Fintech Lab Wiki - User contributions [en]

The DAO

2023-10-02T09:43:23Z

Moratoc:

== The DAO and its foundation ==
The DAO was founded in 2016, putting into practice an idea that had been already theorized in 2013, with the goal at the time of establishing a ride-sharing platform, that is, one that would connect drivers and users on the basis of a decentralized software architecture (see https://bitcoinmagazine.com/technical/bootstrapping-a-decentralized-autonomous-corporation-part-i-1379644274).

While it is interesting to analyze the characteristics of The DAO, it is important to keep in mind how each [[Decentralized Autonomous Organization|decentralized organization]] is different from the other, as much on the basis of the different cryptocurrencies that can be used, as on the strength of the wide elasticity and variability in the way they are [[The governance of DAOs|governed]]. Several initiatives, in fact, followed this initial experimentation between 2016 and 2017, based on proceedings of [[Initial Coin Offerings (ICOs): legal issues according to Italian law|ICOs]], demonstrating the interest of non-professional investor start-up initiatives in legal forms other than traditional corporate finance models<ref>P. Ortolani, ''Decentralized Autonomous Organizations'': inquadramento giuridico ''de jure condito'' e prospettive ''de jure condendo'', in Blockchain ''e'' Smart Contract. ''Funzionamento, profili giuridici e internazionali, applicazioni pratiche'', a cura di R. Battaglini, M. T. Giordano, Giuffrè, Milano, 2019, p. 405.</ref>.

The establishment of The DAO was, indeed, quite simple, following a process that can be usefully broken down into the following stages:

# a 28-day "creation" phase, during which investors had the opportunity to trade ETH for tokens issued by the DAO, raising a sum of Ether cryptocurrency of about $150 million, from more than 11,000 private investors. During this period, the price of the tokens grew, in part to incentivize the riskiness of the initial, information-free investment. These tokens contained a disclaimer that they would not qualify as shares or other forms of corporate participation.
# After this initial period, tokens were no longer issued, although it was still possible to trade existing ones on secondary markets. Suddite tokens allowed for both publishing proposals and voting on them, directly controlling the structure of the organization and managing it democratically. In this sense, The DAO constituted a full experimentation of that decentralization which, while it could be graduated until it came considerably closer to the mechanisms of a traditional corporation, is an essential character of the typical DAO. During this "static" phase a [https://hackingdistributed.com/2016/05/27/dao-call-for-moratorium/ white paper] was also published by some experts identifying some of the risks involved in investing in and using the DAO.
# [[The token holders|Token holders]] were able to vote on several proposals, among which "Slock.it," a project aimed at establishing a platform in accordance with the model of the so-called sharing economy, functional to connect property owners with potential landlords, gained wide acceptance. Transactions and relationships between contractors were handled automatically, minimizing intermediation, on the basis of smart contracts.
# An update of the system on which DAO was based was developed and proposed, functional to prevent cyber attacks whose danger had been pointed out by several experts, and which had been tested on another DAO project (MakerDAO). Several developers of the platform, in fact, had detected the presence of some programming errors in the smart contract on which The DAO was based.
# A [https://hackingdistributed.com/2016/06/16/scanning-live-ethereum-contracts-for-bugs/ second warning] about the vulnerability of The DAO was issued on June 16.

== The attack and the "hard fork" ==
In June 2016, an anonymous cyber attack was launched on the organization, similar to the one whose risk had been identified and analyzed. Figuring that the hacker's goal was to convert the stolen cryptocurrency into legal tender, an attempt was made to block trading. However, fearing reputational repercussions and thus a loss in the value of crypto, not everyone agreed to freeze the market immediately. Within a short time, about a third of the capital put into the platform was taken away.

It was decided not to initiate a court proceeding for a technical reason: the dispossession by the anonymous attacker had transferred the ether deposit codes into his own material possession, gaining exclusive control of them and making a contrary transfer by enforcement impossible. A court proceeding, therefore, could have led only to an abstract pronouncement, i.e. materially unrealizable. Moreover, the impossibility of recovering the misappropriated ethers would have been without prejudice to any claims by the fund's investors for the platform's negligent conduct, consisting of its failure to control the defective program and thus contrary to the duty of care. The directors of The DAO were then faced with the alternative of whether to suffer the consequences of the breach or to activate a technical solution that could reduce losses<ref>M. L. Perugini, Distributed Ledger Technologies e sistemi di blockchain. Digital currency, smart contract e altre applicazioni, Key, 2018, p. 85.</ref>.

In the following weeks, thanks to the political clout of the founder and the Ethereum Foundation, a "hard fork" version of the Ethereum software, considered as the best technical solution, was developed and released to [[The miners|miners]]. This system fork allowed the blockchain to be recalculated to the block prior to the attack, resulting in the loss of validity of the blocks containing the stolen ethers.

This solution created heated debates in the community. Specifically, a portion of miners believed that majority consensus was a necessary and sufficient element to proceed with the reorganization; while an opposing current of thought emphasized that the very immutability of the blockchain generated the market trust necessary for the success of the project. In other words, the historical reconstruction of transactions could not be altered<ref>M. L. Perugini, Distributed Ledger Technologies e sistemi di blockchain. Digital currency, smart contract e altre applicazioni, Key, 2018, p. 85.</ref>!

A portion of hubs, in fact, rejected this modification, resulting in a parallel blockchain (Ethereum classic), while the majority voted in favor of executing the fork.

Eventually, the majority of miners implemented this new software, so that after a few months the blockchain registry was updated to effectively delete The DAO, and tokens issued from it were delisted from secondary markets.

== References ==

* Q. DuPont, ''Experiment in algorithmic governance. A history and ethnography of “The Dao”, a failed decentralized autonomous organization'', in ''Bitcoin and beyond. Cryptocurrencies, blockchain, and global governance'', edited by M. Campbell-Verduyn, 2018, p. 159 et seq.
* P. Ortolani, ''Decentralized Autonomous Organizations'': inquadramento giuridico ''de jure condito'' e prospettive ''de jure condendo'', in Blockchain ''e'' Smart Contract. ''Funzionamento, profili giuridici e internazionali, applicazioni pratiche'', edited by R. Battaglini, M. T. Giordano, Giuffrè, Milano, 2019, p. 403 et seq.
* M. L. Perugini, ''Distributed Ledger Technologies e sistemi di blockchain. Digital currency, smart contract e altre applicazioni'', Key, 2018, p. 85.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The European Economic Interest Grouping (EEIG)

2023-10-02T09:34:47Z

Moratoc:

= General features =
The EEIG is a legal institution set up by the European Union to facilitate cooperation between entrepreneurs belonging to different member states, also in order to remove obstacles in this regard posed by the diversity of individual national laws.

The institution is governed by [https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:31985R2137 EU Regulation No. 2137 of 1985], which is directly applicable in all member states. In order to better understand the essential characteristics of European acts (regulations, directives, decisions...) see the page "[https://www.law.ox.ac.uk/legal-research-and-mooting-skills-programme/eu-legal-sources EU Legal Sources]" available at University of Oxford site.

Each national legislature has since issued specific supplementary rules, applicable to groups headquartered in individual member states.

The structure and function of the EEIG largely coincide with those of [[The consortium|consortia with external activities]].

In particular,

* parties to the contract establishing the EEIG may be only natural or legal persons engaged in economic activity, who, however, unlike in the consortium, need not be entrepreneurs. The EEIG may also be formed by intellectual professionals, provided that the grouping is not used to directly engage in freelance practice.
* At least two members must have a central administration or must carry out their activities in different states of the Union.
* The EEIG is an associational body that has external relevance, which means it can assume rights and obligations in its own name. It also has procedural capacity. In other words, it constitutes an autonomous center of imputation of legal relations distinct from its members.
* New members can be added but their admission must be decided by unanimous consent.

The function of the EEIG is to facilitate and develop the economic activity of its members. Therefore, the group does not aim to make profits for itself.

= EEIG's formation =
The constitutive contract must be in writing under penalty of nullity and is subject to legal publicity, i.e. it must be

# registered in the Commercial Register: it has constitutive effect, which means that the EEIG acquires legal personality with such registration;
# published in the Official Gazette of the Republic: it has declaratory effect, which means that this procedure is necessary in order to grant enforceability against third parties.

= Organization and decision-making processes =
The internal organization and operating rules of the EEIG are largely left to private autonomy.

Two bodies are provided:

# assembly;
# administrative body.

The members of the group can collectively adopt any decision for the realization of the object of the group.

The most important decisions, specified in Article 17 of the Regulation<ref>Art. 17, second paragraph:

"''A unanimous decision by the members shall be required to:''

''(a) alter the objects of a grouping;''

''(b) alter the number of votes allotted to each member;''

''(c) alter the conditions for the taking of decisions;''

''(d) extend the duration of a grouping beyond any period fixed in the contract for the formation of the grouping;''

''(e) alter the contribution by every member or by some members to the grouping's financing;''

''(f) alter any other obligation of a member, unless otherwise provided by the contract for the forma tion of the grouping;''

''(g) make any alteration to the contract for the forma tion of the grouping not covered by this paragraph, unless otherwise provided by that contract''".</ref>, must be made unanimously, while for others the contract sets the required majorities. Unless otherwise stipulated by the participants, all decisions are made unanimously.

Each member has only one vote, but the contract may give more votes to some members, provided that no one member alone has a majority of votes.

The management of the EEIG is entrusted to one or more administrators, appointed by the founding contract or by decision of the members. A legal person may also be appointed as administrator.

= Liability regime =
Profits that result from the group's activities are considered directly as profits of the members and distributed among them according to the proportion provided for in the contract or, in the silence of the parties, in equal parts.

There is no compulsory formation of initial assets, and any fund established is not an independent asset in any case. However, the liability regime for obligations is very strict.

Obligations assumed by the group: all members of the group are jointly and unlimitedly liable, in addition to the group with its own assets. This strict discipline has been a strong disincentive to the formation of this type of group.

The liability of the members is subsidiary to that of the EEIG, which means that creditors of the group must first turn to the group itself to obtain payment and only if payment is not made do they turn to the individual members.

= References =

* https://eur-lex.europa.eu/IT/legal-content/summary/european-economic-interest-grouping.html#
* G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 281-286.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The firm network contract and other forms of business cooperation

2023-10-02T09:31:02Z

Moratoc:

The comparison between [[Network contract under Italian Law|firm network contracts]] and other forms of business cooperation is functional to:

# identify possible sources useful in filling the many gaps in the legislation on firm networks;
# identify (and regulate) possible phenomena of transformation into firm network contracts of pre-existing different forms of cooperation between enterprises, also in order to make a functional distinction depending on whether the network contract serves to begin a collaboration between previously unrelated enterprises; to stabilize a pre-existing collaboration; to respond with aggregation to forms of crisis; to bring together business entities that are different from each other.

We consider the following institutions, all provided for Italian legislation.

=[[The consortium]]=
This is an associative scheme between entrepreneurs that is suitable for encompassing two distinct phenomena of reality, namely the anti-competitive consortium and the coordinating consortium. Again, fundamental is the distinction between a consortium carrying out purely internal activities and a consortium with external activities.

While the substantive differences from the firm network contract are minimized, the two cases are not fully overlapping either. In particular, it is possible to identify a substantial identity of regime between the two legal figures in the case where the network members have a common patrimonial fund and a common office for the execution of the network project. In such a case, in fact, the network members assume the status of an organizational group, which is in turn a necessary condition for the group to be given legal subjectivity.

In particular, the differences between the two institutions include the following profiles:

'''Purpose of the contract'''

The firm network contract is signed for the pursuit of a specific purpose: to individually and collectively increase its innovative capacity and competitiveness in the market, to be achieved through collaboration or information exchange activities. On the other hand, the consortium contract is signed for the purpose of regulating or carrying out certain stages of the respective enterprises.

'''Joint organization'''

It is provided as an essential element only for the firm network contract. In the event that the definition of the common program of the network provides for the establishment of the common fund and a common body, it must be concluded that we are faced with an organized group and therefore characterized by the presence of legal subjectivity.

'''Profit-making purpose'''

While the consortium purpose is akin to the mutualistic purpose, the network contract can have, indifferently, a mutualistic or lucrative purpose depending on the activity carried out and indicated in the program (i.e., depending on whether the intent of the network enterprises is to share profits or to achieve a direct advantage in terms of lower costs or higher revenues).

'''Provisions about formalities'''

Only the written form is needed for the consortium (and only for consortia with external activities a form suitable for registration in the Commercial Register).

=Industrial Districts (ID)=
A district is an agglomeration of enterprises, generally of small and medium size, located in a circumscribed and historically determined territorial area, specialized in one or more phases of a production process and integrated through a complex network of economic and social interrelations.

Compared to districts, first formally recognized by Law No. 317 of 1991, business networks are distinguished in that they disregard two elements that are instead essential to the former, namely specialization and territory.

The typical characteristics of so-called industrial districts, which only partially coincide with those proper to the network contract, can be summarized as follows:

*there is a need for high specialization in a specific manufacturing sector or industry (typically so-called made in Italy);
*there is typically a high presence of small and medium-sized enterprises;
*the district essentially operates by breaking down production processes into different stages of reduced optimal size. This means that each enterprise included in the district realizes a specific segment of the value chain;
*sub-supply contracts are typically concluded to regulate relations between enterprises in the district;
*common production and organizational know-how is developed.

For further details about industrial districts see "[https://cros-legacy.ec.europa.eu/system/files/the_definition_of_industrial_districts.pdf The definition of Industrial Districts]" written by S. Lombardi on Jun 15-16, 2016.

=[[The company group (under Italian law)|THE COMPANY GROUP]] =
It is governed by Articles 2497 et seq. of the Civil Code and differs from the network contract in that

*coordination among group companies is vertical, pyramidal, hierarchical in nature: one or more companies, called "''holding'' companies," perform management and coordination activities pursuant to Article 2497''sexies'' of the Civil Code over the other companies. According to this rule, it is presumed that the enterprise that is required to prepare annual financial statements in a peculiar manner, or the enterprise that exercises control over the other enterprises, performs management and coordination activities over them, i.e., gives them directives to influence their activities.
*In the network contract, on the other hand, no enterprise assumes the role of main contractor, such that it can be defined as eminently "horizontal". At most, there could be a sort of leadership in the head of one or more network enterprises, varying in competence, that is, for reasons of greater specialization or experience.

=[[Joint ventures|JOINT VENTURES]]=
These are forms of temporary and occasional cooperation between enterprises put in place to jointly carry out a complex work or affair, particularly used in the area of large public and private contracts. A stable organization is not established, but rather a set of mandated relationships in which the various participants take on the guise of principals except for one: the so-called "leader," who is entitled to act ''vis-à-vis'' the principal in the name and on behalf of all concerned.

The essential characteristics of joint ventures are as follows, indeed not to be considered extraneous to the network contract:

*joint ventures are formed for the implementation of a single work of a complex business;
*the individual enterprises that are part of a joint venture also maintain their autonomy during the execution of the contract, not giving rise to any form of joint exercise of an economic activity.

The distinction, more precisely, lies in the circumstance that the objective of a joint venture is a project, not an activity, such as that regulated with the network program, which is functional for the growth of the individual participating enterprise.

=[[The European Economic Interest Grouping (EEIG)]]=
The EEIG, introduced by Legislative Decree 240/1991, is a plurilateral associative contract with a common purpose, necessarily transnational and made up of subjects carrying out heterogeneous activities (not necessarily commercial entrepreneurs), the purpose of which is to facilitate cross-border cooperation by developing the economic activity of the members, leaving ample autonomy to the contracting parties in outlining its organization and discipline.

The essential distinction from business networks is easy to identify:

*at least two members must have their central administration and/or must carry out their economic activity in states other than the European Union;
*while it has legal subjectivity, it lacks patrimonial autonomy, resulting in the unlimited liability of its members.

=Franchising (or affiliation contract)=
It is a contract between legally independent parties, by virtue of which one party (franchisor) grants the availability to the other party (franchisee), in exchange for remuneration, of a set of industrial or intellectual property rights. In this way the franchisee is included into a system consisting of a plurality of other franchisees distributed throughout the territory, in order to market certain goods or services. This is, indeed, quite different from the network contract: in the affiliation contract a plurality of services typical of other named contracts (license to use distinctive signs, administration, service contract, lease or commodity loan of movable or immovable property) converge, unitedly aimed at achieving full economic integration between franchisor and franchisees.

For further details about franchising see "[https://www.investopedia.com/terms/f/franchisee.asp#:~:text=Examples%20of%20well%2Dknown%20franchise,Block%20(NYSE%3A%20HRB). Franchisee: Definition, Examples, Benefits, and Responsibilities]".

For some examples see "[https://mktoolboxsuite.com/franchise-examples/ 10 Brilliant Franchise Examples to Learn From (in 2022)]".

=References=

*F. Cafaggi, ''Il contratto di rete nella prassi. Prime riflessioni'', in ''Contratti'', 2011, pp. 511 et seq.
* G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 255-291.
*G. F. Campobasso, ''Diritto commerciale'', vol. II, ''Diritto delle società'', UTET Giuridica, Milano, 2022, pp. 640 et seq.
*G. F. Campobasso, ''Diritto commerciale'', vol. III, ''Contratti, titoli di credito, procedure concorsuali'', UTET Giuridica, Milano, 2022, pp. 33 et seq.
*P. Corrias, ''Cooperazione tra imprese appaltatrici e responsabilità verso terzi'', in ''Responsabilità civile e previdenza'', 2016, pp. 736 et seq.
*A. Gentili, ''Una prospettiva analitica su reti di imprese e contratti di rete'', in ''Obbligazioni e contratti'', 2010, pp. 87 et seq.
*M. Libertini, ''Contratto di rete e concorrenza'', in ''Giustizia civile rivista trimestrale'', 2014.
* G. Meruzzi, ''Notazioni in tema di soggettività giuridica della rete'', in ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', edited by G. Meruzzi, 11 aprile 2012, pp. 15 et seq.
*E. Mugnai, ''“Contratti di rete” e attività di direzione e coordinamento'', in ''Rivista di diritto societario'', 2015, pp. 823 et seq.
*P. Saccomanno, ''Il contratto di rete: profili di un’indagine aperta'', in ''Contratto e impresa'', 2017, pp. 673 et seq.
*P. Zanelli, ''Reti di impresa: dall’economia al diritto, dall’istituzione al contratto'', in ''Contratto e impresa'', 2010, pp. 951 et seq.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Joint ventures

2023-10-02T09:24:15Z

Moratoc:

== The phenomenon ==
Joint ventures are temporary and occasional forms of cooperation between enterprises set up to jointly carry out a complex work or business. For the most part, these are large public or private works that exceed the operational capacity of a single enterprise but, at the same time, have characteristics that allow for the cooperation of several separate enterprises in their implementation.

It is a widely spread phenomenon in the international arena.

The firms that join together want to join forces and cooperate with each other in the execution phase of the work, but at the same time they want to retain their operational autonomy. They each want to execute directly, with their own means and organization, a part of the work.

The enterprises concerned present themselves to the other party as separate but related enterprises. They submit a joint bid and jointly undertake to execute the overall work, entrusting one of them (parent company) with the task of jointly managing relations with the client and coordinating the work in the execution phase. Each enterprise retains full legal and economic autonomy in the completion of part of the work and is directly accountable to the client for the part under its responsibility.

Such forms of cooperation constitute, according to case law, unnamed associative contracts, an expression of the contractual autonomy of the parties under Article 1322 of the Civil Code. These phenomena, in fact, have not yet received, in Italy, an organic and unified discipline that considers both internal and external profiles of their activity.

== Liability regime ==
A distinction must be made according to whether the work is divisible or not.

''Non-splittable work'': the companies are all jointly and severally liable for the entire work. The division of work in the execution phase is only of internal relevance.

''Unsplittable work'': only the so-called parent company is liable for the entire work. The other combined enterprises are only liable for the execution of the part under their responsibility.

== Relations between companies ==
The legislature gives full freedom to the combined enterprises with regard to relations among themselves and toward third parties (other than the client).

Enterprises are free to maintain the minimum functional connection that derives from the collective mandate or to set up a common organization of a consortium type, intended to coordinate and regulate the execution of the work.

In addition, companies may establish a company among themselves, which automatically takes over the execution of the work, without the need for the client's authorization.

However, the liability regime of the combined companies is retained.

== Reference ==
G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 287-292.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Agency Theory

2023-10-01T10:45:21Z

Moratoc:

== {{Musa cat}}Definition of the theory ==
Agency theory has long concerned disciplines as diverse as economics, finance, law, politics and psychology. Scholars who approached the concept attempted (and to a large extent still attempt) to explain with it the relationship that exists, typically within a business in corporate form, between ownership (or the owner) and control (or the one who is charged with managing).

Jensen and Mecking, two scholars in finance, defined the agency relationship, in a groundbreaking article published in 1976, as “''a contract under which one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent''”.

The same authors, in formulating this felicitous definition, also introduced the fundamental issue: “''if both parties to the relationship are utility maximizers there is good reason to believe that the agent will not always act in the best interests of the principal''”. This divergence of interests, which often manifests itself in practice, notably between the shareholders and the directors of a company, makes it (generally) structurally impossible for the agent to make zero cost decisions that are optimal from the principal's point of view.

== Agency costs ==
In light of this consideration, the authors of the research identified the fundamental agency costs, which increase, proportionally, as the divergence of goals and interests between agent and principal increases; inversely proportionally, as trust between the two parties decreases.

Specifically, according to the authors agency costs can be enucleated as follows:

* “''the monitoring expenditures by the principal''”: that is, the costs that the principal has to incur in carrying out, essentially, monitoring activities on the agent's activity in order to prevent and limit opportunistic behavior;
* “''the bonding expenditures by the agent''”: i.e., the costs that the agent is required to incur in order to gain the principal's trust, notably by assuring the principal that he or she will not make decisions likely to cause him or her harm and that, even if this happens, the harm will be compensated;
* “''the residual loss''”: it occurs whenever there is a divergence between the interests of the principal and the agent and between the decisions taken in one or the other direction, despite monitoring and bonding activities.

The costs thus described occur indeed whenever there is a “''separation of ownership and control''”, since it is always difficult to induce the agent to behave in a way that maximizes the principal's profit (or interests). This happens in every organization and corporation, lucrative or not, as well as at every level of management, in universities, and even at the governmental level.

== Information asymmetry ==
A problem related to agency theory is that of information asymmetry, which structurally exists between ownership and control.

