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August 16, 2023

Cayman Islands DAO Foundation: The Premier Choice for DAO Legal Structures

Cayman Islands DAO Foundation: The Premier Choice for DAO Legal Structures

The rise of decentralized autonomous organizations (DAOs) has called for innovative legal structures. In response, the Cayman Islands Foundation Company has swiftly become the preferred choice for many DAOs, often looking for DAO Legal Structures or so called “DAO Legal Wrappers”. Established under the companies law, the Cayman foundation offers unparalleled flexibility in its establishment, operations, and stakeholders – all customizable via its articles and bylaws.

Why the Cayman Islands Foundation Company is the Gold Standard:

  • Ownerless Structure: The foundation can function without members, maintaining its structure as long as it has one or more supervisors. This “orphaned” structure effectively resolves the dual ownership challenge many DAO legal structures face.
  • Founderless Status: Unique to the Cayman Islands, the foundation does not require a founder. This aligns perfectly with a DAO’s decentralized principles.
  • Flexible Corporate Governance: Duties, powers, and rights can be designated to various roles, from members and directors to founders and supervisors. It’s even feasible to reflect or link these to the DAO’s governance via the articles of association or bylaws.
  • Corporate Status: As an entity under the Companies Act, the foundation benefits from limited liability, the capability to own assets, and enforce rights.
  • Tax Neutrality: The Cayman Islands stand out with its absence of income tax, capital gains tax, corporation tax, and other direct taxes.
  • Defined Purpose: Unlike other foundations, a Cayman foundation can be established for a specific purpose, commonly aimed at promoting a blockchain protocol or ecosystem, without the need for beneficiaries.
  • Beneficial Class: Whilst being mindful of AML considerations, Cayman foundations can denote beneficiaries by class, which could include holders of a particular token or NFT.

Inherent Benefits of Setting up a Cayman Islands DAO Foundation:

Cayman foundations naturally complement DAOs and DeFi projects, emphasizing decentralization. Their separate legal entity status ensures they can sign contracts, open bank accounts, and more. With a capacity for external advanced control mechanisms, founders can influence the foundation’s direction.

Crypto projects and venture capitalists favor Cayman foundations for their transparent regulatory framework and strong crypto network. The familiarity of the jurisdiction to investors, advisors and legal counsel also makes it a popular choice.

For those valuing confidentiality, the foundation’s private bylaws, distinct from its constitution, ensure discreet operations. Additionally, the absence of corporate tax or capital gains in Cayman solidifies its attractiveness.

Applications of Cayman DAO Foundations in the Web3 Domain:

At Cavenwell, we’ve partnered with Cayman-based legal counsel to establish a number of Cayman DAO Foundations tailored for various functions, including:

  • Treasury management for projects, including token sale proceeds and native token holdings.
  • Advancing the interests of token protocols and communities.
  • Acting as the primary operational vehicle for DAOs.
  • Serving as an independent entity executing DAO’s periodic directives.

Choose Cavenwell for Your DAO Structuring

The Cayman Islands Foundation Company represents a compelling structure for DAOs. As industry leaders, Cavenwell offers comprehensive services, from advisory and regulatory services to foundation incorporation and office roles with the ability to also support clients across other prominent Web 3 jurisdictions.

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