Authored by Defi Ted with review from Michael Cairo (Horizons Law and Consulting Group)
Summary
This proposal aims to establish a Cayman Islands foundation company to associate with ParagonsDAO, with the assistance of Horizons Law & Consulting Group (“Horizons Law”), based in the United States. This proposed entity structure is intended to offer certain benefits to the organization.
Motivation
ParagonsDAO seeks to form and associate with a Cayman Islands foundation company, which can provide potential benefits such as enhanced legal protection, tax advantages, and a relatively favorable regulatory environment. To ensure the proper establishment and compliance with all applicable legal requirements, ParagonsDAO intends to engage Horizons Law, a U.S. law firm with expertise in the blockchain industry and international transactions and entity structuring.
Specification
- Engagement of Horizons Law: ParagonsDAO will engage Horizons Law to handle the legal work required to establish a Cayman Islands foundation company to associate with ParagonsDAO.
- Payment Structure: The cost for Horizons Law’s services will be 1,234,567 PDT tokens. This amount will be divided into an upfront payment of 234,567 PDT tokens, with the remaining 1,000,000 PDT tokens vested over a 12-month period. $100,000 in USDC will also be reserved to pay other Cayman Islands service providers (i.e., a Cayman Islands law firm, an independent director, and other service providers, as deemed necessary upon receipt of legal advice from any of the foregoing) for formation and maintenance costs associated with the foundation company structure. Horizons Law will share all invoices with ParagonsDAO and retain all documents. For the avoidance of doubt, fees due to Cayman Islands service providers are not included in the PDT payable to Horizons Law; those fees are to be paid by ParagonsDAO directly to the relevant Cayman Islands service providers.
- Timeline: Horizons Law will work with ParagonsDAO to establish the foundation company within a reasonable time frame, subject to the completion of all necessary legal and compliance requirements.
- Communication and Updates: Throughout the process, Horizons Law will maintain regular communication with ParagonsDAO and provide updates on the progress of the establishment, including any potential roadblocks or delays.
Rationale
Establishing a Cayman Islands foundation company to associate with ParagonsDAO can offer several advantages for the organization and its community members, including:
- Legal protection: The Cayman Islands foundation company provides a legal structure that can help protect the organization’s members and its assets from potential liabilities. Specifically, Cayman Islands foundation companies are a flexible corporate vehicle with legal personality (meaning that they can enter into agreements and undertake actions with third parties). Like an ordinary corporation or limited liability company, a foundation company is distinct from its members, but unlike a traditional company, foundation companies can be structured without shareholders or owners. Instead, they can be operated by independent directors and supervisors, who act as stewards of the entity and act in the interest of the DAO, like the relationship between a trustee and a trust. In essence, these independent directors and supervisor will carry out the decisions of ParagonsDAO as they are voted upon and enacted through ParagonsDAO’s governance apparatus. Therefore, with no shareholders, all of the officers of a foundation company simply have the objectives of ParagonsDAO as their priority.
- Tax benefits: The Cayman Islands is known for its favorable tax environment, which can provide potential tax advantages for ParagonsDAO and its operations. For clarity, Horizons Law will not be providing any tax advice to ParagonsDAO or to the foundation company. Community members are responsible for receiving their own tax advice from competent tax advisors with experience in members’ applicable jurisdiction.
- Regulatory environment: The Cayman Islands offers a generally business-friendly regulatory environment, which can enable ParagonsDAO to operate more efficiently and effectively. Although regulations in crypto vary across multiple jurisdictions and the overall regulatory environment remains largely unclear, we believe that the Cayman Islands foundation company structure is optimal for ParagonsDAO at this point in time.
By engaging Horizons Law, ParagonsDAO can ensure that the foundation company’s establishment is compliant with all legal requirements, minimizing potential risks, and maximizing the potential benefits for the organization and its community members.