Information asymmetry refers to the difference in information available to the two parties (or contractors). As a rule, in fact, managers have access to information regarding the internal organization of the company and the operations carried out by the company. At the same time, shareholders do not have the necessary expertise to understand whether corporate operations are in fact consistent with their own interests. Therefore, it is often possible for managers to engage in opportunistic behavior also and precisely because of information in their possession. And indeed, the presence of information asymmetries hinders, in general terms, the achievement of a social optimum through free bargaining between the parties.

Information asymmetry generates two problems:

* c.d. adverse selection: the principal, in choosing the agent, cannot make an optimal choice, as he lacks useful information to accurately assess the actual capabilities of each candidate;
* c.d. moral hazard: it occurs when the agent abuses the principal's lack of information. In this sense, the agent indulges in misbehavior because he knows that the principal does not have the information, or, in any case, the expertise, to discover such improprieties.

== References ==

* ''Agency Theory: Definition, Examples of Relationships, and Disputes'', available at https://www.investopedia.com/terms/a/agencytheory.asp

* J. Bendickson, J. Muldoon, E. Liguori, P. Davis, ''Agency theory: background and epistemology'', in ''Journal of Management History'', 2016, pp. 437-449, available at https://www.researchgate.net/publication/307981546_Agency_theory_background_and_epistemology/link/5b7858c7299bf1d5a7149a2a/download

* M. C. Jensen, W. H. Meckling, ''Agency costs and the theory of the firm'', in ''Journal of Financial Economics'', 1976, pp. 305-360, particularly p. 308.

* F. Zogning, ''Agency Theory: A Critical Review'', in ''European Journal of Business and Management'', 2017, pp. 1-8, available at https://www.researchgate.net/publication/364812853_Agency_theory_A_critical_review
{{MUSA DO Law}}

Corporate governance code

2023-10-01T10:38:27Z

Moratoc:

== Self-regulation as a source of corporate governance ==
[[Corporate governance]] is a progressive, ever-evolving reality, influenced, in its formation and adaptation, by regulatory acts, market forces, and cultural and social movements.

Market automatisms are indeed insufficient to solve the problems peculiar to corporations, typically related to the misalignment of interests between their ownership and control, which can be explained through the well-known [[Agency Theory|agency theory]].

The limitations of corporate law derive, essentially, from its nature as a heteronomous source. The legal norm, in fact, directs the will of the individuals to which it is subject, but it does not have any influence on it, since it is not the result of a process of reflection and repentance of these individuals.

Another source of governance becomes, therefore, that which is formed within the business environment itself, more functional in ensuring the genuine formation of business ethics, which is the basis of good corporate governance. Attention to such good governance does not, therefore, derive from external rules, but is rather the product of so-called moral suasion, that is, the belief on the part of businesses in the need for self-discipline.

Clear, in any case, is the importance of a stable connection between corporate governance codes and state-source corporate law. In particular, where corporate law reaches, there is no need for self-regulation to intervene; if, on the other hand, corporate law is silent, it is important for self-regulation to fill in the gaps.

== The principle of "comply or explain" ==
Each company should therefore have its own code, specifying and clarifying, in particular, the roles and functions of corporate bodies.

These codes have, in the various countries (an essential overview of which is given below), different sources and origins, but equally have an essentially voluntary basis. And indeed, the only obligation for companies is to communicate externally (so-called disclosure) the adoption or non-adoption of the code, as well as, possibly, from which individual standards they have deviated. This is the principle of comply or explain, where fundamental is not so much the decision itself, but rather its justification. It is precisely from this obligation to explain that, if not an obligation to adopt the code (which, as mentioned, does not exist), at least a kind of presumption, on the part of the legislature, of its adoption is inferred.

According to Italian law, it is up to the directors of the company to decide whether or not to adopt the code, with only a judgment of expediency on the directors' decision remaining with the shareholders.

The rules dictated by the self-regulatory code, if implemented, end up acquiring, directly by statute and indirectly by law, binding force.

== European corporate governance codes: an overview ==
1) [https://www.ecgi.global/code/cadbury-report-financial-aspects-corporate-governance Cadbury Code 1992]

This is the Report of the Committee on Financial Aspects of Corporate Governance, better known as the Cadbury Report by Adrian Cadbury, chairman of the committee. Submitted on 1.12.1992, it is the first and most important report on corporate governance.

2) [https://www.borsaitaliana.it/comitato-corporate-governance/codice/2020eng.en.pdf Italian Corporate Governance Code 2020]

Fur further details see [https://www.assonime.it/attivita-editoriale/studi/Pagine/Report-on-Corporate-Governance-in-Italy-the-implementation-of-the-Italian-Corporate-Governance-Code_2021.aspx the Report on Corporate Governance in Italy: the implementation of the Italian Corporate Governance Code].

3) [https://www.frc.org.uk/getattachment/5aae591d-d9d3-4cf4-814a-d14e156a1d87/Stewardship-Code_Dec-19-Final-Corrected.pdf UK Stewardship Code 2020]

4) [https://www.fresenius.com/sites/default/files/2022-12/220627_German_Corporate_Governance_Code_2022.pdf German Corporate Governance Code 2022]

== References ==

* M. Tonello, Corporate governance ''e tutela del risparmio. Convergenza internazionale e competizione tra modelli regolamentari'', in ''Trattato di diritto commerciale e di diritto pubblico dell’economia'', edited by F. Galgano, vol. XXXV, Cedam, Padova, 2006, pp. 197-198-377.
* L. Enriques, ''Codici di “''corporate governance''”, diritto societario e assetti proprietari: alcune considerazioni preliminari'', in ''Banca Impresa Società'', 2003, p. 99.
* M. Cera, ''Le società con azioni quotate nei mercati'', Zanichelli, 2020, pp. 123 ss.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The miners

2023-10-01T10:30:41Z

Moratoc:

== Activity ==
The miners are responsible for the activity known as “[https://www.simplilearn.com/bitcoin-mining-explained-article blockchain mining]”.

These workers make their computers available to the blockchain for the purpose of verifying transactions made on it, typically transactions involving cryptocurrencies, approving them and enclosing them into blocks to be added to the blockchain.

Their task is to solve a mathematical problem with brute-force methods (so-called “proof-of-work”) in order to make a block of transactions valid to be concatenated to others. This method consists of trying all possible solutions to a question until the exact one is found.

They receive, in turn for their work, a fixed amount of cryptocurrencies generated ''ex novo''.

In other words, their job can be divided into the following phases.

# To make a new block of the blockchain, the network creates a [https://www.investopedia.com/terms/h/hash.asp hash] for the block of transactions. Miners start generating hashes through their computers.
# The first miner to generate a hash gets to attach the block to their copy of the blockchain.
# Other miners check the block is correct.
# The miner receives his reward.

== Role in a DAO ==
Usually, individual miners, in order to maximize their earnings, gather in “mining pools”, which are regulated at the technological level, based on protocols that coordinate the actions of hundreds or thousands of members.

Otherwise, the miners work in competition with each other: the fastest to get a valid block, thus the one with the most computational power, can hook it into the blockchain.

In turn, mining pools are controlled by so-called “mining pool operators”, who possess large amounts of computers and, consequently, a strong power of control over the organization for which miners work, including the possibility of directing its resources, at their discretion, in one or the other direction generated in the event of a fork.

In this sense, when they work for a decentralized autonomous organization, they stand at an intermediate level between [[The core developers of a dao|core developers]] and [[The token holders|token holders]]. And indeed, they are not directly part of management, as they cannot implement or modify the code, and yet they exercise a strong power of informal control through, precisely, the activity of validating operations. This circumstance, as is clear, risks causing a dangerous friction between the power they exercise and the interests of the organization's participants.

== References ==

* U. Buonora, ''Spiegazione dei fondamenti'', in ''Criptoattività, criptovalute e'' bitcoin, edited by S. Capaccioli, Giuffrè, Milano, 2021, p. 63.
* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by P. Hacker, I. Lianos, G. Dimitropoulos, and S. Eich, Oxford University Press, 2019, p. 32.
* ''How Does Bitcoin Mining Work?'', available at https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrency-stocks/bitcoin-mining/

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The self regulation of a DAO

2023-10-01T10:25:39Z

Moratoc:

== Rule of code ==
The need for a regulation of [[DAOs: essential legal issues|Decentralized Autonomous Organizations (DAOs)]] is partially met through the providing of the rule-of-code principle, also known as "''code-is-law''" or "''law code''" which incorporates, on closer inspection, the very definition of [[SMART CONTRACT AND ESSENTIAL LEGAL ISSUES|smart contract]].

And indeed, every blockchain-based organization needs a blockchain governance code, which should provide, as a minimum content, rules concerning the constitution of internal bodies, representative of [[The token holders|token holders]] and possibly of different categories of [[The stakeholders|stakeholders]]; decision-making processes; the rights and duties of participants; the duties of [[The core developers of a dao|core developers]]; the rules of so-called hard fork proceedings; the activities of [[The miners|miners]].

This content should be prepared by a representative group of experts and stakeholders.

Analyzing the issue more closely, it can be seen that if, on the one hand, there is indeed a desire for greater regulation of the organizations in question, considering it as an incentive for their establishment and participation on the basis of a fundamental principle of legal certainty, on the other hand, the idea has been put forward that the introduction of new rules could, on the contrary, constitute a disincentive for those seeking high flexibility and autonomy, also benefiting previous participants over new ones.

The issue, however, would lose its problematic connotation where one considers the comply-or-explain regime that characterizes corporate governance codes, among which the blockchain governance code may well rank. In this sense, each organization could and should decide whether or not to adopt the code, giving notice of the choice to third parties, by appropriate means. According to some authors, for cryptocurrencies or exceptionally important organizations the self-regulatory code should be replaced with a binding regulation.

Once the typical content of the code has been identified, a further question arises, relating to its effectiveness, given also and precisely the organization's decision-making autonomy in this regard. On this point, it should be considered that

* it may be useful to provide incentives for those who adopt the code;
* it is important that said codes include, in particular, rules on the participation of token holders, so that they are incentivized, upstream, to adopt the code, downstream, to participate in the life of the entity;
* consideration should be given to erecting barriers to entry for newly established organizations.

== Gap filling ==
That said, there is a main issue that would require further analysis, with reference to the internal regulation of the DAO and the contract on which it is based, given that it is a smart contract. We refer, in this sense, to the costs arising from the inflexibility of the programming code and the characteristics of the computer code. In particular,

* it is impossible for the code to provide the governance scheme entirely, without relying on general and standard clauses that can be used to fill any gaps (so-called gap filling mechanism);
* at the same time, the inclusion of general clauses such as the concept of contractual good faith can hardly be envisaged, precisely because of the difficulty of guaranteeing effectiveness to such broad concepts through the automatisms typical of smart contracts;
* the irreversibility of transactions makes it particularly difficult to correct any material errors, for example in entering the address of the recipient of a transaction, and thus restore the ''status quo'' prior to the transaction, unless the consent of the counterparty is reached, but this is net of the difficulties of cooperation inherent in the multiplicity of nodes involved.

== References ==

* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', 2017, pp. 21-23-25.
* A. Wright, ''The rise of decentralized autonomous organizations: opportunities and challenges'', in Blockchain & Procedural Law: Law & Justice in the Age of Disintermediation seminars, 2021, p. 171.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The token holders

2023-10-01T09:53:50Z

Moratoc:

== Brief notes on tokens ==
The token holders are the owners of tokens, which can briefly be described as computer files created within a Distributed Ledger Technology (DLT) network and recorded in a common database.

Having posited this first, essential definition, it is believed that the substantive and legal nature of tokens is more readily understood where it is defined by moving from a number of distinctions.

First, tokens are distinguished on the basis of the function to which they are preordained, into:

* tokens representing cryptocurrencies, with no embedded rights or liabilities;
* payment tokens, which are intended to replicate the functions of currency, maintaining a fixed value and representing the liabilities of the issuer. They include stablecoins, tokens issued by central banks (being tested) and non-convertible tokens;
* utility tokens, which are non-tradable and incorporate only administrative rights or user licenses. These include Non Fungible Tokens (NFTs), which represent ownership rights to unique (non-fungible) physical or digital assets;
* asset or security tokens (investment tokens). These, in particular, are negotiable and transferable, representing entrepreneurial projects, or physical and financial assets that give the holder property and administrative rights.

The tripartition into payment tokens, utility tokens and security tokens has been officially proposed by FINMA (Swiss Market Supervisory Authority) in the “''[https://www.finma.ch/en/~/media/finma/dokumente/dokumentencenter/myfinma/1bewilligung/fintech/wegleitung-ico.pdf Practical Guide to Initial Coin Offerings]''” published on Feb. 16, 2018.

The same was later reiterated by the EBA ([https://www.eba.europa.eu/about-us European Banking Authority]) in “''[https://www.eba.europa.eu/sites/default/documents/files/documents/10180/2545547/67493daa-85a8-4429-aa91-e9a5ed880684/EBA%20Report%20on%20crypto%20assets.pdf?retry=1 Report with advice for the European Commission on crypto-assets]''”, published on Jan. 9, 2019.

However, according to some scholars, this tripartition has a purely indicative value, because it is important to better consider the complexity realty of tokens, thus proceeding with a case-by-case analysis, in order to make a correct classification.

Second, based on the issuing procedure, tokens are distinguished according to whether they are issued in one slot or minted by a defined entity and offered through an ICO ([[Initial Coin Offerings (ICOs): legal issues according to Italian law|Initial Coin Offering]]) or an IEO (Initial Exchange Offering).

== Brief notes on security tokens ==
Security tokens can, in turn, be distinguished into:

* digitally native security tokens: programmable financial instruments, created as smart contracts residing on a DLT, which can form the basis of, e.g., so-called "Distributed autonomous organizations" (DAOs);
* purely synthetic security tokens;
* security tokens originated by traditional financial entities.

== The token holders in a decentralized autonomous organization ==
Those who have conferred crypto assets to a decentralized autonomous organization (DAO), thus receiving security tokens in turn, become members of the organization.

They can obtain governance or non-governance tokens (for further details see “[[DAO Governance|DAO governance]]”), so their rights, which derive from the tokens themselves, can vary.

In general, DAO’s tokens grant patrimonial rights, which imply a return on investment. In this sense, there are two possible type of benefit: (1) the token owner can receive different types of benefits, such as discounts, additional token or cash; (2) the owner can resell its token and thus obtain additional amount of cryptoassets.

Moreover, they grant administrative rights, which imply a right to public proposals on the shared platform, both in relation to new transactions and, for example, in order to change the DAO's organizational rules; together with voting rights.

== References ==

* G. Farina, Blockchain'','' DLT'','' ''valute virtuali, cripto-attività: la disintermediazione finanziaria'', in ''Diritto dell’innovazione'', edited by A. Blandini, Cedam, Milano, 2022, p. 449.
* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by P. Hacker, I. Lianos, G. Dimitropoulos, and S. Eich, Oxford University Press, 2019, p. 32.
* R. Piselli, ''Quando la decentralizzazione delle DLT incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, pp. 373 ss.
* C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 5.
* A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, pp. 206-207.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The governance of DAOs

2023-10-01T09:48:25Z

Moratoc:

= From corporations to decentralized organizations =
In order to understand the functioning and organization of the [[DAOs: essential legal issues|DAO]], assimilating it, in analytical perspective, to the broader phenomenon of organizations based on blockchain, it is necessary to preliminarily distinguish between external and internal governance profiles.

''Internal governance.'' It concerns the decision-making processes of the organization's participants, which require rules of procedure, often contained in a so-called blockchain governance code.

''External governance''. In this sense a key legal issue concerns the ability of token holders to exercise their right of exit, either by selling their assets or by initiating a split (so-called fork). In particular, they can disinvest if they feel that the enterprise is not properly managed.

What immediately emerges, in this sense, is the attempt to assimilate decentralized organizations to corporations, at least to derive indications in terms of internal organization and governance.

On the one hand, the differences between the two organizational forms are indeed undeniable, especially on the structural level, given that corporations are based on [[Agency Theory]], which well describes the existing relationship between the ownership of the enterprise (shareholders) and the control of it (managers), based on an eminently hierarchical structure.

On the other hand, however, the comparison between the two phenomena appears useful, among others, for three essential reasons:

# both corporations and decentralized organizations face the challenge of coordinating and controlling the behavior of different actors: some with direct or indirect management functions (directors; [[The core developers of a dao|core developers]]; [[The miners|miners]]), others spread horizontally, connected in collective structures (shareholders; [[The token holders|token holders]]). And indeed, although the horizontal and democratic nature of blockchain-based organizations has been theorized, it has been noted in practice how the separation of ownership and control has in fact been maintained.
# Both organizations (hierarchical or otherwise) face the same problems related to human decision-making processes, which suffer from the limitation of personal cognitive capabilities. The only possibility of overcoming the resulting difficulties lies, on the one hand, in the division of tasks and, on the other, in the enhancement of specific skills.
# The tokens issued by blockchain-based organizations are not only a decentralized payment method, but also, and more importantly, a way to finance entrepreneurial projects, which would otherwise require the establishment of companies.

In conclusion, “''many of the problems that corporate governance should solve reappear in cryptocurrencies and decentralized enforcement schemes. It is clear, however, that in adapting corporate governance concepts to cryptocurrencies, we must take into account not only the similarities but also the profound differences between these entities''<ref>· P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, p. 21.</ref>”.
{| class="wikitable"
|

'''DAO'''
|

'''COMPANY'''
|-
|

Loose
|

Tight
|-
|

Grassroots
|

Hierarchical
|-
|

Transparent
|

Usually not transparent
|-
|

Open
|

Invite-only
|-
|

Fully global
|

Not always global
|}
Table: A. Dhanani, B. J. Hausman (2022), p. 2.

= The administration of a DAO =
Managerial and organizational decisions, within the DAO, are made by the token holders, based on a bidirectional relationship between token and governance: on the one hand, the token is an instrument of governance, in that it confers property rights (right to profits) and administrative rights (right of proposal; right to vote); on the other hand, the rules of organization and power relations affect the value of the token itself.

Under the Wyoming regulatory framework (for further details see [[DAOs’ current forms of regulations: an overview]]), in particular, the administration of the DAO can be entrusted to the members ("member managed decentralized autonomous organization") or to a smart contract ("algorithmically managed decentralized autonomous organization"). The former constitutes the rule: it applies in the absence of an express statutory exception.

= On-chain and off-chain governance. =
Blockchain governance can take place in two ways.

''Off-chain governance''. Most private organizations are governed in this way. These structures actually appear decentralized, but it is always possible for participants to organize a mutiny. They, in fact, in case of disagreement with the governance protocol used, can initiate a hard fork, creating a parallel blockchain.

''On-chain governance''. Participants vote directly within a self-governing and democratic structure.

It should be pointed out that, even in this second model, not all decisions are made in a decentralized manner: while it is true that the activities conducted by organizations are carried out through a self-governance structure, it is also true that they remain influenced, inevitably, by the external market. In particular, here again an external crisis situation may result in the need to proceed with a hard fork, a decision that in effect assumes the connotations of a centralized decision.

= The "one token-one vote" principle and its exceptions =
The types of decisions that can be delegated to token holders, according to the provisions of the smart contract they subscribe for, vary depending on the goals of the DAO and the interests of its participants, who are also incorporated into the code. Typically, they are called upon to vote on any changes or implementations of the code, hiring of employees, business strategies, and new investments.

It is also pointed out that while in traditional enterprises decisions remain private, in DAOs these are transparent and public.

As a general rule, it is possible to identify the operation of the "one token-one vote" principle, whereby the weight of the vote depends on the amount of tokens owned.

At the same time, however, certain exceptions to this principle can be identified.

First, a distinction must be made between governance and non-governance tokens, as only the former attribute actual decision-making power regarding the development and the operations to be carried out on the blockchain (for further details: https://academy.binance.com/it/articles/what-are-governance-tokens#).

Moreover, not all governance tokens, in any case, necessarily grant voting power over every organizational and managerial decision-making aspect.

Again, note how some DAOs include a requirement that tokens be deposited in order to exercise voting rights.

Finally, it is possible to envisage that some tokens attribute, on the decision-making level, greater weight.

In fact, although, as seen, DAOs are based, as a fundamental premise, on the distribution of ownership and voting power in a democratic and thus egalitarian manner among participants, there are indeed different voting mechanisms.

= The voting mechanisms =

# Reputational voting: those who have obtained a good reputation – a concept, however, extremely difficult to assess in the absence of predefined and agreed-upon indices – against their activity exercised in the DAO, obtain tokens attributed with greater weight in terms of voting.
# Quadratic voting: one token assigns one vote, while two tokens assign four, so that a large number of tokens ends up granting disproportionate voting power. On the one hand, this incentivizes token purchase and involvement in management; on the other, it risks concentrating power in the hands of a few, betraying those democratic drives that characterize DAOs. Fort further details: https://www.bloomberg.com/news/articles/2019-05-01/a-new-way-of-voting-that-makes-zealotry-expensive#xj4y7vzkg
# Conviction voting: the weight of the vote increases as the period for which the token remains in the ownership of the same entity becomes longer. This, on the one hand, incentivizes the stability of the organization's ownership structure while, on the other hand, discouraging turnover, an equally important element in the life of the entity.
# Holographic consensus voting: this is a multi-stage voting process based on mechanisms for betting on proposals made and published by participants. For further details:https://medium.com/daostack/holographic-consensus-part-1-116a73ba1e1c; Y. Faquir-Rhazoui, J. Arroyo, S. Hassan, A Scalable Voting System: Validation of Holographic Consensus in DAOstack, 2021, p. 5557 ss., available at https://scholarspace.manoa.hawaii.edu/server/api/core/bitstreams/d0686298-aa64-4f41-aa7c-ff4b379d0c87/content
# Liquid democracy: this is a mechanism based on a system of proxies to individuals elected by the participants themselves to represent them. Importantly, the proxy is always revocable. For further details: https://www.peaka.com/blog/web3-dao-voting-mechanisms/; https://blog.xdao.app/unleashing-the-power-of-dao-voting-a-deep-dive-into-dao-voting-mechanisms-and-systems-4d4ece7aed36

= The proposing right =
Tokens grant the right to promote and consult proposals on the DAO platform, regardless of the share held or, at the participants' discretion, only on the basis of qualified holdings.

Usually, governance proposals have a three-stage roadmap: a pre-proposal poll; a draft proposal and finally a governance proposal.

