards.

enter at the end

In a situation where it is difficult for the foreign DAO model to be legal in Korea, we need to be careful of "contractors" and other illegal and illegal acts.

We would like to remind our partners once again that we need to be aware of the latest technology and invest appropriately and legally in this new technology, due to the many consequences. This was discovered by our legal team.