Tim Chan, Senior Affiliate, Norton Rose Fulbright & Founding father of The InsurTechLawyer Weblog

It is a paper introduced on the XVI AIDA World Insurance coverage Congress 2023, 30 August to 1 September 2023, Melbourne, Australia.

Summary
1.1 The Decentralised Autonomous Organisation (DAO) has had an undeservingly chequered previous. Initially hailed as some of the important improvements because the invention of the company personhood, it heralded a brand new method to do enterprise. Nevertheless, tempering its superb debut, DAOs have been stricken by vulnerabilities amounting in thousands and thousands of {dollars} in losses and likewise implicated in legal exercise. DAOs have additionally been embroiled in a number of lawsuits and makes an attempt to pinpoint its authorized characterisation have been thwarted by its chameleon-like design.

1.2 Current litigation in the USA demonstrates the complicated legal responsibility questions that may come up in respect of DAOs. In jurisdictions that don’t recognise DAOs as a separate authorized persona, DAOs could also be common partnerships during which token holders are collectively and severally answerable for the DAO’s wrongful acts. This undesirable consequence fiercely hinders the creation an setting that permits DAOs to prosper. Consequently, it has led to jurisdictions contemplating one of the best ways to manage DAOs and whether or not to grant DAO members restricted legal responsibility, a key to enabling enterprise.

1.3 To check the answer, policymakers have turned to grasp the legal responsibility affecting DAO token holders. A translation of administrators’ duties to DAO tokenholders is imperfect due to some basic variations – administrators owe duties to shareholders; in a DAO there are not any shareholders. Moreover token holders should not able to performing wrongful acts {that a} director of an organization would possibly be capable to carry out.

1.4 By legislating the popularity of DAOs in authorized techniques all over the world, a chance arises for companies to show to DAOs as a substitute for the company car. D&O insurers play an vital function in making certain administrators have the boldness to carry out their duties on the earth of company legislation. What does the DAO alternative imply for insurers? How would possibly insurers serve this market? This paper considers the event of the DAO, legal responsibility points, and proposals for token holder legal responsibility on this thrilling and rising space of legislation.

Learn the entire paper by following this hyperlink.