= Some essential problematic issues =
Token holders' direct management powers over the organization results in governance issues that are not immediately resolvable.

# First, there is the risk that decisions made by the organization's participants are often inadequately informed, even in the face of the use of blockchain precisely for informational purposes.
# Second, there is widespread concern toward phenomena of "voter apathy," such that there is a risk that the rights granted to token holders may be rendered ineffective.
# Again, note how often token-holders operate under pseudonyms, implying that a single person could create multiple digital identities and vote with them. In this scenario, voting systems would, in all evidence, lose their democratic connotation, considering that a single participant could control the entire organization.
# The decentralization and, to some extent, democratization of voting mechanisms then leads to the risks of inefficiency that typically result from any attempt to coordinate a plurality of interests and actors.
# Democratic instances, moreover, find a decisive limitation in the costs of entry (so-called barrier costs) for those who wish to become part of the organization, particularly in terms of technological skills.
# Finally, security risks cannot be ignored: any bugs and security breaches in the system in turn require a vote of the members to be resolved. The slowness of the process, however, well may lead to a worsening of the situation, even to the point of encouraging hacking attempts or fraud. Noted in this regard is the example of [[The DAO|The Dao]] case.

According to some authors, the most drastic solution to the problems listed so far is, simply, to rely on the algorithm. «''Such an option implies that token holders should fully trust the functioning of the underlying code. The only governance tool in their hand would be the choice to acquire – or not acquire – the related tokens. Needless to say, algorithmic DAOs build on the (bold) assumption that the underlying code is actually fit for purpose and capable of automatically drive the organization throughout its life''<ref>· O. Borgogno, ''Making decentralized autonomous organizarions (DAOs) fit for legal life: mind the gap'', in ''Questioni di Economia e Finanza'', Banca d’Italia, 2022, pp. 13-14.</ref>».

= The main advantages of DAOs' decision making =
Once we have seen the main issues related to decentralized governance mechanisms, the following is a brief survey of the advantages highlighted by scholars.

# Transactions that are concluded on the blockchain allow for the movement of assets very rapidly.
# Decisions made by the members of the DAO are, as seen, public, which allows for greater verifiability of compliance with the regularity of decision-making processes: first and foremost, the attainment of quorums, where provided, constitutive and deliberative. The decision-making process is, therefore, as well as transparent, secure and autonomous (at least in theory), since, thanks to the rigidity and automatisms of the rules embedded in the smart contract, it guarantees a reduction in opportunistic behavior or, more trivially, errors.
# Blockchain-based decision-making processes are faster as there is no need for prior email communication or proxy voting. In fact, decision-making processes in DAOs are usually continuous; there are no votes reserved for specific times of the year.
# The DAO incorporates information and feedback from a wide range of [[The stakeholders|stakeholders]], in multiple different situations and circumstances, allowing for more prudent decisions with long-term positive effects. This, however, while taking into consideration that token hokders tend to have an interest in maximizing the value of their investment in the short term, rather than making decisions that guarantee gains in the long term but result in lowering the value of tokens, which circulate in the secondary market, in the short term.

= References =

* C. Bellavitis, C. Fisch, P. P. Momtaz, ''The rise of decentralized autonomous organizations (DAOs): a first empirical glimpse'', 2022, p. 5, 409, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4074833
* O. Borgogno, ''Making decentralized autonomous organizarions (DAOs) fit for legal life: mind the gap'', in ''Questioni di Economia e Finanza'', Banca d’Italia, 2022, pp. 13-14.
* A. Dhanani, B. J. Hausman, ''Decentralized Autonomous Organizations'', in ''Intellectual Property & Technology Law Journal'', 2022, p. 2.
* Q. DuPont, ''Experiment in algorithmic governance. A history and ethnography of “The Dao”, a failed decentralized autonomous organization'', 2018, p. 160.
* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, pp. 19-21.
* G. Nuzzo, ''Impresa e società nell’era digitale (appunti)'', in ''Banca, borsa tit. cred.'', 2022, I, p. 434.
* P. Ortolani, Decentralized Autonomous Organizations'':'' ''inquadramento giuridico'' de jure condito ''e prospettive'' de jure condendo, in Blockchain ''e'' Smart Contract. ''Funzionamento, profili giuridici e internazionali, applicazioni pratiche'', edited by R. Battaglini, M. T. Giordano, Giuffrè, Milano, 2019, p. 413.
* R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, p. 385.
* H. Qureshi, ''Blockchains should not be democracies'', in ''HackerNoon.com'', 26 Apr 2018, available at https://medium.com/hackernoon/blockchains-should-not-be-democracies-14379e0e23ad.
* O. Rikken, M. Janssen, Z. Kwee, ''Governance challenges of blockchain and decentralized autonomous organizations'', in ''Information Polity'', 2019, p. 409.
* B. Schneider, R. Ballesteros, P. Moriggl, P. M. Asprion, ''Decentralized Autonomous Organizations – Evolution, Challenges, and Opportunities'', in ''Workshop and Models at Work Papers'', 23-25 Nov 2022, pp. 5, 411.
* A. Sims, ''Blockchain and Decentralised Autonomous Organisations (DAOs): the evolution of companies?'', in ''New Zealand Universities Law Review'', 2020, pp. 20-21, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3524674
* A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, p. 2017.
* A. Wright, ''The rise of decentralized autonomous organizations: opportunities and challenges'', in ''Blockchain & Procedural Law: Law & Justice in the Age of Disintermediation seminars'', 2021, pp. 160-163.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Platform governance

2023-10-01T09:29:34Z

Moratoc:

== Definition ==
In the digital world, «''many of the largest and most successful business operate and organize as open and inclusive'' ''platforms''»<ref>M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, p. 172.</ref>, which use technologies in order to facilitate economic exchange; to transfer information; to connect people.

The term “platform” tends to be associated with different types of tech-companies<ref>M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, p. 177.</ref>:

* exchange platform, such as Amazon or Alibaba;
* service platform, such as Airbnb or Uber;
* content platform, such as YouTube or Netflix;
* software platform, such as Google Android;
* social platform, such as Facebook or Instagram;
* smart contract platform, such as Ethereum.

However, these platform companies not only use technologies to facilitate interaction and obtain value from this intermediary activity, but also, they use them to organize their own structure. Thus, they maximize collaboration among multiple [[The stakeholders|stakeholders]] and «''deliver constant innovation in platform services and functionality''»<ref>M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, p. 172.</ref>.

In this sense, the main characteristics of platform governance are the following ones:

# they try to make stakeholders feeling part of the organization, thus using their inputs and feedbacks to improve users’ experience and engagement. In this sense, [https://www.ecgi.global/content/codes-stewardship?field_categories_tid=Stewardship stewardship codes] became very important, so that many platform governance entities have one;
# the platform is open and accessible, which means, for instance that the code is "open source";
# communication is seen as a fundamental value, not only as «''one-way process of information disclosure (from platform operators to platform users)''», but also as a means for a more engaged, responsive and open process that could encourages «''a mutually productive dialogue''»<ref>M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, p. 176.</ref>.

Traditional firms are very different: they are organized in a hierarchically structured corporate form, oriented toward achieving the corporate purpose stated by the shareholders and maximizing their profit, mainly through the distribution of profits and the increase in the value of the shares. In order to reach these goals, corporate governance traditionally provides for<ref>M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, p. 174.</ref> a highly centralized source of authority; a clear boundary between the firm and the “outside world”; a settled and formal hierarchy with functionally differentiated “departments” and “roles”; a standardized operating systems and procedures dictated by the centralized authority.

However, if such firms want to remain competitive, they should adapt to the different world where they operate, which is hyper-competitive and have been transformed by new technologies (artificial intelligence and distributed ledgers), that have been largely used even in some of the typical functions of corporations. The phenomenon, known as ''CorpTech''<ref>L. Enriques, D. Zetzsche, ''Corporate Technologies and the Tech Nirvana Fallacy'', in ''Hastings Law Journal'', 2020, p. 72. </ref> (from a crasis, precisely, of the terms "[[Corporate governance|corporate]]" and "technology"), is allegedly bringing about a deconstruction of the typical architectures of corporate governance, and clearly describes the changing movement.

For those who would like to learn more about the topic, see

* C. Ciligot, ''What Is Platform Governance and Why Is It a Big Deal?'', Feb 24, 2020, available at https://learn.g2.com/platform-governance
* S. Etlinger, ''The Next Wave of Platform Governance'', May 14, 2021, available at https://www.cigionline.org/articles/next-wave-platform-governance/

== References ==

* L. Enriques, D. Zetzsche, ''Corporate Technologies and the Tech Nirvana Fallacy'', in ''Hastings Law Journal'', 2020, p. 72.
* M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, pp. 171-199.
* T. Teh, ''Platform Governance'', in ''American Economic Journal: Microeconomics'', 2022, pp. 213-254.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

DAOs obligations and liabilities

2023-10-01T09:09:02Z

Moratoc:

== Brief notes on DAOs obligations and liabilities ==
There are many unresolved questions regarding the obligations of [[Decentralized Autonomous Organization|Decentralized Autonomous Organizations (DAOs)]] members (i.e. [[The token holders|token holders]]) and managers (if they are not also members).

First, it would be appropriate to identify the liability discipline of the managers, if they do not coincide with token holders (a possibility that the doctrine moreover discusses), and of the token holders to the association, in the event that their conduct results in harm to the same. In particular, the possibility of applying fiduciary obligations (i.e. duty of care, duty of loyalty) or general clauses (i.e. good faith) is discussed.

Moreover, should the menagers be subjects outside the participants of the organization, we would return to the discussion of those problems arising from the [[Agency Theory|agency relationship]] that the DAO, by its definition, would (also) be directed to eliminate or mitigate.

Second, a matter of central importance is the regulation of liability for obligations undertaken by the organization.

In this regard, it’s important to notice that «''as long as DAOs are not legally recognized, they also do not have limited liability protection. This means that contributors to a DAO can be held personally liable for the debts and obligations of the DAO»''<ref>A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, p. 207.</ref>.

Consequently, the solution depends on the legal status given to the organization. In this sense, limited liability is a typical characteristic of [[Corporations (under Italian Civil Code)|corporations]].

In order to have an overview of the regulation of DAOs all around the world, see “[[DAOs’ current forms of regulations: an overview|DAOs’ current form of regulations: an overview]]”.

The lack of limited liability has many disadvantages, such as:

* the fact that DAO members are not incentivized to take risky business decisions as any business mistakes may lead to the seizure of their personal assets, thus stifling the innovation potential of such DAOs<ref>''Legal aspects of decentralized autonomous organisations (DAOs)'', available at https://nomoretax.eu/legal-aspects-of-decentralized-autonomous-organisations-daos/</ref>;
* the deterrence of many potential contributors from participating;
* the difficulty to raise capital since most investors would be unwilling to put their assets at risk<ref>A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, p. 207.</ref>''.''

== The decision of a U.S. court ==
According to what has been said, [https://storage.courtlistener.com/recap/gov.uscourts.casd.732409/gov.uscourts.casd.732409.49.0.pdf a U.S. court in California] has ruled in favor of plaintiffs, who initiated a class action in May 2022 and who alleged that the bZx protocol, and governance token-holding members of its decentralized autonomous organization (DAO), were negligent and liable for losses resulting from a hack that drained its treasury. The decision implies that DAO members might be held liable for negligence, potentially undermining the already challenged decentralized nature of DAOs, while providing a defense for founders who have seen their creations accused of wrongdoing[4].

More precisely, a group of nineteen, named Plaintiff, brought this putative class action against the members of a general partnership (collectively, the “Defendants”) for one count of negligence. Plaintiff alleged that each Defendant is a general partner of the bZx DAO, a purported “Decentralized Autonomous Organization”, and that they wew injured by Defendants’ negligence after a developer working for the bZx DAO was successfully targeted by a phishing attack which occurred on Nov 5, 2021 and which led to the theft of millions in cryptocurrencies. On Nov 21, 2021, the bZx DAO approved a compensation plan for those impacted by the hack, but the FAC ([https://www.law.cornell.edu/wex/amended_complaint First amended Complaint]) alleged complete repayment will take thousands of years. In May 2022, the Plaintiff initiated the class action and in June they filed their FAC.

In deciding the issue, the Court first identified the legal backgrounds:

* «''a claim is plausible'' ''if the factual allegations supporting it permit “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged”''»;
* «''In order to establish negligence under California law, a plaintiff must establish for required elements: Duty; Breach; Causation; Damages''».

* «''“In California, the ‘general rule’ is that people owe a duty of care to avoid causing harm to others and that they are thus usually liable for injuries their negligence inflicts”. However, “liability in negligence for purely economic losses . . . is ‘the exception, not the rule.’” “The primary exception to the general rule of no-recovery for negligently inflicted purely economic losses is where the plaintiff and the defendant have a ‘special relationship.’”''»''.''

Plaintiffs’ theory of liability is premised on the existence of a general partnership among all persons holding BZRX tokens. The FAC contends Defendants are partners of the purported bZx DAO general partnership, and, therefore, jointly and severally liable for Plaintiffs’ injuries. The Leveragebox Defendants argue the FAC fails to plausibly demonstrate the existence of a general partnership. Additionally, they argue the FAC doesn’t sufficiently allege Defendants are members of the purported general partnership.

The Court considered

# whether the FAC includes sufficient factual matter to plausibly allege that the bZx DAO is a general partnership (bZx DAO General Partnership Formation);
# whether the FAC sufficiently alleges that each Defendant is a partner in such a partnership (Partnership Allegations Against Each Defendant).

BZx DAO General Partnership Formation: California law provides that the “association of two or more persons to carry on as coowners a business for profit forms a partnership, whether or not the persons intend to form a partnership.” According to the Court, there is a general partnership among the BZRX token holders, because, among other reasons:

* the organization is controlled by the token holders, who have governance rights in the DAO;
* token holders can share in the DAO’s profits;
* token holders can vote to distribute treasury assets to token holders, like how corporations can authorize dividends.

Partnership Allegations Against Each Defendant: according to the Court, Plaintiffs’ allegations are sufficient to permit the reasonable inference that the defendants hold governance tokens.

Under California partnership law, «''all partners are jointly and severally liable for partnership obligations''».

The Court found that Plaintiffs’ injury is fairly traceable to the bXz DAO general partnership and that they have standing to sue the alleged general partners.

----[1] A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, p. 207.

[2] ''Legal aspects of decentralized autonomous organisations (DAOs)'', available at <nowiki>https://nomoretax.eu/legal-aspects-of-decentralized-autonomous-organisations-daos/</nowiki>

[3] A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, p. 207.

[4] S. Reynolds, ''The Liability of DAOs and Their Founders Has Been Put to the Test in Court'', Mar 29, 2023, available at <nowiki>https://www.coindesk.com/business/2023/03/29/the-liability-of-daos-and-their-founders-has-been-put-to-the-test-in-court/</nowiki>

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The organization and governance of Firm Networks (in Italian law)

2023-09-29T16:29:51Z

Moratoc:

The [[Network contract under Italian Law|network contract]] made its entry into the national regulatory landscape by [https://www.gazzettaufficiale.it/eli/id/2009/04/11/09A04321/sg d.l. 5/2009], in whose art. 3, paragraphs 4 ''ter'' - 4 ''quinquies'' the reference discipline is still provided. In particular, under paragraph 4 ''ter'' cited, «''with the network contract several entrepreneurs pursue the purpose of increasing, individually and collectively, their innovative capacity and competitiveness in the market and to this end they undertake, on the basis of a common network program, to''» carry out one or more of the following activities:

* «''cooperate in predetermined forms and areas pertaining to the operation of their businesses''»;
* «''or to exchange information or services of an industrial, commercial, technical or technological nature''»;
* «''or else to jointly engage in one or more activities falling within the scope of their enterprise''».

= Firm network organs =
«''The contract may also provide (...) for the appointment of a joint body to manage, in the name and on behalf of the participants, the performance of the contract or individual parts or stages thereof''».

Art. 4 ''ter'', d.l. 5/2009

The only body that is expressly contemplated in the legislative provisions on business networks is the “common body” which is merely eventual, the establishment of which must be provided for in the contract.

In the case it is provided by the parties, it is always the contract that must govern its management and representative powers and the rules regarding its possible replacement.

In general terms, the common body (which can also coincide with one of the member companies) is the one who is in charge of implementing the contract (or certain stages of it) and administering the asset fund (if established). In other words, it has management functions, that may otherwise, by express provision of the parties, be delegated to a so-called management committee in its absence.

When the network benefits from legal subjectivity, the common body acts on behalf of the network

* in negotiated planning procedures with public administrations;
* in procedures inherent in guarantee interventions for access to credit;
* in procedures inherent in the development of the entrepreneurial system in processes of internationalization and innovation provided for by the system.

With respect to the so-called “network-contracts”, on the other hand, the body acts as a representative of the member entrepreneurs, including individual ones, unless otherwise stipulated in the contract.

From what has been said, it can be seen how, both in the case of “network-subject” and in the case of “network-contract”, it is left to the free choice of the parties to provide for an executive body, representative of the network or of the entrepreneurs. In both cases, therefore, there may be no common body with management and representative powers, according to the contractual provisions.

= The common fund and patrimonial autonomy =
«''The contract may also provide for the establishment of a common property fund (…)''»

Art. 4 ''ter'', d.l. 5/2009

«''The provisions of Articles 2614 and 2615, second paragraph, of the Civil Code apply to the common property fund, insofar as they are compatible. In any case, for obligations contracted by the common body in relation to the network program, third parties may assert their rights exclusively on the common fund''».

«''If provision is made for the establishment of the common fund, the network may register in the ordinary section of the business register in whose district its seat is established; with registration in the ordinary section of the business register in whose district its seat is established, the network acquires legal subjectivity''».

Art. 4 ''quater'', d.l. 5/2009

The further profile that is expressly considered by the law concerns the possibility of establishing a common fund. Even in this case, its provision is merely eventual and left to the free determination of the parties, who are allowed to endow the network with an asset fund or not. Where, however, the network is endowed with a common body and an asset fund, [https://www.brocardi.it/codice-civile/libro-quinto/titolo-x/capo-ii/sezione-ii/art2614.html Articles 2614] and [https://www.brocardi.it/codice-civile/libro-quinto/titolo-x/capo-ii/sezione-ii/art2615.html 2615] of the Civil Code, i.e., the rules governing the common fund of [[The consortium|consortia]] with external activities, apply to it (see paragraph 4 ''quater'', no. 2, cited above). This provision also provides that «''in any case, for obligations contracted by the common body in connection with the network program, third parties may assert their rights exclusively on the common fund''».

The combined provisions of the regulations extend to the business network the regime of patrimonial autonomy that characterizes consortia with external activity, regardless of whether the network has legal subjectivity or not.

What has been summarized above reveals the absolute flexibility of the legislative framework, which defers the determination of the organizational and governance profiles of the network to contractual autonomy. Therefore, a further bipartition of networks can be drawn with reference to the chosen organizational structure and in a cross-sectional sense with respect to the articulation between “networks-contract” and “networks-subject”. We can thus further distinguish between:

* structured networks: having a common organization, consisting in particular of the capital fund and the common body. Such must be the networks-subject, in order to achieve autonomous subjectivity, but networks without subjectivity can also be endowed with such an organization (which is, as seen, the rule);
* unstructured networks: having neither a common body nor a common asset fund.

= Decision making processes =
«''For the purposes of the disclosure requirements set forth in subsection 4-quater, the contract must be drawn up by public deed or by notarized private deed (…) and must indicate: (…) f) the rules for taking decisions by the participants on any matter or aspect of common interest that does not fall, when a common body has been established, within the management powers conferred on that body, as well as, if the contract provides for the amendability of the network program by majority vote, the rules on how to take decisions to amend the program''».

Art. 4 ''ter'', d.l. 5/2009

The legislative framework is very meager on this point, if not absolutely silent, limiting itself to deferring to contractual provisions the determination of rules for decision-making by the parties, on any matter or aspect of common interest as well as for changes in contractual provisions.

In order to analyze decision-making mechanisms within the network, a preliminary distinction must be made between

* decision-making by the participants;
* decision-making reserved for the common body.

In this regard, the network contract must provide,

* the rules for the taking of decisions by the participants on any matter or aspect of common interest that does not fall, when a common body has been established, within the management powers conferred on that body, the management power being subtracted from the decisions of the adherents, precisely as a result of the appointment of the Common Body;
* if the contract provides for the modifiability of the Network program by majority vote, the rules on how decisions to modify the program are to be made.

Therefore:

# the decision-making competence of the participants is general in nature, whereas that of the common body is residual in nature;
# the managers are proper agents;
# a position of dominance remains in the hands of the participants with respect not only to contract amendments but also to contract implementation activities.

As a rule, that is, without any other contractual provision,

# decisions are made unanimously on both modification and implementation of the contract;
# decisions have a binding form, that is, they must be drawn up by public deed or notarized writing.

The legal model thus allows room for private autonomy:

# the common body can be given more or less powers;
# its appointment and replacement may not be by unanimity;
# the managers may operate jointly or severally.

In the case of gaps in the parties' provisions on decision-making procedures, some authors suggest the application of the rules provided for resolutions of the assembly of joint stock companies, or more flexible models as in unlimited liability companies or the [[The European Economic Interest Grouping (EEIG)|EEIG]].

As the competence and discretion of the common body grows, a hiatus between ownership and management is determined, although without arriving at true organic representation as is the case in corporations, where [[Agency Theory]] is discussed.

The question is, how far can private autonomy go? Can it even go as far as a reversal of the relationship of participating/common body powers?

Some general principles remain inalienable:

* each participant must be involved in the decision-making process;
* in the context of joint initiatives, there is a need for a structure of information and supervision with respect to management performance;
* action for compensation for damage done to the joint initiative and the pooled assets.

= Voice and exit rights =
The provision of voice and exit instruments is indispensable in the governance of the network contract that aspires to be recognized.

The voice right, in particular, consists of

# taking part in the decision-making process;
# taking part in the process of selecting and designating those in charge of the execution phase of the contract;
# carrying out monitoring and supervisory activities with respect to the activity of participation in the contract;
# activating reactions in the presence of improper fulfillment of the tasks of implementation and execution of the contract.

The exit right, on the other hand, consists in the dissolution of the individual contractual relationship limited to the individual entrepreneur. Suddite dissolution can be voluntary (withdrawal) or forced (exclusion).

Given the importance of these rights, an essential question inevitably arises: what sanction applies to the contract that does not provide for them? Nullity? If so, total or partial? Or, rather, non-recognition of the contract?

The doctrine tends to rule out the nullity thesis and consider more appropriate the non-accessibility of fiscal, administrative and financial benefits. This is because compliance with the elements stipulated by law constitutes a burden and not an obligation, insofar as it is functional to obtain a kind of statutory award.

In conclusion, on the point:

# the recognized network contract requires the presence of voice and exit rights;
# the conformation of these rights is left to private autonomy.

= The modification of the network contract =
Wide discretion and freedom is left to private autonomy in establishing the rules of modifiability of the Network contract and program, subject to the limit imposed by the principle of meritoriousness and through recourse to the experience of positive law and contractual practice, which from day to day produces proven dispositive norms.

Such changes may move within the general principles of contracts in general and associative contracts with common purpose, in particular. The decisions, if the Common Body has not been appointed, may concern any matter or aspect of common interest to the Network.

As with any contract, the rule applies that it can be amended with the consent of all the contracting parties, but considering the spread and the possible number of adherents that the Network contract can gather, the law represents the possibility that the Network contract may contemplate in its contractual wording the amendability by majority vote. Hence the need to dictate, in the Network contract, the procedural rules to be applied to make amendments to the contractual regulations.

The transtypity of the Network contract, which means that it isn’t a new type of contract, allows a reference to the rules proper to collaborative contracts, i.e., to the mechanisms provided for in associative contracts, and thus to the assembly method and to all typified regulations concerning the taking of decisions in the consortium and/or corporate sphere, as applicable.

= References =

* P. Benazzo, ''I diritti di'' voice ''e di'' exit ''nei contratti di rete «riconosciuti»'', in ''Rivista delle società'', 2012, pp. 677-710.
* F. Cafaggi, ''Il contratto di rete nella prassi. Prime riflessioni'', in ''I Contratti'', 2011, pp. 511 ss.
* G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 255-291.
* G. F. Campobasso, ''Diritto commerciale'', vol. II, ''Diritto delle società'', UTET Giuridica, Milano, 2022, pp. 640 ss.
* G. F. Campobasso, ''Diritto commerciale'', vol. III, ''Contratti, titoli di credito, procedure concorsuali'', UTET Giuridica, Milano, 2022, pp. 33 ss. and 46 ss.
* A. Caprara, ''Le “modificazioni soggettive” del contratto di rete: spunti di riflessione'', in ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', edited by G. Meruzzi, April 11, 2012, pp. 29 ss.
* M. Ceolin, ''Il contratto di rete tra imprese nella legislazione italiana: rete strutturata e non strutturata tra luci e ombre a dieci anni dalla sua introduzione'', in ''Revista de Direito da Cidade'', 2019, pp. 413 ss.
* F. Cirianni, ''Il contratto di rete'', in ''Notariato'', 2010, pp. 442 ss.
* P. Corrias, ''Cooperazione tra imprese appaltatrici e responsabilità verso terzi'', in ''La responsabilità civile e previdenza'', 2016, pp. 736 ss.
* A. Di Lizia, ''(Contratto di) Rete di imprese. Rassegna e clausole contrattuali'', in ''Notariato'', 2012, pp. 277-296.
* G. Doria, ''Reti di imprese e innovazione tecnologica'', in ''Rivista scientifica trimestrale di diritto amministrativo'', 2020, pp. 305 ss.
* A. E. Fabiano, ''Le reti di imprese: uno strumento giuridico a servizio della sostenibilità?'', in ''La Nuova Giurisprudenza Civile Commentata'', 2022, II, pp. 1364 ss.
* A. Gentili, ''Una prospettiva analitica su reti di imprese e contratti di rete'', in ''Obbligazioni e contratti'', 2010, pp. 87 ss.
* M. Libertini, ''Contratto di rete e concorrenza'', in ''Giustizia civile rivista trimestrale'', 2014.
* G. Meruzzi, ''Notazioni in tema di soggettività giuridica della rete'', in ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', edited by G. Meruzzi, April 11, 2012, pp. 15 ss.
* G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019.
* E. Mugnai, ''“Contratti di rete” e attività di direzione e coordinamento'', in ''Rivista di diritto societario'', 2015, pp. 823 ss.
* P. Saccomanno, ''Il contratto di rete: profili di un’indagine aperta'', in ''Contratto e impresa'', 2017, pp. 673 ss.
* F. Schiavone, Governance'','' ''Reti d’imprese e distretti industriali: considerazioni metodologiche'', in ''EconomiaAziendale'', ''online'' review, www.ea2000.it, 2003.
* P. Zanelli, ''Reti di impresa: dall’economia al diritto, dall’istituzione al contratto'', in ''Contratto e impresa'', 2010, pp. 951 ss.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The consortium

2023-09-29T15:58:05Z

Moratoc:

= Italian regulation and classification =
«''Through the consortium contract, several entrepreneurs establish a common organization for the regulation or performance of certain stages of their respective enterprises''».

Art. 2602 Civil Code

The definition of consortium found in the Italian Civil Code, as a result of [https://www.gazzettaufficiale.it/eli/id/1976/06/07/076U0377/sg the 1976 reform], is broad and refers to an associative scheme between entrepreneurs, thus encompassing two distinct phenomena:

* anti-competitive consortium: a consortium whose purpose is to regulate and limit mutual competition in the market between entrepreneurs engaged in the same or similar activities;
* coordination consortium: a consortium established for the performance of certain stages of the respective enterprises. In other words, it is an instrument of inter-firm cooperation.

These forms of cooperation are mainly resorted to by small and medium-sized enterprises in order to achieve and recover market competitiveness through the reduction of overhead costs.

For the first type of consortia, it is necessary to activate control and enforcement mechanisms so that monopolistic phenomena - in contrast with both national and EU antitrust law - do not occur.

The second type, on the other hand, is favored by the legislator, which in fact provides some tax breaks, as not only do such consortia promote the survival of medium and small enterprises, but also help preserve the competitive structure of the market.

According to the civil code regulation, a further distinction is important, between:

* consortia with internal activity;
* consortia with external activity.

In both there is a common organization, but in the former such an organization serves only to regulate relations between enterprises. In the latter, on the contrary, the parties establish a common office that carries out activities with third parties in the interests of the participating enterprises.

= The consortium contract =
The main features of the consortium contract, which can be deduced from the provisions laid down in Articles 2602 et seq. of the Civil Code, can be summarized as follows:

* it can be concluded only between entrepreneurs;
* it is a formal contract, that is, it must be stipulated in writing under penalty of nullity;
* it is a contract of duration, which can be freely determined by the parties. In the silence of the parties it lasts for 10 years;
* it tends to be an open contract, which means that new entrepreneurs can be part of it without requiring the consent of all other participants. However, in order for this feature to be maintained, the parties must stipulate the conditions for admission of new consortium members.

= Consortia with internal activity =
Essential structural character of consortia is the creation of a common organization. This organizational structure is based on the presence of

* a body with deliberative functions composed of all consortium members (assembly);
* a body with management and executive functions (governing body).

= Consortia with external activity =
Such consortia represent only one of the possible organizational forms for the collective exercise of business activities.

The regulation of such consortia aims to govern both ongoing and completed relations between the consortium and third parties.

They differ from the ones with only internal activity mainly for the following reasons:

* there is a legal disclosure regime for them, in the sense that an excerpt of the consortium contract must be registered into the commercial register;
* the contract must specify the subjects vested with the presidency, management and representation of the consortium, together with a description of their powers;
* there is also express provision for the formation of a capital fund, consisting of the initial and subsequent contributions of the consortium members and the assets acquired by such contributions.

The essential rules on liability can be summarized as follows:

* for obligations assumed in the name of the consortium, the consortium is exclusively liable, and creditors may assert their rights only against the consortium fund;
* for obligations assumed by the bodies of the consortium on behalf of individual consortium members, both the consortium members and the consortium fund are jointly and severally liable.

= References =
M. Campobasso, Diritto commerciale, vol. 1, Diritto dell'impresa, Utet, 2022, pp. 265-275.

For further details see ''Consortiums: Meaning, Types, and Examples,'' available at https://thestrategystory.com/blog/consortiums-meaning-types-and-examples/#:~:text=A%20consortium%20of%20companies%20refers,pursuit%20of%20a%20specific%20objective.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

THE FOUNDERS OF A DAO

2023-09-29T15:14:45Z

Moratoc:

== Role and activity ==
The founders of a [[Decentralized Autonomous Organization|Decentralized Autonomous Organization (DAO)]] are involved in the process of its establishment. Mainly, they are in charge of drafting the so-called "white paper" containing the rules and objectives of the organization, which is published on the web, particularly on social media, in order to present the idea behind the entity and attract investors. The latter, if interested, can join the proposal by contributing cryptocurrencies, receiving tokens issued by the organization in return.

Moreover, they "''usually are the initial [[The core developers of a dao|developers]] of the smart contract-based protocol''", who then "''transfer ongoing decision-making to the software's users and supporters''"<ref>O. Borgogno, ''Making decentralized autonomous organizations (DAOs) fit for legal life: mind the gap'', Questioni di Economia e Finanza by Banca d'Italia, 2022, p. 8.</ref>.

While, in theory, the procedure of establishing the DAO and distributing its control among those who decide to believe in the initiative appears fully democratic, it has been found in practice to be an unequal takeover phenomenon. In this sense, the founders, together with the early entrants to the system, purchase large quantities of tokens at a cost approaching zero, with the aim of subsequently increasing their price through the management of the DAO, and then trading them on the secondary market and profiting from the difference.

Lastly, the founders are responsible for opening up the open source code of the blockchain and [[Smart Contracts and DeFi|smart contracts]] underlying the DAO in order to promote forms of collaboration in software development with any interested [[The core developers of a dao|developers]].

== References ==

* R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, p. 373 ss.
* C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda,'' in ''Technological Forecasting & Social Change,'' 2022, p. 3.
* O. Borgogno, ''Making decentralized autonomous organizations (DAOs) fit for legal life: mind the gap'', Questioni di Economia e Finanza by Banca d'Italia, 2022, p. 8.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The core developers of a dao

2023-09-29T08:37:31Z

Moratoc:

== Role and activity ==
Those known as the "developers" of a [[Decentralized Autonomous Organization|Decentralized Autonomous Organization (DAO)]] are in charge of "''creating, deploying, and developing the DAO white paper rules in a [[Smart Contracts and DeFi|smart contract]] encoded on blockchain protocol''"<ref>C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 5.</ref>.

"''While anyone may make proposals for updating the code''", only the members of the "core developing team" hold the "''commit key''" (the password that allows changes to be made to the blockchain's software repository) to being able to modify it<ref name=":0">P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', 22 Nov 2017, p. 11.</ref>. In this sense, each line of code constitutes to all intents and purposes, on the one hand, a strategic or managerial choice of the organization, involving the entire blockchain and, therefore, all participants in the network, and on the other hand, a technical choice that is functional to reflect the defined objectives.

The developers are not directly accountable to [[The token holders|token holders]]. In fact, "''a DAO does not necessarily have a controlling party and, therefore, allows for open access and permissionless innovation - that is, developers can experiment with new products and ideas without fearing repercussions from a central governing entity''"<ref>C. Bellavitis, C. Fisch, P. P. Mumtaz, ''The rise of decentralized autonomous organizations (DOAs): a first empirical glimpse'', June 7, 2022, p. 9.</ref>.

In most cases, the developers are members of associations or [[Foundation (under Italian Civil Code)|foundations]], which are thus responsible for coordinating and promoting the network underlying the [[DAOs: essential legal issues|DAO]], while also making strategic choices<ref>R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, p. 386.</ref>.

Moreover, they do "''often coordinate their actions with operators of large [[The miners|mining pools]]''"<ref name=":0" />.

==References==

*P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', 22 Nov 2017, p. 11, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2998830
*R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, p. 386.
*C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 5.
*C. Bellavitis, C. Fisch, P. P. Mumtaz, ''The rise of decentralized autonomous organizations (DOAs): a first empirical glimpse'', June 7, 2022, p. 9.
*A. Walch, ''Deconstructing "Decentralization": Exploring the Core Claim of Crypto Systems'', in ''Crypto Assets: Legal and Monetary Perspectives'' (Chris Brummer, ed.), Oxford University Press, 2019, p. 52.

[[Category:MUSA Tech4Fin Milestone 1]]
[[Category:MUSA DOLaw]]

Decentralized Organizations and The Rule of Law

2023-08-23T16:40:38Z

Moratoc:

== Introduction ==
The notion of decentralized organization is broad and may include a wide range of institutions ranging from private to public and even the level of regulation required may change substantially in relation to the functions and the responsibilities that have to be decentralized.

As a starting point, to properly frame the discussion in relation to [[FINTECH TECH4FIN MILEStone 1 MUSA SPOKE 4 WP BOCCONI|the research project goals]], we briefly review the two basic setups that represent the starting point for the proposal of a new legal infrastructure that fosters efficiency of existing decentralized organizations.

First we will explore the legal issues that are open and the emerging discipline that tries to regulate the so called [[DAOs: essential legal issues|Decentralized Autonomous Organizations]] (DAO hereafter) in the crypto space. Second, we will review a lesser known regulation that has been created and is now in use in Italy to improve the coordination and raise the level of integration of small and medium enterprises that can formalize their productive agreements relying on the '[https://contrattidirete.registroimprese.it/reti/ contratto di rete]' a business network contract.

== Regulation of Decentralized Autonomous Organizations: state of the art ==
The proposal to rely on DAO to constitute an innovative form of organizing business activities, whose characteristics, indeed variable and combinable to the point of constituting entities very different each other, deserve in-depth studies in order to exploit their interesting potential. A number of [[DAOs: essential legal issues|legal issues]] have to be addressed to make this proposal consistent with current European and national regulations

In particular, the typical DAO is characterized by a non-hierarchical structure, where the paradigms of [[Agency Theory|agency theory]], applicable to traditional corporations, can undergo significant upheaval. In this sense, the management of DAO is entrusted to [[The token holders|token holders]] and to some extent to [[The stakeholders|stakeholders]], who both may or may not operate on the basis of the [[The principle of collegiality|principle of collegiality]]. Therefore, the organization can be defined as decentralized, changing the pillars on which traditional [[corporate governance]] is based, inferable from legal provisions or [[Corporate governance code|corporate governance codes]], and thus approaching a more innovative model of [[platform governance]].

Decentralization is made even more pregnant if combined with organizational autonomy and automatization, as it is based on [[SMART CONTRACT AND ESSENTIAL LEGAL ISSUES|smart contracts]] and, therefore, distributed ledger technologies. Beyond the possible legal qualification as a contract or as a mere means of executing a contract, what characterizes the smart contract is the rule-of-code principle, on which [[The self regulation of a DAO|the self-regulation of the DAO]] is based, which allows the automatic execution of the provisions contained therein, eliminating the need for intermediation. The blockchain on which the smart contract is based, however, requires the work of parties other than organizational members, such as [[The miners|miners]] and [[The core developers of a dao|core developers]].

The complexity of the phenomenon, which contributes to its undoubted charm, clearly emerges from the interweaving of legal, economic and technological profiles, even if only hinted at here. Therefore, even in the face of by now multiple practical experiments and the first pronouncements on [[DAOs obligations and liabilities|DAO obligations and liabilities]], as well as in the light of an analysis of [[DAOs’ current forms of regulations: an overview|current forms of regulation]], what emerges is the need to deepen, first of all doctrinal, [[DAO Governance|DAO governance]] profiles.

As a phenomenon that has developed essentially online without serious reflection on their legal structure, DAOs often operate without a clear and predetermined legal status. This leads to uncertainties about the relationship between token holders and between them and the DAO, with the risk that, as they carry out business activities, they can be qualified as partnerships.

In order to solve the uncertainties relating to the absence of a clear legal form and the identification of the applicable law and court of jurisdiction, there has been a tendency to set up DAOs according to clear legal models. In this sense, DAOs are sometimes established in the form of a company or a [[Foundation (under Italian Civil Code)|foundation]], thus relying on general models that, due to their characteristics, are suitable for incorporation of DAOs. Among companies, [[Partnerships (under Italian civil code)|partnerships]] and limited liability companies are preferred, which are considered to be the most suitable [[Corporations (under Italian Civil Code)|corporations]] to incorporate DAOs as they are more flexible.

The analysis of the legal models used for the establishment of DAOs and the sectors in which they are concretely employed suggests that DAOs can be used for the pursuit of both non-lucrative and [[lucrative purpose]], even if limits to the purpose that can be pursued may be imposed by individual national jurisdictions. This means that depending on the jurisdiction and the legal form in which the DAO is incorporated, there may be specific limitations to the purpose.

A further issue of complexity concerns the difficulty of identifying the [[Jurisdiction (Under Italian Law)|jurisdiction]] to which the DAO belongs and the applicable law.

The [[DAO formation]] is a complex procedure, carried on by the so-called [[THE FOUNDERS OF A DAO|founders]], as it involves an intersection between empirical-technological profiles, concerning the elaboration of the underlying IT structure of the DAO, and purely legal profiles. From a legal point of view, the analysis of the best-known legal models in the international regulatory landscape shows that the formation of a DAO can take place according to the forms provided for limited liability companies or foundations, depending on the legal nature of the chosen entity. Consequently, depending on the model chosen, the [[Articles of incorporation and bylaws (under Italian Law)|articles of incorporation or bylaws]] may be required.

Moreover, a key step in the establishment of DAOs concerns the raising of the capital needed to start the project, which is usually gained through the issuance of DAO voting tokens against the transfer of cryptocurrencies native to the blockchain on which the DAO is established. The initial offering of tokens constitutes an [[Initial Coin Offerings (ICOs): legal issues according to Italian law|Initial Coin Offering (ICO)]] and is therefore subject to the relevant regulations.

As long as the tokens underlying the DAO can be qualified as [[financial instruments]], their issuance is governed by the regulation of the [[issuer]]’s offers of financial products to the public. In contrast, for other types of tokens, the recently adopted European regulation, known as [[MiCAR (Reg. EU 2023/1114)]], applies.

A famous example of a DAO concerns [[The DAO|TheDAO]], which was “''the first high-profile realization''” of a decentralized autonomous organization running on the Ethereum platform. TheDAO case also represents a popular example of the application of the [[Howey test]] to a DAO.

==Firm Networks and the Italian Regulation==
The [[Firm networks: the phenomenon|phenomenon of firm networks]] is of undoubted interest both, in general terms, for its potential as a widely used tool for increasing the innovative capacity and competitiveness of the participating business entities. To better understand the characteristics of this phenomenon, it may be interesting to compare it to [[The firm network contract and other forms of business cooperation|other forms of business cooperation]], including, in particular, the [[The consortium|consortium]], the [[Joint ventures|joint venture]], the [[The company group (under Italian law)|company group]] or the [[The European Economic Interest Grouping (EEIG)|European Economic Interest Group.]]

The [[Network contract under Italian Law|network contract]] has been specifically introduced into the Italian regulatory framework by Law Decree 5/2009, whose article 3, paragraphs 4ter - 4quinquies, still provide the relevant rules. The Law Decree 5/2009 has so introduced in the Italian contract law, differently from what happens in all the other legal systems, a specific type of contract to rule network relations between business entities. In particular, pursuant to the above-mentioned paragraph 4ter, “''with the network contract several entrepreneurs pursue the purpose of individually and collectively increasing their innovative capacity and competitiveness on the market and to this end they undertake, on the basis of a joint network program, to''” carry out one or more of the activities listed in the article. Since the rule expressly refers to [[Entrepreneur (under Italian Law)|entrepreneurs]], the contract can be entered into by individual entrepreneurs, [[Partnerships (under Italian civil code)|partnerships]], [[Corporations (under Italian Civil Code)|corporations]], [[Cooperative corporation (under Italian Law)|cooperatives]], [[Social Enterprise (Italian Law)|social enterprises]], as well as all those further forms of [[Collective enterprise|collective enterprises]], such as the [[Third Sector Entities]] insofar as they exclusively or principally carry out business activities, albeit non-profit. The network contract is subject to registration in the section of the [[Business registry (under Italian Law)|business registry]] in which each participant is registered.

The network contract is configured as a plurilateral contract with common purpose, having associative cause. Under the original legislative framework, the possibility of attributing an autonomous [[Legal Subjectivity (under Italian Law)|legal subjectivity]] or [[Legal personality (under Italian Law)|legal personality]] to the network was debated. Following the amendments made in 2012, the aforementioned article 3, paragraph 4ter, now expressly excludes that the network is endowed with legal subjectivity, without prejudice, however, to the possibility of its acquisition by the express will of the parties. So, it is currently possible to constitute firm networks both with or without legal subjectivity.

Of particular interest are the profiles related to the [[The organization and governance of Firm Networks (in Italian law)|organization and governance of firm networks]]. Infact, the great flexibility of the contract type allow the participant business entities to organize in very different ways the profiles related to the patrimonial autonomy, the decision making processes, the exercise of voice and exit rights, the procedure of network contract’s modification.

[[Category:MUSA Tech4Fin Milestone 1]]
[[Category:MUSA DOLaw]]

The company group (under Italian law)

2023-08-23T16:36:36Z

Moratoc:

== The phenomenon ==
The corporate group is an aggregation of corporate enterprises that are

* formally autonomous and independent;
* all subject to a unified management. This means that all enterprises participating in the group are under the dominant influence of a single company (called the holding company).

The holding company directly or indirectly controls the other companies (called subsidiaries) and directs their activities according to a unified plan, in pursuit of a unified and common purpose, the so-called group interest.

Each of the companies comprising the group may correspond to, as its corporate object,

* a distinct field of activity,
* a distinct stage of the production process,
* a distinct form of industrial use of the same basic substance,
* a distinct market.

Thus, it can be said that in groups there is a single enterprise in the economic aspect, to which correspond several enterprises in the legal aspect, that is, all those that are part of the aggregation.

Groups of companies can take different conformations:

* Chain groups: company A directs company B, which directs company C.
* Ray groups: company A simultaneously directs all the others.

This is a physiological phenomenon that is widespread in practice, especially for large and multinational companies, as well as a reality that the national legislature tends to favor.

The reason why business groups are formed is essentially to combine the advantages arising from the economic unity of the large enterprise (speed and autonomy of decision-making) with those arising from the articulation into several distinct and autonomous organizational structures (separation of business risk). In other words, through groups, needs for greater efficiency in the production system are met.

== The legislation ==
To this date, there is a lack of organic regulations specifically dedicated to groups of companies, but the phenomenon is not completely ignored in legal terms. In particular, in the Civil Code one must consider:

* Articles 2359 et seq. which regulate the notion of control and subsidiary and holding company;
* Articles 2497 et seq. introduced in 2003, which deal with the so-called management and coordination activities of companies.

== The controlled company ==
A controlled company is defined as a company that is, directly or indirectly, under the dominant influence of another company, called the holding company, which can define its activities. This definition is derived from Article 2359 of the Civil Code, according to which control can take several forms:

* De jure shareholder control: the company in which another company has a majority of the votes that can be exercised in the ordinary shareholders' meeting is controlled.
* De facto shareholder control: the company in which another company has sufficient votes to exercise a dominant influence in the ordinary shareholders' meeting is controlled.
* Contractual control: companies that are under the dominant influence of another company by virtue of special contractual ties with it are controlled.

== The activity of management and coordination ==
However, the existence of a corporate control relationship is not sufficient to say that there is a group of companies. Rather, such control gives rise to the presumption that the parent company also exercises management and coordination activity over the controlled company. Indeed, it is in this activity that the essence of the group of companies is embodied.

The notion of management and coordination activity can be traced to an essentially material fact, that is, as the set of activities by which the parent company substantiates the essence of control, in its relationship with the controlled company. As a material fact, the activity is expressed in conduct that is difficult to typify, so the legislator prefers to resort to general clauses in describing it. Normally, management and coordination activity takes the form of the transmission to subsidiaries of decisions that are made by the holding company. This transmission may take place on the basis of formalized procedures, through directives or circulars, or, as is often the case, in the form of confidential directives, which the managers of the holding company send to the managers of the controlled company.

== References ==

* M. Campobasso, Diritto commerciale, vol. II, Diritto delle società, Utet, Milano, 2020, pp. 282 et seq.
* F. Galgano, Trattato di diritto civile, vol. IV, Cedam, 2015, pp. 770-771.
* G. Meruzzi, Complemento di diritto commerciale, vol. II, Società di capitali e cooperative, Egea, Milano, 2017, pp. 111-112.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The DAO

2023-08-23T16:35:49Z

Moratoc:

== The DAO and its foundation ==
The DAO was founded in 2016, putting into practice an idea that had been already theorized in 2013, with the goal at the time of establishing a ride-sharing platform, that is, one that would connect drivers and users on the basis of a decentralized software architecture (see https://bitcoinmagazine.com/technical/bootstrapping-a-decentralized-autonomous-corporation-part-i-1379644274).

While it is interesting to analyze the characteristics of The DAO, it is important to keep in mind how each [[Decentralized Autonomous Organization|decentralized organization]] is different from the other, as much on the basis of the different cryptocurrencies that can be used, as on the strength of the wide elasticity and variability in the way they are [[The governance of DAOs|governed]]. Several initiatives, in fact, followed this initial experimentation between 2016 and 2017, based on proceedings of [[Initial Coin Offerings (ICOs): legal issues according to Italian law|ICOs]], demonstrating the interest of non-professional investor start-up initiatives in legal forms other than traditional corporate finance models<ref>P. Ortolani, ''Decentralized Autonomous Organizations'': inquadramento giuridico ''de jure condito'' e prospettive ''de jure condendo'', in Blockchain ''e'' Smart Contract. ''Funzionamento, profili giuridici e internazionali, applicazioni pratiche'', a cura di R. Battaglini, M. T. Giordano, Giuffrè, Milano, 2019, p. 405.</ref>.

The establishment of The DAO was, indeed, quite simple, following a process that can be usefully broken down into the following stages:

# a 28-day "creation" phase, during which investors had the opportunity to trade ETH for tokens issued by the DAO, raising a sum of Ether cryptocurrency of about $150 million, from more than 11,000 private investors. During this period, the price of the tokens grew, in part to incentivize the riskiness of the initial, information-free investment. These tokens contained a disclaimer that they would not qualify as shares or other forms of corporate participation.
# After this initial period, tokens were no longer issued, although it was still possible to trade existing ones on secondary markets. Suddite tokens allowed for both publishing proposals and voting on them, directly controlling the structure of the organization and managing it democratically. In this sense, The DAO constituted a full experimentation of that decentralization which, while it could be graduated until it came considerably closer to the mechanisms of a traditional corporation, is an essential character of the typical DAO. During this "static" phase a [https://hackingdistributed.com/2016/05/27/dao-call-for-moratorium/ white paper] was also published by some experts identifying some of the risks involved in investing in and using the DAO.
# [[The token holders|Token holders]] were able to vote on several proposals, among which "Slock.it," a project aimed at establishing a platform in accordance with the model of the so-called sharing economy, functional to connect property owners with potential landlords, gained wide acceptance. Transactions and relationships between contractors were handled automatically, minimizing intermediation, on the basis of smart contracts.
# An update of the system on which DAO was based was developed and proposed, functional to prevent cyber attacks whose danger had been pointed out by several experts, and which had been tested on another DAO project (MakerDAO). Several developers of the platform, in fact, had detected the presence of some programming errors in the smart contract on which The DAO was based.
# A [https://hackingdistributed.com/2016/06/16/scanning-live-ethereum-contracts-for-bugs/ second warning] about the vulnerability of The DAO was issued on June 16.

== The attack and the "hard fork" ==
In June 2016, an anonymous cyber attack was launched on the organization, similar to the one whose risk had been identified and analyzed. Figuring that the hacker's goal was to convert the stolen cryptocurrency into legal tender, an attempt was made to block trading. However, fearing reputational repercussions and thus a loss in the value of crypto, not everyone agreed to freeze the market immediately. Within a short time, about a third of the capital put into the platform was taken away.

It was decided not to initiate a court proceeding for a technical reason: the dispossession by the anonymous attacker had transferred the ether deposit codes into his own material possession, gaining exclusive control of them and making a contrary transfer by enforcement impossible. A court proceeding, therefore, could have led only to an abstract pronouncement that was materially unrealizable. Moreover, the impossibility of recovering the misappropriated ethers would have been without prejudice to any claims by the fund's investors for the platform's negligent conduct, consisting of its failure to control the defective program and thus contrary to the duty of care. The directors of The DAO were then faced with the alternative of whether to suffer the consequences of the breach or to activate a technical solution that could reduce losses<ref>M. L. Perugini, Distributed Ledger Technologies e sistemi di blockchain. Digital currency, smart contract e altre applicazioni, Key, 2018, p. 85.</ref>.

In the following weeks, thanks to the political clout of the founder and the Ethereum Foundation, a "hard fork" version of the Ethereum software, considered as the best technical solution, was developed and released to [[The miners|miners]]. This system fork allowed the blockchain to be recalculated to the block prior to the attack, resulting in the loss of validity of the blocks containing the stolen ethers.

This solution created heated debates in the community. Specifically, a portion of miners believed that majority consensus was a necessary and sufficient element to proceed with the reorganization; while an opposing current of thought emphasized that the very immutability of the blockchain generated the market trust necessary for the success of the project. In other words, the historical reconstruction of transactions could not be altered<ref>M. L. Perugini, Distributed Ledger Technologies e sistemi di blockchain. Digital currency, smart contract e altre applicazioni, Key, 2018, p. 85.</ref>!

A portion of hubs, in fact, rejected this modification, resulting in a parallel blockchain (Ethereum classic), while the majority voted in favor of executing the fork.

Eventually, the majority of miners implemented this new software, so that after a few months the blockchain registry was updated to effectively delete the DAO, and tokens issued from it were delisted from secondary markets.

== References ==

* Q. DuPont, ''Experiment in algorithmic governance. A history and ethnography of “The Dao”, a failed decentralized autonomous organization'', in ''Bitcoin and beyond. Cryptocurrencies, blockchain, and global governance'', edited by M. Campbell-Verduyn, 2018, p. 159 et seq.
* P. Ortolani, ''Decentralized Autonomous Organizations'': inquadramento giuridico ''de jure condito'' e prospettive ''de jure condendo'', in Blockchain ''e'' Smart Contract. ''Funzionamento, profili giuridici e internazionali, applicazioni pratiche'', edited by R. Battaglini, M. T. Giordano, Giuffrè, Milano, 2019, p. 403 et seq.
* M. L. Perugini, ''Distributed Ledger Technologies e sistemi di blockchain. Digital currency, smart contract e altre applicazioni'', Key, 2018, p. 85.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The principle of collegiality

2023-08-23T16:35:10Z

Moratoc:

The collegial principle operates, in general terms, as a criterion for regulating decision-making processes within bodies that are, precisely, collegial in nature, that is, composed of a plurality of members.

More precisely, a body is defined as collegial when the exercise of its function is delegated to a plurality of persons, who express their will through the adoption of a decision, which in turn is formalized through an act called a "resolution" or "deliberation."

This act

* on the one hand, synthesizes, that is, reduces to unity, the wills of the individual members of the organ;
* on the other hand, and precisely because of this, it is imputed to the organ as a subject distinct from its members.

In order for the resolution to be validly passed, it is necessary that the so-called ''constitutive quorum'' be reached, which consists of the number (or percentage) of individual members, with voting rights, who must be present at the vote in order for the body to be considered regularly constituted.

Again, a so-called ''deliberative quorum'', which is the number of affirmative votes required for the resolution to be validly passed, must be achieved.

Once the mentioned ''quorums'' have been reached, the discussion phase among the members of the body is essential, at the outcome of which the resolution, as a formal and legally relevant act, is issued.

Each body may, also by its own rules of procedure, establish its own ''quorums''.

Typically, the ''deliberative quorum'' alternatively refers to the criteria of unanimity, absolute majority, simple or relative majority, or even qualified majority.

An absolute majority is reached when affirmative votes exceed half of those eligible to vote.

A simple majority is reached when the votes in favor exceed half of those voting.

A relative majority is achieved when the votes in favor exceed those received by any other proposal.

Finally, it is possible to provide, as mentioned above, for a qualified majority, that is, it requires that the affirmative votes exceed a percentage of those voting or eligible to vote greater than half.

The collegial method does not, as a rule, require that the majority criterion be met, since it more generally constitutes a principle of organizing the decisions of collective formations.

A clear example of multi-person bodies are corporate bodies: shareholders' meeting, board of directors and supervisory board of a limited or unlimited liability company under Italian law.

On closer inspection, the multipersonal nature of the body does not necessarily imply that it operates according to the collegial method. With regard to the board of directors, for example, the Civil Code dictates different rules depending on whether the company is a joint-stock company or a different form of limited liability company. Only in the former, in fact, it is necessarily provided for the adoption of the collegial method if the body is multi-person. For the second type of company, Article 2475, paragraph 4 of the Civil Code provides that the company's statute may stipulate that decisions of the directors shall be made "''by written consultation or on the basis of consent expressed in writing''".

Two ways of voting are inferred from this: written consultation and express consent in writing. In both cases, it can be understood how the discussion phase among the members of the body is eliminated.

Still different from the collegial method is the mode of operation of directors of unlimited liability companies, who can decide whether to act jointly, with the limitation of the individual director's ability to make decisions necessary in order to avoid an urgent danger to the company, or disjunctively, where each director can make decisions necessary for the accomplishment of the company's object (Articles 2257 and 2258 of the Civil Code).

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Firm networks: the phenomenon

2023-08-23T16:34:13Z

Moratoc:

The network contract made its entry into the national regulatory landscape by d.l. 5/2009, in whose art. 3, paragraphs 4 ''ter'' - 4 ''quinquies'', the reference discipline is still provided. In part, under paragraph 4 ''ter'' cited, «''with the network contract several entrepreneurs pursue the purpose of increasing, individually and collectively, their innovative capacity and competitiveness in the market and to this end they undertake, on the basis of a common network program, to''» carry out one or more of the following activities:

* «''cooperate in predetermined forms and areas pertaining to the operation of their businesses''»;
* «''or to exchange information or services of an industrial, commercial, technical or technological nature''»;
* «''or else to jointly engage in one or more activities falling within the scope of their enterprise''».

== The relevance of the phenomenon at a European level ==
The aggregative phenomenon between enterprises is aimed at greater growth and increased competitiveness. It has stimulated the reflections of European institutions on several occasions with regard to small and medium-sized enterprises (SME), from the following different points of view.

*[https://www.sba.gov/sites/default/files/files/Small%20Business%20Act.pdf Small Business Act (SBA)] of 2008.

This is a European Commission Communication containing a sort of decalogue in support of SMEs, in which the development of models favoring cooperation between enterprises (including the Italian firm networks and the German cluster networks) is cited as an example of good practice.

*[https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2011:011:0001:0072:EN:PDF Guidelines on the Applicability of Article 101 TFEU to Horizontal Cooperation Agreements] (2011/C 11/01).

These guidelines typify the following categories: research and development agreements; joint production agreements; cooperation agreements in patent matters (patent pools); joint purchasing or selling agreements; reciprocal service provision agreements; cooperation agreements in promotional activities. The antitrust matter, only mentioned here, is indeed a separate issue, since, it should be noted, the network contract is not typified and regulated as relevant as an agreement restricting competition.

== The relevance of the phenomenon at a national level ==

* Statute of Enterprises (l. 180/2011): Art. 1 (2) explicitly states that the aim pursued is to ensure the full application of the SBA, while Art. 2 (1) (n) indicates among the general principles “''the promotion of policies aimed at aggregation among enterprises, also through the support of clusters and enterprise networks''”.

* Decree-Law No. 78/2010, Article 42 (2''quater'') which provides for tax benefits.

* Decree-Law No. 5/2009, which contains the main rules about the organization of firm networks. For the essential elements of this law see "[[Network contract under Italian Law|Firm networks and essential legal issues]]".

== Practical implications: sustainability and digitalization ==

==== The network as a legal instrument to support sustainability. ====
Given its neutral connotation, the network may well be functional to instances of sustainability in any economic sector. They acquire a particular value to the extent that they implement innovation in the production process, thus following the same guidelines of the sustainable development model: innovation of production cycles, product innovation, implementation of eco-innovations and environmental innovations.

In particular, consider the extension of the network tool to agrifood companies (legislative decree 83/2012). In this sector, there is a phenomenon of so-called sustainable intensification, by which is meant a management of the land and natural resources that makes it possible to produce, with scarce resources and minimal environmental impact, at the same time food and positive environmental externalities (biodiversity, landscape, etc.).

==== The network for promoting technological innovation. ====
Significantly, the Italian Court of Cassation, 21 January 2009, no. 1465, with reference to a joint venture stated that “''the development and exploitation of technologies is one of the fields in which the need for cooperation between companies is most significantly manifested, so that the extent of the necessary investments, the consequent financial commitment in relation to the often very long timeframes for execution and exploitation, and the high risk of failure of the initiative lead to the “sharing” of burdens and risks between several companies''”.

== The phenomenon in data ==
Main features of existing firm networks in Italy:

a) Wide variety of sectors involved: 22% agribusiness, 13.2% trade, construction 13.1%, tourist services 10%, professional services and mechanics 12%.

b) Strong incidence of small enterprises: 51% micro enterprises, 20% small enterprises.

c) Enterprise density primarily below 10 enterprises: almost 52% are micro-aggregations (2-3 enterprises). The data show a progressive polarisation of network contracts on the extreme levels of entrepreneurial density.

d) High degree of geographical concentration: compared to the experience of industrial districts, networks in many cases also include enterprises located in very distant areas, and indeed interesting forms of aggregation have developed between enterprises operating in different geographical divisions. However, networks between enterprises tend to develop mainly within the same geographical area (81.8%) (uniregional networks constitute 71.60%, within which uniprovincial networks constitute 50.9%).

e) Degree of inter-sectoral heterogeneity of network enterprises declining: almost 61 % of networks involve enterprises operating in different sectors. However, this figure is declining and unisectoral enterprises, now 39.1 %, are gradually increasing (in 2014 they were only 16.2 %). Bi-sectoral networks stand at 33.9%, showing the reluctance of entrepreneurs to attempt productive, instead, multi-sectoral relationships. It should be noted, however, that the level of sectoral heterogeneity is higher among the subject-networks.

f) 10% of the network-companies are multi-sectoral: they are present in at least two network-contracts.

g) Prevalent location in the Centre: 35% Central regions, 26% South, 21% North-East, 18% North-West.

h) Prevalence of corporations: they are 52% (48.4% are srl), compared to 25.5% of sole proprietorships (very widespread in the Centre), 13.6% of partnerships (very widespread in the North-East) and 6.9% of cooperatives.

Summary remarks:

* The direction seems to be towards broader aggregations on the territory, within differentiated production systems.
* Within the single networks, sectoral differentiation is progressively decreasing: the aim seems to be to increase the competitiveness of single Italian enterprises, as seen predominantly micro and small, instead of building relationships between complementary sectors. On the other hand, the prevailing sector remains the agrifood one, networks in the tertiary sector are less widespread.

Essential documentation is available on the following web pages:

* [https://www.retimpresa.it/wp-content/uploads/zf_documents/1642755291rapporto_Reti_2021.pdf National Observatory on Enterprise Networks 2022];
* [https://www.retimpresa.it/wp-content/uploads/zf_documents/1627935349foto_reti_primosem_2021.pdf Photo of enterprise networks, 1 semester 2021].

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The European Economic Interest Grouping (EEIG)

2023-08-23T16:32:52Z

Moratoc:

= General features =
The EEIG is a legal institution set up by the European Union to facilitate cooperation between entrepreneurs belonging to different member states, also in order to remove obstacles in this regard posed by the diversity of individual national laws.

The institution is governed by [https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:31985R2137 EU Regulation No. 2137 of 1985], which is directly applicable in all member states. In order to better understand the essential characteristics of European acts (regulations, directives, decisions..) see the page "[https://www.law.ox.ac.uk/legal-research-and-mooting-skills-programme/eu-legal-sources EU Legal Sources]" available at University of Oxford site.

Each national legislature has since issued specific supplementary rules, applicable to groups headquartered in individual member states.

The structure and function of the EEIG largely coincide with those of consortia with external activities.

In particular,

* parties to the contract establishing the EEIG may be only natural or legal persons engaged in economic activity, who, however, unlike in the consortium, need not be entrepreneurs. The EEIG may also be formed by intellectual professionals, provided that the grouping is not used to directly engage in freelance practice.
* At least two members must have a central administration or must carry out their activities in different states of the Union.
* The EEIG is an associational body that has external relevance, which means it can assume rights and obligations in its own name. It also has procedural capacity. In other words, it constitutes an autonomous center of imputation of legal relations distinct from its members.
* New members can be added but their admission must be decided by unanimous consent.

The function of the EEIG is to facilitate and develop the economic activity of its members. Therefore, the group does not aim to make profits for itself.

= EEIG's formation =
The constitutive contract must be in writing under penalty of nullity and is subject to legal publicity, i.e. it must be

# registered in the Commercial Register: it has constitutive effect, which means that the EEIG acquires legal personality with such registration;
# published in the Official Gazette of the Republic: it has declaratory effect, which means that this procedure is necessary in order to grant enforceability against third parties.

= Organization and decision-making processes =
The internal organization and operating rules of the EEIG are largely left to private autonomy.

Two bodies are provided:

# assembly;
# administrative body.

The members of the group can collectively adopt any decision for the realization of the object of the group.

The most important decisions, specified in Article 17 of the Regulation<ref>Art. 17, second paragraph:

"''A unanimous decision by the members shall be required to:''

''(a) alter the objects of a grouping;''

''(b) alter the number of votes allotted to each member;''

''(c) alter the conditions for the taking of decisions;''

''(d) extend the duration of a grouping beyond any period fixed in the contract for the formation of the grouping;''

''(e) alter the contribution by every member or by some members to the grouping's financing;''

''(f) alter any other obligation of a member, unless otherwise provided by the contract for the forma tion of the grouping;''

''(g) make any alteration to the contract for the forma tion of the grouping not covered by this paragraph, unless otherwise provided by that contract''".</ref>, must be made unanimously, while for others the contract sets the required majorities. Unless otherwise stipulated by the participants, all decisions are made unanimously.

Each member has only one vote, but the contract may give more votes to some members, provided that no one member alone has a majority of votes.

The management of the EEIG is entrusted to one or more administrators, appointed by the founding contract or by decision of the members. A legal person may also be appointed as administrator.

= Liability regime =
Profits that result from the group's activities are considered directly as profits of the members and distributed among them according to the proportion provided for in the contract or, in the silence of the parties, in equal parts.

There is no compulsory formation of initial assets, and any fund established is not an independent asset in any case. However, the liability regime for obligations is very strict.

Obligations assumed by the group: all members of the group are jointly and unlimitedly liable, in addition to the group with its own assets. This strict discipline has been a strong disincentive to the formation of this type of group.

The liability of the members is subsidiary to that of the EEIG, which means that creditors of the group must first turn to the group itself to obtain payment and only if payment is not made do they turn to the individual members.

= References =

* https://eur-lex.europa.eu/IT/legal-content/summary/european-economic-interest-grouping.html#
* G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 281-286.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The firm network contract and other forms of business cooperation

2023-08-23T16:32:08Z

Moratoc:

The comparison between [[Network contract under Italian Law|firm network contracts]] and other forms of business cooperation is functional to:

# identify possible sources useful in filling the many gaps in the legislation on firm networks;
# identify (and regulate) possible phenomena of transformation into firm network contracts of pre-existing different forms of cooperation between enterprises, also in order to make a functional distinction depending on whether the network contract serves to

* begin a collaboration between previously unrelated enterprises;
* stabilize a pre-existing collaboration;
* respond with aggregation to forms of crisis;
* bringing together business entities that are different from each other.

We consider the following institutions, all provided for Italian legislation.

= [[The consortium]] =
This is an associative scheme between entrepreneurs that is suitable for encompassing two distinct phenomena of reality, namely the anti-competitive consortium and the coordinating consortium. Again, fundamental is the distinction between a consortium carrying out purely internal activities and a consortium with external activities.

While the substantive differences from the firm network contract are minimized, the two cases are not fully overlapping either. In particular, it is possible to identify a substantial identity of regime between the two legal figures in the case where the network members have a common patrimonial fund and a common office for the execution of the network project. In such a case, in fact, the network members assume the status of an organizational group, which is in turn a necessary condition for the group to be given legal subjectivity.

In particular, the differences between the two institutions include the following profiles:

'''Purpose of the contract'''

The firm network contract is signed for the pursuit of a specific purpose: to individually and collectively increase its innovative capacity and competitiveness in the market, to be achieved through collaboration or information exchange activities. On the other hand, the consortium contract is signed for the purpose of regulating or carrying out certain stages of the respective enterprises.

'''Joint organization'''

It is provided as an essential element only for the firm network contract. In the event that the definition of the common program of the network provides for the establishment of the common fund and a common body, it must be concluded that we are faced with an organized group and therefore characterized by the presence of legal subjectivity.

'''Profit-making purpose'''

While the consortium purpose is akin to the mutualistic purpose, the network contract can have, indifferently, a mutualistic or lucrative purpose depending on the activity carried out and indicated in the program (i.e., depending on whether the intent of the network enterprises is to share profits or to achieve a direct advantage in terms of lower costs or higher revenues).

'''Provisions about formalities'''

Only the written form is needed for the consortium (and only for consortia with external activities a form suitable for registration in the Commercial Register).

= Industrial Districts (ID) =
A district is an agglomeration of enterprises, generally of small and medium size, located in a circumscribed and historically determined territorial area, specialized in one or more phases of a production process and integrated through a complex network of economic and social interrelations.

Compared to districts, first formally recognized by Law No. 317 of 1991, business networks are distinguished in that they disregard two elements that are instead essential to the former, namely specialization and territory.

The typical characteristics of so-called industrial districts, which only partially coincide with those proper to the network contract, can be summarized as follows:

* there is a need for high specialization in a specific manufacturing sector or industry (typically so-called made in Italy);
* there is typically a high presence of small and medium-sized enterprises;
* the district essentially operates by breaking down production processes into different stages of reduced optimal size. This means that each enterprise included in the district realizes a specific segment of the value chain;
* sub-supply contracts are typically concluded to regulate relations between enterprises in the district;
* common production and organizational know-how is developed.

For further details about industrial districts see "[https://cros-legacy.ec.europa.eu/system/files/the_definition_of_industrial_districts.pdf The definition of Industrial Districts]" written by S. Lombardi on Jun 15-16, 2016.

= [[The company group (under Italian law)|THE COMPANY GROUP]] =
It is governed by Articles 2497 et seq. of the Civil Code and differs from the network contract in that

* coordination among group companies is vertical, pyramidal, hierarchical in nature: one or more companies, called "''holding'' companies," perform management and coordination activities pursuant to Article 2497''sexies'' of the Civil Code over the other companies. According to this rule, it is presumed that the enterprise that is required to prepare annual financial statements in a peculiar manner, or the enterprise that exercises control over the other enterprises, performs management and coordination activities over them, i.e., gives them directives to influence their activities.
* In the network contract, on the other hand, no enterprise assumes the role of main contractor, such that it can be defined as eminently "horizontal". At most, there could be a sort of leadership in the head of one or more network enterprises, varying in competence, that is, for reasons of greater specialization or experience.

= [[Joint ventures|JOINT VENTURES]] =
These are forms of temporary and occasional cooperation between enterprises put in place to jointly carry out a complex work or affair, particularly used in the area of large public and private contracts. A stable organization is not established, but rather a set of mandated relationships in which the various participants take on the guise of principals except for one: the so-called "leader," who is entitled to act ''vis-à-vis'' the principal in the name and on behalf of all concerned.

The essential characteristics of joint ventures are as follows, indeed not to be considered extraneous to the network contract:

* joint ventures are formed for the implementation of a single work of a complex business;
* the individual enterprises that are part of a joint venture also maintain their autonomy during the execution of the contract, not giving rise to any form of joint exercise of an economic activity.

The distinction, more precisely, lies in the circumstance that the objective of a joint venture is a project, not an activity, such as that regulated with the network program, which is functional for the growth of the individual participating enterprise.

= [[The European Economic Interest Grouping (EEIG)]] =
The EEIG, introduced by Legislative Decree 240/1991, is a plurilateral associative contract with a common purpose, necessarily transnational and made up of subjects carrying out heterogeneous activities (not necessarily commercial entrepreneurs), the purpose of which is to facilitate cross-border cooperation by developing the economic activity of the members, leaving ample autonomy to the contracting parties in outlining its organization and discipline.

The essential distinction from business networks is easy to identify:

* at least two members must have their central administration and/or must carry out their economic activity in states other than the European Union;
* while it has legal subjectivity, it lacks patrimonial autonomy, resulting in the unlimited liability of its members.

= Franchising (or affiliation contract) =
It is a contract between legally independent parties, by virtue of which one party ('''franchisor''') grants the availability to the other party ('''franchisee'''), in exchange for remuneration, of a set of industrial or intellectual property rights. In this way the '''franchisee''' is included into a system consisting of a plurality of other franchisees distributed throughout the territory, in order to market certain goods or services. This is, indeed, quite different from the network contract: in the affiliation contract a plurality of services typical of other named contracts (license to use distinctive signs, administration, service contract, lease or commodity loan of movable or immovable property) converge, unitedly aimed at achieving full economic integration between franchisor and franchisees.

For further details about franchising see "[https://www.investopedia.com/terms/f/franchisee.asp#:~:text=Examples%20of%20well%2Dknown%20franchise,Block%20(NYSE%3A%20HRB). Franchisee: Definition, Examples, Benefits, and Responsibilities]".

For some examples see "[https://mktoolboxsuite.com/franchise-examples/ 10 Brilliant Franchise Examples to Learn From (in 2022)]".

= References =

* F. Cafaggi, ''Il contratto di rete nella prassi. Prime riflessioni'', in ''Contratti'', 2011, pp. 511 et seq.
* G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 255-291.
* G. F. Campobasso, ''Diritto commerciale'', vol. II, ''Diritto delle società'', UTET Giuridica, Milano, 2022, pp. 640 et seq.
* G. F. Campobasso, ''Diritto commerciale'', vol. III, ''Contratti, titoli di credito, procedure concorsuali'', UTET Giuridica, Milano, 2022, pp. 33 et seq.
* P. Corrias, ''Cooperazione tra imprese appaltatrici e responsabilità verso terzi'', in ''Responsabilità civile e previdenza'', 2016, pp. 736 et seq.
* A. Gentili, ''Una prospettiva analitica su reti di imprese e contratti di rete'', in ''Obbligazioni e contratti'', 2010, pp. 87 et seq.
* M. Libertini, ''Contratto di rete e concorrenza'', in ''Giustizia civile rivista trimestrale'', 2014.
* G. Meruzzi, ''Notazioni in tema di soggettività giuridica della rete'', in ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', edited by G. Meruzzi, 11 aprile 2012, pp. 15 et seq.
* E. Mugnai, ''“Contratti di rete” e attività di direzione e coordinamento'', in ''Rivista di diritto societario'', 2015, pp. 823 et seq.
* P. Saccomanno, ''Il contratto di rete: profili di un’indagine aperta'', in ''Contratto e impresa'', 2017, pp. 673 et seq.
* P. Zanelli, ''Reti di impresa: dall’economia al diritto, dall’istituzione al contratto'', in ''Contratto e impresa'', 2010, pp. 951 et seq.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The core developers of a dao

2023-08-23T16:29:39Z

Moratoc: /* References */

== Definition ==
The core developers are in charge of developing the software that is, for all intents and purposes, the skeleton on which the [[DAOs: essential legal issues|decentralized autonomous organization]] operates, and they define, together with the [[THE FOUNDERS OF A DAO|founders]] of the organization, the rules referred to in the whitepaper, which can basically be traced back to the [[SMART CONTRACT AND ESSENTIAL LEGAL ISSUES|smart contract]].

In other words, the members of the core developing team are the only ones who hold the key to being able to modify the code. In this sense, each line of code constitutes to all intents and purposes, on the one hand, a strategic or managerial choice of the organization, involving the entire blockchain and, therefore, all participants in the network, and on the other hand, a technical choice that is functional to reflect the defined objectives.

The developers, it is pointed out, are not directly accountable to [[The token holders|token holders]].

In most cases, core team members are part of the bodies of associations or [[Foundation (under Italian Civil Code)|foundations]], which are thus responsible for coordinating and promoting the network underlying the [[DAOs: essential legal issues|DAO]], while also making strategic choices.

== References ==

* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', 22 Nov 2017, p. 11, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2998830
* R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, p. 386.
* C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 5.

[[Category:MUSA Tech4Fin Milestone 1]]
[[Category:MUSA DOLaw]]

Joint ventures

2023-08-23T16:27:30Z

Moratoc:

== The phenomenon ==
Joint ventures are temporary and occasional forms of cooperation between enterprises set up to jointly carry out a complex work or business. For the most part, these are large public or private works that exceed the operational capacity of a single enterprise but, at the same time, have characteristics that allow for the cooperation of several separate enterprises in their implementation.

It is a widely spread phenomenon in the international arena.

The firms that join together want yes to join forces and cooperate with each other in the execution phase of the work, but at the same time they want to retain their operational autonomy. They each want to execute directly, with their own means and organization, a part of the work.

The enterprises concerned present themselves to the other party as separate but related enterprises. They submit a joint bid and jointly undertake to execute the overall work, entrusting one of them (parent company) with the task of jointly managing relations with the client and coordinating the work in the execution phase. Each enterprise retains full legal and economic autonomy in the completion of part of the work and is directly accountable to the client for the part under its responsibility.

Such forms of cooperation constitute, according to case law, unnamed associative contracts, an expression of the contractual autonomy of the parties under Article 1322 of the Civil Code. These phenomena, in fact, have not yet received, in Italy, an organic and unified discipline that considers both internal and external profiles of their activity.

== Liability regime ==
A distinction must be made according to whether the work is divisible or not.

Non-splittable work: the companies are all jointly and severally liable for the entire work. The division of work in the execution phase is only of internal relevance.

Unsplittable work: only the so-called parent company is liable for the entire work. The other combined enterprises are only liable for the execution of the part under their responsibility.

== Relations between companies ==
The legislature gives full freedom to the combined enterprises with regard to relations among themselves and toward third parties (other than the client).

Enterprises are free to maintain the minimum functional connection that derives from the collective mandate or to set up a common organization of a consortium type, intended to coordinate and regulate the execution of the work.

In addition, companies may establish a company among themselves, which automatically takes over the execution of the work, without the need for the client's authorization.

However, the liability regime of the combined companies is retained.

== Reference ==
G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 287-292.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Agency Theory

2023-08-23T16:26:27Z

Moratoc:

== {{Musa cat}}Definition of the theory ==
Agency theory has long concerned disciplines as diverse as economics, finance, law, politics and psychology. Scholars who approached the concept attempted (and to a large extent still attempt) to explain with it the relationship that exists, typically within a business in corporate form, between ownership (or the owner) and control (or the one who is charged with managing).

Jensen and Mecking, two scholars in finance, defined the agency relationship, in a groundbreaking article published in 1976, as “''a contract under which one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent''”.

The same authors, in formulating this felicitous definition, also introduced the fundamental issue: “''if both parties to the relationship are utility maximizers there is good reason to believe that the agent will not always act in the best interests of the principal''”. This divergence of interests, which often manifests itself in practice, notably between the shareholders and the directors of a company, makes it (generally) structurally impossible for the agent to make zero cost decisions that are optimal from the principal's point of view.

== Agency costs ==
In light of this consideration, the authors of the research identified the fundamental agency costs, which increase,

* Proportionally, as the divergence of goals and interests between agent and principal increases;
* Inversely proportionally, as trust between the two parties decreases.

Specifically, according to the authors agency costs can be enucleated as follows:

* “''the monitoring expenditures by the principal''”: that is, the costs that the principal has to incur in carrying out, essentially, monitoring activities on the agent's activity in order to prevent and limit opportunistic behavior;
* “''the bonding expenditures by the agent''”: i.e., the costs that the agent is required to incur in order to gain the principal's trust, notably by assuring the principal that he or she will not make decisions likely to cause him or her harm and that, even if this happens, the harm will be compensated;
* “''the residual loss''”: it occurs whenever there is a divergence between the interests of the principal and the agent and between the decisions taken in one or the other direction, despite monitoring and bonding activities.

The costs thus described occur indeed whenever there is a “''separation of ownership and control''”, since it is always difficult to induce the agent to behave in a way that maximizes the principal's profit (or interests). This happens in every organization and corporation, lucrative or not, as well as at every level of management, in universities, and even at the governmental level.

== Information asymmetry ==
A problem related to agency theory is that of information asymmetry, which structurally exists between ownership and control.

Information asymmetry refers to the difference in information available to the two parties (or contractors). As a rule, in fact, managers have access to information regarding the internal organization of the company and the operations carried out by the company. At the same time, shareholders do not have the necessary expertise to understand whether corporate operations are in fact consistent with their own interests. Therefore, it is often possible for managers to engage in opportunistic behavior also and precisely because of the information in their possession. And indeed, the presence of information asymmetries hinders, in general terms, the achievement of a social optimum through free bargaining between the parties.

Information asymmetry generates two problems:

* c.d. adverse selection: the principal, in choosing the agent, cannot make an optimal choice, as he lacks useful information to accurately assess the actual capabilities of each candidate;
* c.d. moral hazard: it occurs when the agent abuses the principal's lack of information. In this sense, the agent indulges in misbehavior because he knows that the principal does not have the information, or, in any case, the expertise, to discover such improprieties.

== References ==

* ''Agency Theory: Definition, Examples of Relationships, and Disputes'', available at https://www.investopedia.com/terms/a/agencytheory.asp

* J. Bendickson, J. Muldoon, E. Liguori, P. Davis, ''Agency theory: background and epistemology'', in ''Journal of Management History'', 2016, pp. 437-449, available at https://www.researchgate.net/publication/307981546_Agency_theory_background_and_epistemology/link/5b7858c7299bf1d5a7149a2a/download

* M. C. Jensen, W. H. Meckling, ''Agency costs and the theory of the firm'', in ''Journal of Financial Economics'', 1976, pp. 305-360, particularly p. 308.

* F. Zogning, ''Agency Theory: A Critical Review'', in ''European Journal of Business and Management'', 2017, pp. 1-8, available at https://www.researchgate.net/publication/364812853_Agency_theory_A_critical_review
{{MUSA DO Law}}

Corporate governance

2023-08-23T16:25:01Z

Moratoc:

== Definition of corporate governance ==
According to Cadbury Code of 1992, the first [[Corporate governance code|Corporate Governance Code]], “''Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations, and the shareholders in general meeting''”.

In general, the term, a U.S.-derived expression, refers, literally, to the governance of companies and, even more precisely, to companies in the form of corporations. These companies are characterized, in Italian law but indeed also in most legal systems, by the presence of different bodies having different functions. There tends to be a body that deals with the management of the company's business (the directors or board of directors), the shareholders' meeting, which is composed by the owners of the shares issued by the company, and a control body.

It is often believed that corporate governance concerns mainly large companies, but this is not the case.

The expression indicates, on the one hand, the set of rules, laws, and processes on the basis of which the proper management of the enterprise is ensured, on the other hand, the activity itself of administration and control of the corporation.

More precisely, therefore, the phenomenon is directed to regulate, on the one hand, the balance of power between the functions (and the bodies in charge) of administration and control, and on the other, the relations between shareholders. In this sense, the aim of corporate governance is to achieve a high degree of systematicity.

Again, corporate governance can be understood as an element of risk for investors, whose interests may not be protected in case of ineffectual or corrupt managers, and for employees, communities, lenders, suppliers, and costumers as well. And indeed, it is precisely corporate governance, with its rules and procedures, that must respond effectively and efficiently to a decisive challenge: "''how to grant managers enormous discretionary power over the conduct of the business while holding them accountable for the use of that power''"<ref>R. A. G. Monks, N. Minow, ''Corporate governance'', John Wiley & Sons, Ltd, England, 2008, pp. 3, 225.</ref>.

It seems clear, at this point, the difficulty of identifying a unified definition of corporate governance, a concept that has indeed attracted the interest of multiple academics, even more so where its complexity is intended to be fully grasped by such a definition. Therefore, it seems useful to propose, briefly, several possible externalizations of it, which in turn are the manifestation of different points of view and interests.

* From an operational perspective<ref>B. Tricker, ''Corporate governance. Principles, Policies, and Practices'', Second Edition, Oxford, 2012, p. 29.</ref>: corporate governance concerns the actions of shareholders, the board of directors and management, and the control body.

* From a relational perspective<ref>B. Tricker, ''Corporate governance. Principles, Policies, and Practices'', Second Edition, Oxford, 2012, p. 30.</ref>: the governance structure implies a precise distribution of powers, duties and responsibilities among the different corporate bodies, identifies the rules underlying the decision-making processes and, consequently, the relationship between the parties involved.

* From financial and economic perspective<ref>B. Tricker, ''Corporate governance. Principles, Policies, and Practices'', Second Edition, Oxford, 2012, p. 30.</ref>: corporate governance concerns, also, the way in which shareholders obtain a return for their investment.

* From a societal perspective<ref>B. Tricker, ''Corporate governance. Principles, Policies, and Practices'', Second Edition, Oxford, 2012, p. 31.</ref>: governance also aimed at balancing economic and social goals, individual and collective interests.

The governance arrangement, in other words, must be functional in ensuring the efficient use of resources. In this sense, beyond, albeit important, ethical and philosophical reflections around the relationship between the individual, the state and the enterprise, there is to be noted an increasingly strong attempt to involve the instances of subjects outside the corporate apparatus and who are also bearers of interests related to business activity (so-called [[The stakeholders|stakeholders]]), such as employees, consumers, suppliers and banks.

Lastly, it is possible to look at how “Corporate governance” is differently defined by the Corporate governance codes of different nations, as can be found on [https://documents1.worldbank.org/curated/ar/194571468330288811/pdf/346690v20Corporate0governance0Rationale.pdf ''Global Corporate Governance Forum'', ''Vol. I'', ''Rationale'']''.''

== Corporate governance in Italian legislation ==
A fundamental role, in the definition of such a vision, is to be found in the Reform of Company Law set forth in Italian Legislative Decree No. 6 of 2003, whose most salient features, with reference to the company's system of administration and control, can be described as follows.

* Strengthening of the powers of the directors, who are entrusted exclusively with the management of the company.

* Central role attributed to information and transparency, as the basis for the proper actions of the directors, also so as to trace their behavior and the decisions taken by them and assess their possible liability.

* Punctualization of the specific powers and duties in charge of the directors of the joint-stock company, regulating their management role in an innovative way, through a systematic articulation of its content and proceduralization of the techniques adopted.
* Attenuation of the dependence of the directors with respect to the majority in the shareholders' meeting, i.e., with respect to those shareholders who participate the company to a greater extent, who have appointed them and who retain the power to revoke them, or to bring a liability action against them.
* Elevation of the principles of proper administration as a general clause of conduct for directors.
* Importance of the system of internal controls as the essential core of corporate governance.
* Possibility of choosing among three different models of administration and control: the traditional, dualistic, and one-tier models.

== From corporate governance to platform governance ==
So far, reference has been made to companies in a hierarchically structured corporate form, oriented toward achieving the corporate purpose stated by the shareholders and maximizing their profit, through the distribution of profits and the increase in the value of the shares.

However, it is interesting to draw attention to the ongoing development of new organizational forms, characterized by a horizontal and more democratic dimension, notably through the use, in the most diverse corporate functions, of new technologies (artificial intelligence and distributed ledgers).

The phenomenon, known as CorpTech<ref>L. Enriques, D. Zetzsche, ''Corporate Technologies and the Tech Nirvana Fallacy'', in ''Hastings Law Journal'', 2020, p. 72.</ref> (from a crasis, precisely, of the terms "corporate" and "technology"), is allegedly bringing about a deconstruction of the typical architectures of corporate governance, leading first to phenomena of so-called platform governance, and finally to community-driven governance. These organizations are managed through digital platforms, open to the community and marked by a decentralization of decision-making hubs.

For further details see "[[Platform governance]]".

== References ==

* D. Corapi, ''Corporate governance'', in ''Riv. dir. comm.'', 2019, pp. 1 ss.
* L. Enriques, D. Zetzsche, ''Corporate Technologies and the Tech Nirvana Fallacy'', in ''Hastings Law Journal'', 2020, p. 72.
* M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of “Corporate” Governance: Hello “Platform” Governance'', in ''European Business Org. Law Review'', 2019, pp. 171 ss., available at https://link.springer.com/article/10.1007/s40804-019-00137-z
* P. De Filippi, B. Loveluck, ''The invisible politics of Bitcoin: governance crisis of a decentralized infrastructure'', in ''Journal of Internet Regulation'', 2016, p. 2.
* R. A. G. Monks, N. Minow, ''Corporate governance'', John Wiley & Sons, Ltd, England, 2008, pp. 3, 225.
* P. Montalenti, ''Amministrazione e controllo nella società per azioni: riflessioni sistematiche e proposte di riforma'', in ''Rivista delle società.'', 2013, pp. 42 ss.
* B. Tricker, ''Corporate governance. Principles, Policies, and Practices'', Second Edition, Oxford, 2012, pp. 29-31.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Corporate governance code

2023-08-23T16:22:35Z

Moratoc:

== Self-regulation as a source of corporate governance ==
[[Corporate governance]] is a progressive, ever-evolving reality, influenced, in its formation and adaptation, by regulatory acts, market forces, and cultural and social movements.

Market automatisms are indeed insufficient to solve the problems peculiar to corporations, typically related to the misalignment of interests between their ownership and control, which can be explained through the well-known [[Agency Theory|agency theory]].

The limitations of corporate law derive, essentially, from its nature as a heteronomous source. The legal norm, in fact, directs the will of the individuals to which it is subject, but it does not have any influence on it, since it is not the result of a process of reflection and repentance of these individuals.

Another source of governance becomes, therefore, that which is formed within the business environment itself, more functional in ensuring the genuine formation of business ethics, which is the basis of good corporate governance. Attention to such good governance does not, therefore, derive from external rules, but is rather the product of so-called moral suasion, that is, the belief on the part of businesses in the need for self-discipline.

Clear, in any case, is the importance of a stable connection between corporate governance codes and state-source corporate law. In particular, where corporate law reaches, there is no need for self-regulation to intervene; if, on the other hand, corporate law is silent, it is important for self-regulation to fill in the gaps.

== The principle of "comply or explain" ==
Each company should therefore have its own code, specifying and clarifying, in particular, the roles and functions of corporate bodies.

These codes have, in the various countries (an essential overview of which is given below), different sources and origins, but equally have an essentially voluntary basis. And indeed, the only obligation for companies is to communicate externally (so-called disclosure) the adoption or non-adoption of the code, as well as, possibly, from which individual standards they have deviated. This is the principle of comply or explain, where fundamental is not so much the decision itself, but rather its justification. It is precisely from this obligation to explain that, if not an obligation to adopt the code (which, as mentioned, does not exist), at least a kind of presumption, on the part of the legislature, of its adoption is inferred.

According to Italian law, it is up to the directors of the company to decide whether or not to adopt the code, with only a judgment of expediency on the directors' decision remaining with the shareholders.

The rules dictated by the self-regulatory code, if implemented, end up acquiring, directly by statute and indirectly by law, binding force.

== European corporate governance codes: an overview ==
'''1)''' [https://www.ecgi.global/code/cadbury-report-financial-aspects-corporate-governance Cadbury Code 1992]

This is the Report of the Committee on Financial Aspects of Corporate Governance, better known as the Cadbury Report by Adrian Cadbury, chairman of the committee. Submitted on 1.12.1992, it is the first and most important report on corporate governance.

'''2)''' [https://www.borsaitaliana.it/comitato-corporate-governance/codice/2020eng.en.pdf Italian Corporate Governance Code 2020]

Fur further details see [https://www.assonime.it/attivita-editoriale/studi/Pagine/Report-on-Corporate-Governance-in-Italy-the-implementation-of-the-Italian-Corporate-Governance-Code_2021.aspx the Report on Corporate Governance in Italy: the implementation of the Italian Corporate Governance Code].

'''3)''' [https://www.frc.org.uk/getattachment/5aae591d-d9d3-4cf4-814a-d14e156a1d87/Stewardship-Code_Dec-19-Final-Corrected.pdf UK Stewardship Code 2020]

'''4)''' [https://www.fresenius.com/sites/default/files/2022-12/220627_German_Corporate_Governance_Code_2022.pdf German Corporate Governance Code 2022]

== References ==

* M. Tonello, Corporate governance ''e tutela del risparmio. Convergenza internazionale e competizione tra modelli regolamentari'', in ''Trattato di diritto commerciale e di diritto pubblico dell’economia'', edited by F. Galgano, vol. XXXV, Cedam, Padova, 2006, pp. 197-198-377.
* L. Enriques, ''Codici di “''corporate governance''”, diritto societario e assetti proprietari: alcune considerazioni preliminari'', in ''Banca Impresa Società'', 2003, p. 99.
* M. Cera, ''Le società con azioni quotate nei mercati'', Zanichelli, 2020, pp. 123 ss.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The stakeholders

2023-08-23T16:20:30Z

Moratoc:

== Definition<ref>[https://www.borsaitaliana.it/borsa/glossario/stakeholder.html]</ref> ==
Person interested in the performance of an enterprise to which he or she is linked through relationships of various kinds.

To the category of stakeholders belong:

* the shareholders (shareholders) interested in both profits and capital gains;
* creditors (debtholders) interested in the repayment of interest and the face value of debt;
* the customers, interested in the quality of the products;
* the suppliers, interested in the payment of goods;
* employees, interested in the receipt of wages and the quality of the work environment;
* other categories of stakeholders belonging to the environment in which the enterprise operates.

== The role of stakeholders in corporate governance ==
Stakeholders, precisely because they are interested in the performance of corporate entrepreneurial activity, have assumed an increasingly important role, on the one hand, in the discussions of academics at an international level, and on the other, for corporate policies. In particular, their voice acquires prominence in the context of discussions around sustainable companies, i.e. companies that pursue the so-called ESG factors: Environment, Social, Governance.

For example, the Italian [[Corporate governance code|Corporate Governance Code]] recalls the importance of achieving a so-called sustainable success, defining it as “''the objective that guides the actions of the board of directors and that consists of creating long-term value for the benefit of the shareholders , taking into account the interests of other stakeholders relevant to the company''”.
<references />

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The miners

2023-08-23T16:19:50Z

Moratoc:

== Definition ==
The miners are responsible for the activity known as “[https://www.simplilearn.com/bitcoin-mining-explained-article blockchain mining]”.

These workers make their computers available to the blockchain for the purpose of verifying transactions made on it, typically transactions involving cryptocurrencies, approving them and enclosing them into blocks to be added to the blockchain.

Their task is to solve a mathematical problem with brute-force methods (so-called “proof-of-work”) in order to make a block of transactions valid to be concatenated to others. This method consists of trying all possible solutions to a question until the exact one is found.

They receive, in turn for their work, a fixed amount of cryptocurrencies generated ''ex novo''.

In other words, their job can be divided into the following phases.

# To make a new block of the blockchain, the network creates a [https://www.investopedia.com/terms/h/hash.asp hash] for the block of transactions.Miners start generating hashes through their computers.
# The first miner to generate a hash gets to attach the block to their copy of the blockchain.
# Other miners check the block is correct.
# The miner receives his reward.

== Miners in a decentralized autonomous organization ==
Usually, individual miners, in order to maximize their earnings, gather in “mining pools”, which are regulated at the technological level, based on protocols that coordinate the actions of hundreds or thousands of members.

Otherwise, the miners work in competition with each other: the fastest to get a valid block, thus the one with the most computational power, can hook it into the blockchain.

In turn, mining pools are controlled by so-called “mining pool operators”, who possess large amounts of computers and, consequently, a strong power of control over the organization for which miners work, including the possibility of directing its resources, at their discretion, in one or the other direction generated in the event of a fork.

In this sense, when they work for a decentralized autonomous organization, they stand at an intermediate level between core developers and token holders. And indeed, they are not directly part of management, as they cannot implement or modify the code, and yet they exercise a strong power of informal control through, precisely, the activity of validating operations. This circumstance, as is clear, risks causing a dangerous friction between the power they exercise and the interests of the organization's participants.

== References ==

* U. Buonora, ''Spiegazione dei fondamenti'', in ''Criptoattività, criptovalute e'' bitcoin, edited by S. Capaccioli, Giuffrè, Milano, 2021, p. 63.
* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by P. Hacker, I. Lianos, G. Dimitropoulos, and S. Eich, Oxford University Press, 2019, p. 32.
* ''How Does Bitcoin Mining Work?'', available at https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrency-stocks/bitcoin-mining/

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The self regulation of a DAO

2023-08-23T16:19:16Z

Moratoc:

== Rule of code ==
The need for regulation of the DAO is partially met through the providing of the rule-of-code principle, also known as "''code-is-law''" or "''law code''" which incorporates, on closer inspection, the very definition of [[SMART CONTRACT AND ESSENTIAL LEGAL ISSUES|smart contract]].

And indeed, every blockchain-based organization needs a blockchain governance code, which should provide, as a minimum content, rules concerning

* the constitution of internal bodies, representative of token holders and possibly of different categories of [[The stakeholders|stakeholders]];
* decision-making processes;
* the rights and duties of participants;
* the duties of [[The core developers of a dao|core developers]];
* the rules of so-called hard fork proceedings;
* the activities of [[The miners|miners]].

This content should be prepared by a representative group of experts and stakeholders.

Analyzing the issue more closely, it can be seen that if, on the one hand, there is indeed a desire for greater regulation of the organizations in question, considering it as an incentive for their establishment and participation on the basis of a fundamental principle of legal certainty, on the other hand, the idea has been put forward that the introduction of new rules could, on the contrary, constitute a disincentive for those seeking high flexibility and autonomy, also benefiting previous participants over new ones.

The issue, however, would lose its problematic connotation where one considers the comply-or-explain regime that characterizes corporate governance codes, among which the blockchain governance code may well rank. In this sense, each organization could and should decide whether or not to adopt the code, giving notice of the choice to third parties, by appropriate means. According to some authors, for cryptocurrencies or exceptionally important organizations the self-regulatory code should be replaced with a binding regulation.

Once the typical content of the code has been identified, a further question arises, relating to its effectiveness, given also and precisely the organization's decision-making autonomy in this regard. On this point, it should be considered that

* it may be useful to provide incentives for those who adopt the code;
* it is important that said codes include, in particular, rules on the participation of token holders, so that they are incentivized, upstream, to adopt the code, downstream, to participate in the life of the entity;
* consideration should be given to erecting barriers to entry for newly established organizations.

== Gap filling ==
That said, there is a main issue that would require further analysis, with reference to the internal regulation of the DAO and the contract on which it is based, given that it is a smart contract. We refer, in this sense, to the costs arising from the inflexibility of the programming code and the characteristics of the computer code. In particular,

* it is impossible for the code to provide the governance scheme entirely, without relying on general and standard clauses that can be used to fill any gaps (so-called gap filling mechanism);
* at the same time, the inclusion of general clauses such as the concept of contractual good faith can hardly be envisaged, precisely because of the difficulty of guaranteeing effectiveness to such broad concepts through the automatisms typical of smart contracts;
* the irreversibility of transactions makes it particularly difficult to correct any material errors, for example in entering the address of the recipient of a transaction, and thus restore the ''status quo'' prior to the transaction, unless the consent of the counterparty is reached, but this is net of the difficulties of cooperation inherent in the multiplicity of nodes involved.

== References ==

* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', 2017, pp. 21-23-25.
* A. Wright, ''The rise of decentralized autonomous organizations: opportunities and challenges'', in Blockchain & Procedural Law: Law & Justice in the Age of Disintermediation seminars, 2021, p. 171.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The token holders

2023-08-23T16:17:30Z

Moratoc:

== Some brief notes on tokens ==
The token holders are the owners of tokens, which can briefly be described as computer files created within a Distributed Ledger Technology (DLT) network and recorded in a common database.

Having posited this first, essential definition, it is believed that the substantive and legal nature of tokens is more readily understood where it is defined by moving from a number of distinctions.

First, tokens are distinguished, on the basis of the function to which they are preordained, into:

* tokens representing cryptocurrencies, with no embedded rights or liabilities;
* payment tokens, which are intended to replicate the functions of currency, maintaining a fixed value and representing the liabilities of the issuer. They include stablecoins, tokens issued by central banks (being tested) and non-convertible tokens;
* utility tokens, which are non-tradable and incorporate only administrative rights or user licenses. These include Non Fungible Tokens (NFTs), which represent ownership rights to unique (non-fungible) physical or digital assets;
* asset or security tokens (investment tokens). These, in particular, are negotiable and transferable, representing entrepreneurial projects, or physical and financial assets that give the holder property and administrative rights.

The tripartition into payment tokens, utility tokens and security tokens has been officially proposed by FINMA (Swiss Market Supervisory Authority) in the “''[https://www.finma.ch/en/~/media/finma/dokumente/dokumentencenter/myfinma/1bewilligung/fintech/wegleitung-ico.pdf Practical Guide to Initial Coin Offerings]''” published on Feb. 16, 2018.

The same was later reiterated by the EBA ([https://www.eba.europa.eu/about-us European Banking Authority]) in “''[https://www.eba.europa.eu/sites/default/documents/files/documents/10180/2545547/67493daa-85a8-4429-aa91-e9a5ed880684/EBA%20Report%20on%20crypto%20assets.pdf?retry=1 Report with advice for the European Commission on crypto-assets]''”, published on Jan. 9, 2019.

However, according to some scholars, this tripartition has a purely indicative value, because it is important to better consider the complexity realty of tokens, thus proceeding with a case-by-case analysis, in order to make a correct classification.

Second, based on the issuing procedure, tokens are distinguished according to whether they are:

* issued in one slot;
* minted by a defined entity and offered through an ICO ([[Initial Coin Offerings (ICOs): legal issues according to Italian law|Initial Coin Offering]]) or an IEO (Initial Exchange Offering).

== Brief notes on security tokens ==
Security tokens can, in turn, be distinguished into:

* digitally native security tokens: programmable financial instruments, created as smart contracts residing on a DLT, which can form the basis of, e.g., so-called "Distributed autonomous organizations" (DAOs);
* purely synthetic security tokens;
* security tokens originated by traditional financial entities.

== The token holders in a decentralized autonomous organization ==
Those who have conferred crypto assets to a decentralized autonomous organization (DAO), thus receiving security tokens in turn, become members of the organization.

They can obtain governance or non-governance tokens (for further details see “[[DAO Governance|DAO governance]]”), so their rights, which derive from the tokens themselves, can vary.

In general, DAO’s tokens grant:

patrimonial rights:

* return on investment - in this sense there are to possible type of benefit: (1) the token owner can receive different types of benefits, such as discounts, additional token or cash; (2) the owner can resell its token and thus obtain additional amount of cryptoassets;

administrative rights:

* right to public proposals on the shared platform, both in relation to new transactions and, for example, in order to change the DAO's organizational rules;
* voting rights.

== References ==

* G. Farina, Blockchain'','' DLT'','' ''valute virtuali, cripto-attività: la disintermediazione finanziaria'', in ''Diritto dell’innovazione'', edited by A. Blandini, Cedam, Milano, 2022, p. 449.
* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by P. Hacker, I. Lianos, G. Dimitropoulos, and S. Eich, Oxford University Press, 2019, p. 32.
* R. Piselli, ''Quando la decentralizzazione delle DLT incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, pp. 373 ss.
* C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 5.
* A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, pp. 206-207.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The governance of DAOs

2023-08-23T16:15:33Z

Moratoc:

= From corporations to decentralized organizations =
In order to understand the functioning and organization of the DAO, assimilating it, in analytical perspective, to the broader phenomenon of organizations based on blockchain, it is necessary to preliminarily distinguish between external and internal governance profiles.

* Internal governance: concerns the decision-making processes of the organization's participants, which require rules of procedure, often contained in a so-called blockchain governance code.
* External governance: a key legal issue concerns the ability of token holders to exercise their right of exit, either by selling their assets or by initiating a split (so-called fork). In particular, they can disinvest if they feel that the enterprise is not properly managed.

What immediately emerges, in this sense, is the attempt to assimilate decentralized organizations to corporations, at least to derive indications in terms of internal organization and governance.

On the one hand, the differences between the two organizational forms are indeed undeniable, especially on the structural level, given that corporations are based on [[Agency Theory]], which well describes the existing relationship between the ownership of the enterprise (shareholders) and the control of it (managers), based on an eminently hierarchical structure.

On the other hand, however, the comparison between the two phenomena appears useful, among others, for three essential reasons:

# Both corporations and decentralized organizations face the challenge of coordinating and controlling the behavior of different actors: some with direct or indirect management functions (directors; core developers; miners), others spread horizontally, connected in collective structures (shareholders; token holders). And indeed, although the horizontal and democratic nature of blockchain-based organizations has been theorized, it has been noted in practice how the separation of ownership and control has in fact been maintained.
# Both organizations (hierarchical or otherwise) face the same problems related to human decision-making processes, which suffer from the limitation of personal cognitive capabilities. The only possibility of overcoming the resulting difficulties lies, on the one hand, in the division of tasks and, on the other, in the enhancement of specific skills.
# The tokens issued by blockchain-based organizations are not only a decentralized payment method, but also, and more importantly, a way to finance entrepreneurial projects, which would otherwise require the establishment of companies.

In conclusion, “''many of the problems that corporate governance should solve reappear in cryptocurrencies and decentralized enforcement schemes. It is clear, however, that in adapting corporate governance concepts to cryptocurrencies, we must take into account not only the similarities but also the profound differences between these entities''<ref>· P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, p. 21.</ref>”.
{| class="wikitable"
|

'''DAO'''
|

'''COMPANY'''
|-
|

Loose
|

Tight
|-
|

Grassroots
|

Hierarchical
|-
|

Transparent
|

Usually not transparent
|-
|

Open
|

Invite-only
|-
|

Fully global
|

Not always global
|}
Table: A. Dhanani, B. J. Hausman (2022), p. 2.

= The administration of a DAO =
Managerial and organizational decisions, within the DAO, are made by the token holders, based on a bidirectional relationship between token and governance: on the one hand, the token is an instrument of governance, in that it confers property rights (right to profits) and administrative rights (right of proposal; right to vote); on the other hand, the rules of organization and power relations affect the value of the token itself.

Under the Wyoming regulatory framework (for further details see [[DAOs’ current forms of regulations: an overview]]), in particular, the administration of the DAO can be entrusted to the members (member managed decentralized autonomous organization) or to a smart contract (algorithmically managed decentralized autonomous organization). The former constitutes the rule: it applies in the absence of an express statutory exception.

= On-chain and off-chain governance. =
Blockchain governance can take place in two ways.

* Off-chain governance. Most private organizations are governed in this way. These structures actually appear decentralized, but it is always possible for participants to organize a mutiny. They, in fact, in case of disagreement with the governance protocol used, can initiate a hard fork, creating a parallel blockchain.
* On-chain governance. Participants vote directly within a self-governing and democratic structure.

It should be pointed out that, even in this second model, not all decisions are made in a decentralized manner: while it is true that the activities conducted by organizations are carried out through a self-governance structure, it is also true that they remain influenced, inevitably, by the external market. In particular, here again an external crisis situation may result in the need to proceed with a hard fork, a decision that in effect assumes the connotations of a centralized decision.

= The "one token-one vote" principle and its exceptions =
The types of decisions that can be delegated to token holders, according to the provisions of the smart contract they subscribe for, vary depending on the goals of the DAO and the interests of its participants, who are also incorporated into the code. Typically, they are called upon to vote on any changes or implementations of the code, hiring of employees, business strategies, and new investments.

It is also pointed out that while in traditional enterprises decisions remain private, in DAOs these are transparent and public.

As a general rule, it is possible to identify the operation of the "one token-one vote" principle, whereby the weight of the vote depends on the amount of tokens owned.

At the same time, however, certain exceptions to this principle can be identified.

* First, a distinction must be made between governance and non-governance tokens, as only the former attribute actual decision-making power regarding the development and the operations to be carried out on the blockchain (for further details: https://academy.binance.com/it/articles/what-are-governance-tokens#);
* moreover, not all governance tokens, in any case, necessarily grant voting power over every organizational and managerial decision-making aspect.
* Again, note how some DAOs include a requirement that tokens be deposited in order to exercise voting rights.
* Finally, it is possible to envisage that some tokens attribute, on the decision-making level, greater weight.

In fact, although, as seen, DAOs are based, as a fundamental premise, on the distribution of ownership and voting power in a democratic and thus egalitarian manner among participants, there are indeed different voting mechanisms.

= The voting mechanisms =

# Reputational voting: those who have obtained a good reputation – a concept, however, extremely difficult to assess in the absence of predefined and agreed-upon indices – against their activity exercised in the DAO, obtain tokens attributed with greater weight in terms of voting.
# Quadratic voting: one token assigns one vote, while two tokens assign four, so that a large number of tokens ends up granting disproportionate voting power. On the one hand, this incentivizes token purchase and involvement in management; on the other, it risks concentrating power in the hands of a few, betraying those democratic drives that characterize DAOs. Fort further details: https://www.bloomberg.com/news/articles/2019-05-01/a-new-way-of-voting-that-makes-zealotry-expensive#xj4y7vzkg
# Conviction voting: the weight of the vote increases as the period for which the token remains in the ownership of the same entity becomes longer. This, on the one hand, incentivizes the stability of the organization's ownership structure while, on the other hand, discouraging turnover, an equally important element in the life of the entity .
# Holographic consensus voting: this is a multi-stage voting process based on mechanisms for betting on proposals made and published by participants. For further details:https://medium.com/daostack/holographic-consensus-part-1-116a73ba1e1c; Y. Faquir-Rhazoui, J. Arroyo, S. Hassan, A Scalable Voting System: Validation of Holographic Consensus in DAOstack, 2021, p. 5557 ss., available at https://scholarspace.manoa.hawaii.edu/server/api/core/bitstreams/d0686298-aa64-4f41-aa7c-ff4b379d0c87/content
# Liquid democracy: this is a mechanism based on a system of proxies to individuals elected by the participants themselves to represent them. Importantly, the proxy is always revocable. For further details: https://www.peaka.com/blog/web3-dao-voting-mechanisms/; https://blog.xdao.app/unleashing-the-power-of-dao-voting-a-deep-dive-into-dao-voting-mechanisms-and-systems-4d4ece7aed36

= The proposing right =
Tokens grant the right to promote and consult proposals on the DAO platform, regardless of the share held or, at the participants' discretion, only on the basis of qualified holdings.

Usually, governance proposals have a three-stage roadmap: a pre-proposal poll; a draft proposal and finally a governance proposal.

= Some essential problematic issues =
Token holders' direct management powers over the organization results in governance issues that are not immediately resolvable.

# First, there is the risk that decisions made by the organization's participants are often inadequately informed, even in the face of the use of blockchain precisely for informational purposes.
# Second, there is widespread concern toward phenomena of "voter apathy," such that there is a risk that the rights granted to token holders may be rendered ineffective.
# Again, note how often token-holders operate under pseudonyms, implying that a single person could create multiple digital identities and vote with them. In this scenario, voting systems would, in all evidence, lose their democratic connotation, considering that a single participant could control the entire organization.
# The decentralization and, to some extent, democratization of voting mechanisms then leads to the risks of inefficiency that typically result from any attempt to coordinate a plurality of interests and actors.
# Democratic instances, moreover, find a decisive limitation in the costs of entry (so-called barrier costs) for those who wish to become part of the organization, particularly in terms of technological skills.
# Finally, security risks cannot be ignored: any bugs and security breaches in the system in turn require a vote of the members to be resolved. The slowness of the process, however, well may lead to a worsening of the situation, even to the point of encouraging hacking attempts or fraud. Noted in this regard is the example of The Dao case.

According to some authors, the most drastic solution to the problems listed so far is, simply, to rely on the algorithm. «''Such an option implies that token holders should fully trust the functioning of the underlying code. The only governance tool in their hand would be the choice to acquire – or not acquire – the related tokens. Needless to say, algorithmic DAOs build on the (bold) assumption that the underlying code is actually fit for purpose and capable of automatically drive the organization throughout its life''<ref>· O. Borgogno, ''Making decentralized autonomous organizarions (DAOs) fit for legal life: mind the gap'', in ''Questioni di Economia e Finanza'', Banca d’Italia, 2022, pp. 13-14.</ref>».

= The main advantages of DAOs' decision making =
Once we have seen the main issues related to decentralized governance mechanisms, the following is a brief survey of the advantages highlighted by scholars.

* Transactions that are concluded on the blockchain allow for the movement of assets very rapidly.
* Decisions made by the members of the DAO are, as seen, public, which allows for greater verifiability of compliance with the regularity of decision-making processes: first and foremost, the attainment of quorums, where provided, constitutive and deliberative. The decision-making process is, therefore, as well as transparent, secure and autonomous (at least in theory), since, thanks to the rigidity and automatisms of the rules embedded in the smart contract, it guarantees a reduction in opportunistic behavior or, more trivially, errors.
* Blockchain-based decision-making processes are faster as there is no need for prior email communication or proxy voting. In fact, decision-making processes in DAOs are usually continuous; there are no votes reserved for specific times of the year.
* The DAO incorporates information and feedback from a wide range of stakeholders, in multiple different situations and circumstances, allowing for more prudent decisions with long-term positive effects. This, however, while taking into consideration that token hokders tend to have an interest in maximizing the value of their investment in the short term, rather than making decisions that guarantee gains in the long term but result in lowering the value of tokens, which circulate in the secondary market, in the short term.

= References =

* C. Bellavitis, C. Fisch, P. P. Momtaz, ''The rise of decentralized autonomous organizations (DAOs): a first empirical glimpse'', 2022, p. 5, 409, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4074833
* O. Borgogno, ''Making decentralized autonomous organizarions (DAOs) fit for legal life: mind the gap'', in ''Questioni di Economia e Finanza'', Banca d’Italia, 2022, pp. 13-14.
* A. Dhanani, B. J. Hausman, ''Decentralized Autonomous Organizations'', in ''Intellectual Property & Technology Law Journal'', 2022, p. 2.
* Q. DuPont, ''Experiment in algorithmic governance. A history and ethnography of “The Dao”, a failed decentralized autonomous organization'', 2018, p. 160.
* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, pp. 19-21.
* G. Nuzzo, ''Impresa e società nell’era digitale (appunti)'', in ''Banca, borsa tit. cred.'', 2022, I, p. 434.
* P. Ortolani, Decentralized Autonomous Organizations'':'' ''inquadramento giuridico'' de jure condito ''e prospettive'' de jure condendo, in Blockchain ''e'' Smart Contract. ''Funzionamento, profili giuridici e internazionali, applicazioni pratiche'', edited by R. Battaglini, M. T. Giordano, Giuffrè, Milano, 2019, p. 413.
* R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, p. 385.
* H. Qureshi, ''Blockchains should not be democracies'', in ''HackerNoon.com'', 26 Apr 2018, available at https://medium.com/hackernoon/blockchains-should-not-be-democracies-14379e0e23ad.
* O. Rikken, M. Janssen, Z. Kwee, ''Governance challenges of blockchain and decentralized autonomous organizations'', in ''Information Polity'', 2019, p. 409.
* B. Schneider, R. Ballesteros, P. Moriggl, P. M. Asprion, ''Decentralized Autonomous Organizations – Evolution, Challenges, and Opportunities'', in ''Workshop and Models at Work Papers'', 23-25 Nov 2022, pp. 5, 411.
* A. Sims, ''Blockchain and Decentralised Autonomous Organisations (DAOs): the evolution of companies?'', in ''New Zealand Universities Law Review'', 2020, pp. 20-21, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3524674
* A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, p. 2017.
* A. Wright, ''The rise of decentralized autonomous organizations: opportunities and challenges'', in ''Blockchain & Procedural Law: Law & Justice in the Age of Disintermediation seminars'', 2021, pp. 160-163.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

DAOs: essential legal issues

2023-08-23T16:13:34Z

Moratoc:

= DAOs: an essential definition =
DAOs can be defined as "''non-hierarchical organizations that perform and record routine tasks on a peer-to-peer, cryptographically secure, public network, and rely on the voluntary contributions of their internal stakeholders to operate, manage and evolve the organization through a democratic consultation process''<ref>Y. Hsieh, J. P. Vergne, P. Anderson, K. Lakhani, M. Reitzig, ''Bitcoin and the rise of decentralized autonomous organizations'', in ''Journal of Organization Design'', 2018, p. 2.</ref>" .

The operation of the DAO, its structure, organization and the interactions that its participants enact, are contained within a blockchain.

DAOs are also described, as suggested by the same acronym, as decentralized, autonomous and organized organizations, and it is precisely from the integration of these principles that the phenomenon emerges as a "''new organizational design''<ref>C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 3.</ref>".

Some peculiar features of DAOs, considered by a large proportion of scholars as advantageous elements, are:

* stability: every transaction is recorded and stored;
* anonymity: participants can register with their usernames, avoiding exposing their identities;
* knowability: transactions are validated and can be easily verified;
* transparency: the proposals made, the decision-making process, and the allocation and content of powers and duties among participants are knowable.

== Distributed and decentralized ==
Decentralization is imposed by the use of DLTs (Distributed Ledger Technologies) and operates on two distinct levels:

* on the one hand, it eliminates the need for an intermediary in product placement procedures;
* on the other, it marginalizes the role of the corporate model in the conduct of business activity.

The revolutionary profile of DAOs lies in the second of these issues, considering that [[The token holders|the token-holders]] – i.e., those who have obtained, as a counter-performance of the made contribution of cryptocurrencies, tokens attributing the right to vote – directly control the organization and the management of the entity, without the said function being delegated to another entity, tending to be different from the owner, and thus eliminating those so-called [[Agency Theory|agency relationships (and costs)]] that characterize corporations.

In other words, hierarchical and centralized authority (typically the managers) is dispensed with a structure based on cooperation and equality of its participants.

It is precisely the decentralized nature of the DAO that allows to distinguish (partially) such organizations from the increasingly common entities established through [[DAO formation|Initial Coin Offerings]] or through [https://economiapertutti.bancaditalia.it/chiedere-prestito/crowdfunding/index.html?com.dotmarketing.htmlpage.language=3 crowdfunding] activities.

== Autonomous and automated ==
DAOs operate according to the rules contained in the whitepaper, drafted and signed by [[THE FOUNDERS OF A DAO|the founders]], which are encoded in a [[SMART CONTRACT AND ESSENTIAL LEGAL ISSUES|smart contract]] that in turn is executed automatically using the blockchain protocol. Essentially, the smart contract is a computational program consisting of a series of provisions that are applied automatically and autonomously, irreversibly, and which, thanks to blockchain technology, are recorded and stored over time. The rules contained in the code, therefore, enable the operation of the organization without the need for human intervention and coordination.

In other words, the smart contract constitutes the foundational element of the DAO, which defines the [[The self regulation of a DAO|DAO's self-regulation]], according to the fundamental rule-of-code principle, and preserves its assets by tracking its movements.

Again, the automatisms arising from this technology enable the implementation of trust in the organization while reducing transaction costs and costs related to the exchange of information between participants.

== Organized and ordered ==
Blockchain technology, together with the clearly defined rules on it, allows for full transparency regarding the powers and duties of both members of the organization (token holders) and other [[The stakeholders|stakeholders]]. This transparency allows for increased trust in the functioning of the organization and efficiency of management.

= The distinction between DOs and DAOs =
Part of the doctrine distinguishes between DAOs and DOs: in the former, the functions are automatic and self-executing, as the blockchain and smart contracts constitute the communication protocol to enable interaction between algorithmic systems; in the latter, the decision-making and consultation role of the human being is included, while the algorithm acts only as a function of streamlining and automating the governance of the group.

Some authors distinguish instead between “''participatory DAOs''” in which smart contracts are used to collect votes from participants, and “''algorithmic DAOs''” organizations that are entirely algorithmic in their operation.

= DAO formation =
The establishment of a DAO is a complex procedure, carried on by the so-called [[THE FOUNDERS OF A DAO|founders]], as it involves an intersection between empirical-technological profiles, concerning the elaboration of the underlying IT structure of the DAO, and purely legal profiles.

For further details see: [[DAO formation]].

= DAO governance =
The peculiarities of DAOs, deriving in particular from its decentralized nature, are reflected in the decision-making processes of its participants, which constitute the essential core of [[Corporate governance|Corporate Governance]]. The horizontal structure of the organization actually has advantages and disadvantages, and its specificities with respect to traditional corporations still need to be explored.

What is certain is that if, on the one hand, an attempt has been made to identify certain essential rules of its functioning, such as the principle of collegiality, the principle of one-token-one-vote or the principle of the rule of code, it is also true that some of them suffer inevitable exceptions, which constitute full demonstration of the complexity of the structure.

For further information see: [[DAO Governance|DAO governance]].

= DAO subjects =
According to some scholars, a fundamental challenge in the elaboration of a good governance scheme “''is the creation of clearly delineated organs whose members have certain rights and duties''<ref>P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, p. 25.</ref>”. In this sense, DAOs should establish organs for [[The core developers of a dao|core developers]], [[The miners|miners]], and [[The token holders|token holders]].

= The legal status of the DAO: doctrinal proposals =
DAOs, a phenomenon that has developed essentially online without serious reflection on their legal structure, often operate without a clear and predetermined legal status. This leads to uncertainties about the relationship between token holders and between them and the DAO, with the risk that, as they carry out business activities, they are qualified as partnerships. Consequently, there is a risk that the participants will find themselves subject to unlimited liability for corporate obligations, in the absence of adequate awareness of this. It is therefore appropriate that a legally secure framework be created, or at least employed, primarily for the consumers themselves who participate in the business of the DAO.

Most common solutions:

* Establishment of DAOs in the form of corporate entities. Among [[Corporations (under Italian Civil Code)|corporations]], the creation of DAOs in the form of a joint stock company seems more difficult, while creation as a limited liability company seems feasible. Obstacles may arise from the impossibility of representing quotas by means of tokens, which would introduce a circulation mechanism similar to that for shares. An assimilation to one of the [[Partnerships (under Italian civil code)|partnerships]] is suggested.
* Establishment of DAOs in the form of a foundation. The DAO is comparable to the [[Foundation (under Italian Civil Code)|foundation]] by the tendency of immutability of purpose (in the one, the founder's purpose; in the other, the purpose set out in the code) and autonomy from the founder and developers. Among the most commonly used jurisdictions for establishing DAOs as foundations are Switzerland, which has a more flexible foundation law, and the Cayman Islands.

= The purpose of the organization =
The analysis of the legal models used for the establishment of DAOs and the sectors in which they are concretely employed suggests that DAOs can be used for the pursuit of both lucrative and non-lucrative purposes.

In particular, those entities that could potentially benefit by operating as a DAO are:

* Charities or other non-profit organizations. The lack of transparency in modern charitable organizations is a significant concern, leading to a loss of trust between donors and these organizations. However, DAOs offer a solution to this problem, since they operate transparently on a blockchain, making all activities and transactions visible and auditable by donors.
* Financial industry. As the case study of MakerDAO suggests, DAOs could address some of the challenges in traditional banking systems. DAO-based currency systems have the ability to connect the vast number of unbanked individuals worldwide, estimated to be around 1.7 billion adults. This connectivity could enable these individuals to participate in investment and borrowing activities. Although financial DAOs are unlikely to replace traditional financial institutions entirely, they provide a new avenue for investing and engaging in financial activities, resembling traditional financial markets.
* E-government systems. In this sector, DAOs could offer significant benefits, since current government systems are often complex, centralized, and prone to errors due to human involvement. These systems lack transparency and often involve lengthy and costly processes. By incorporating DAOs into government services, operations can be automated, leading to increased efficiency and improved transparency, accountability, and resource management.
* Healthcare industries. In healthcare, a blockchain-based health information exchange (HIE) could reduce transaction costs and data errors. It would enable efficient sharing of patient medical records among healthcare providers, giving patients control over their data sharing.
* Insurance industry. In this sector, applying a decentralized and autonomous approach can reduce information asymmetry, administrative and operational costs and enables regulators to detect suspicious transaction patterns. Automation of insurance business processes can improve security by ensuring confidential client data accessible only to authorized parties.

Limits to the purpose that can be pursued may be imposed by individual national jurisdictions. This means that depending on the jurisdiction and the legal form in which the DAO is incorporated, there may be specific limitations to the purpose.

The Coalition of Automated Legal Applications (COALA)’s “''Model Law for Decentralized Autonomous Organizations (DAOs)''”, recently published in its finalized version, expressly acknowledges that a DAO may not only be a for profit entity, but may be used for multiple non-commercial purposes. For this reason, it suggests that “''the DAO is a legal entity than can be used for commercial, mutualistic, social, environmental or political purposes, the nature of which will be specified in its By-Laws''” (Article 1).

= The applicable law and jurisdiction =
A further issue of complexity concerns the difficulty of identifying the jurisdiction to which the DAO belongs.

As regards the determination of the applicable law, two criteria can be abstractly followed: criterion of incorporation or criterion of actual seat.

The problem is that if the DAO is not incorporated in a particular place, as is the case for companies, the first criterion cannot be applied. At the same time, with respect to DAOs, the second is difficult to apply, as they typically do not have a physically identifiable material organization in a given place; they are managed by nodes from all over the world; they are not connected to servers that could serve to identify a physical place of activity since they run on the nodes of a blockchain, and thus everywhere and nowhere. They are structurally 'open to the world': naturally vocated to attract participants from all over the world and to operate worldwide via distributed nodes. They are therefore by their very vocation opposed to the traditional search for a spatial center of gravity, to the law of which to subject them.

The same problem arises with regard to the identification of the competent judge in disputes involving them.

= Current form of regulation of DAOs: an overview =
In order to solve the uncertainties relating to the absence of a clear legal form and the identification of the applicable law and court of jurisdiction, there has been a tendency to set up DAOs according to clear legal models. In this sense, DAOs are sometimes established in the form of a company or a foundation, thus relying on general models that, due to their characteristics, are suitable for incorporation of DAOs. Moreover, in recent years, several countries have introduced ad hoc forms of regulation of the phenomenon, such as:

* Wyoming Decentralized Autonomous Organization Supplement (Wyoming, U.S.A.), which regulates the so-called DAO Limited Liability Company;
* Decentralized Autonomous Organization Act (The Republic of the Marshall Islands), which instead introduces the so-called MIDAO LLC.

For further details see: [[DAOs’ current forms of regulations: an overview|DAOs' current forms of regulations: an overview]].

= Case study: The Dao =
The DAO was “''the first high-profile realization''<ref>Q. DuPont, ''Experiment in algorithmic governance. A history and ethnography of “The Dao”, a failed decentralized autonomous organization'', 2018, p. 160.</ref>” of a decentralized autonomous organization (DAO) running on the Ethereum platform, the history of which, with its splendors and failures, could be read on “[[The DAO]]”.

= References =

* C. Bellavitis, C. Fisch, P. P. Momtaz, ''The rise of decentralized autonomous organizations (DAOs): a first empirical glimpse'', 2022, pp. 2-5, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4074833
* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, p. 25.
* Y. Hsieh, J. P. Vergne, P. Anderson, K. Lakhani, M. Reitzig, ''Bitcoin and the rise of decentralized autonomous organizations'', in ''Journal of Organization Design'', 2018, p. 2.
* G. Kondova, R. Barba, ''Governance of Decentralized Autonomous Organizations'', in ''Journal of Modern Accounting and Auditing'', 2019, p. 406.
* R. Lener, S. L. Furnari, ''Prime riflessioni su DAO e principi generali del diritto dell’impresa'', in ''Riv. dir. priv.'', 2022, pp. 335 ss.
* B. Mienert, ''How can a decentralized autonomous organization (DAO) be legally structured'', in ''E-Zeitschrift für Wirtschaftrecht & Digitalisierung'', 2021, Rn. 336 ss.
* R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, pp. 373 ss.
* C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 3.
* B. Schneider, R. Ballesteros, P. Moriggl, P. M. Asprion, ''Decentralized Autonomous Organizations – Evolution, Challenges, and Opportunities'', in ''Workshop and Models at Work Papers'', 23-25 Nov 2022, p. 3.
* N. Tse, ''Decentralised Autonomous Organisations and the Corporate Form'', in ''Victoria University of Wellington Law Review'', 2020, pp. 313 ss.
* A. Wright, ''The rise of decentralized autonomous organizations: opportunities and challenges'', in ''Stanford Journal of Blockchain Law & Policy'', 2021, p. 156.
* F. Zatti, ''Nuove tecnologie e modelli di governance nello sport: le'' Decentralized Autonomous Organization, in ''Nuovo diritto societario'', 2022, pp. 2155 ss.
* Coalition of Automated Legal Applications (COALA), ''Model Law for Decentralized Autonomous Organizations (DAOs)'', 2021, available at: https://coala.global/wp-content/uploads/2022/03/DAO-Model-Law.pdf

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]
<references />{{Musa cat}}

Platform governance

2023-08-23T16:08:28Z

Moratoc:

== Definition ==
In the digital world, «''many of the largest and most successful business operate and organize as open and inclusive'' platforms»<ref>M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, p. 172.</ref>, which use technologies in order to

* facilitate economic exchange;
* transfer information;
* connect people.

The term “platform” tends to be associated with different types of tech-companies<ref>M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, p. 177.</ref>:

* exchange platform, such as Amazon or Alibaba;
* service platform, such as Airbnb or Uber;
* content platform, such as YouTube or Netflix;
* software platform, such as Google Android;
* social platform, such as Facebook or Instagram;
* smart contract platform, such as Ethereum.

However, these platform companies not only use technologies to facilitate interaction and obtain value from this intermediary activity, but also, they use them to organize their own structure. Thus, they maximize collaboration among multiple [[The stakeholders|stakeholders]] and «''deliver constant innovation in platform services and functionality''»<ref>M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, p. 172.</ref>.

In this sense, the main characteristics of platform governance are the following ones:

# they try to make stakeholders feeling part of the organization, thus using their inputs and feedbacks to improve users’ experience and engagement. In this sense, [https://www.ecgi.global/content/codes-stewardship?field_categories_tid=Stewardship stewardship codes] became very important, so that many platform governance entities have one;
# the platform is open and accessible, which means, for instance that the code is "open source";
# communication is seen as a fundamental value, not only as «''one-way process of information disclosure (from platform operators to platform users)''», but also as a means for a more engaged, responsive and open process that could encourages «''a mutually productive dialogue''»<ref>M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, p. 176.</ref>.

Traditional firms are very different: they are organized in a hierarchically structured corporate form, oriented toward achieving the corporate purpose stated by the shareholders and maximizing their profit, mainly through the distribution of profits and the increase in the value of the shares. In order to reach these goals, corporate governance traditionally provides for<ref>M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, p. 174.</ref>

# a highly centralized source of authority;
# a clear boundary between the firm and the “outside world”;
# a settled and formal hierarchy with functionally differentiated “departments” and “roles”;
# standardized operating systems and procedures dictated by the centralized authority.

However, if such firms want to remain competitive, they should adapt to the different world where they operate, which is hyper-competitive and have been transformed by new technologies (artificial intelligence and distributed ledgers), that have been largely used even in some of the typical functions of corporations. The phenomenon, known as ''CorpTech''<ref>L. Enriques, D. Zetzsche, ''Corporate Technologies and the Tech Nirvana Fallacy'', in ''Hastings Law Journal'', 2020, p. 72. </ref> (from a crasis, precisely, of the terms "[[Corporate governance|corporate]]" and "technology"), is allegedly bringing about a deconstruction of the typical architectures of corporate governance, and clearly describes the changing movement.

For those who would like to learn more about the topic, see

* C. Ciligot, ''What Is Platform Governance and Why Is It a Big Deal?'', Feb 24, 2020, available at https://learn.g2.com/platform-governance
* S. Etlinger, ''The Next Wave of Platform Governance'', May 14, 2021, available at https://www.cigionline.org/articles/next-wave-platform-governance/

== References ==

* L. Enriques, D. Zetzsche, ''Corporate Technologies and the Tech Nirvana Fallacy'', in ''Hastings Law Journal'', 2020, p. 72.
* M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of "Corporate" Governance: Hello "Platform" Governance'', in ''European Business Organization Law Review'', 2019, pp. 171-199.
* T. Teh, ''Platform Governance'', in ''American Economic Journal: Microeconomics'', 2022, pp. 213-254.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

DAOs obligations and liabilities

2023-08-23T16:05:33Z

Moratoc:

== Brief notes on DAOs obligations and liabilities ==
There are many unresolved questions regarding the obligations of members and managers (if they are not also members) of a decentralized autonomous organization. Among them:

* the application of [https://www.legalzoom.com/articles/understanding-fiduciary-duty# fiduciary obligations] or general clauses such as good faith;
* the application of the rules of agency when DAO members are external advisors.

Again, it’s important to notice that «''as long as DAOs are not legally recognized, they also do not have limited liability protection. This means that contributors to a DAO can be held personally liable for the debts and obligations of the DAO»''<ref>A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, p. 207.</ref>.

Limited liability is a typical characteristic of [[Corporations (under Italian Civil Code)|corporations]].

The lack of limited liability has many disadvantages, such as:

* the fact that DAO members are not incentivized to take risky business decisions as any business mistakes may lead to the seizure of their personal assets, thus stifling the innovation potential of such DAOs<ref>''Legal aspects of decentralized autonomous organisations (DAOs)'', available at https://nomoretax.eu/legal-aspects-of-decentralized-autonomous-organisations-daos/</ref>;
* the deterrence of many potential contributors from participating;
* the difficulty to raise capital since most investors would be unwilling to put their assets at risk<ref>A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, p. 207.</ref>''.''

In order to have an overview of the regulation of DAOs all around the world, see “[[DAOs’ current forms of regulations: an overview|DAOs’ current form of regulations: an overview]]”.

== The decision of a U.S. court ==
According to what has been said, [https://storage.courtlistener.com/recap/gov.uscourts.casd.732409/gov.uscourts.casd.732409.49.0.pdf a U.S. court in California] has ruled in favor of plaintiffs, who initiated a class action in May 2022 and who alleged that the bZx protocol, and governance token-holding members of its decentralized autonomous organization (DAO), were negligent and liable for losses resulting from a hack that drained its treasury. The decision implies that DAO members might be held liable for negligence, potentially undermining the already challenged decentralized nature of DAOs, while providing a defense for founders who have seen their creations accused of wrongdoing[4].

More precisely, a group of nineteen, named Plaintiff, brought this putative class action against the members of a general partnership (collectively, the “Defendants”) for one count of negligence. Plaintiff alleged that each Defendant is a general partner of the bZx DAO, a purported “Decentralized Autonomous Organization”, and that they wew injured by Defendants’ negligence after a developer working for the bZx DAO was successfully targeted by a phishing attack which occurred on Nov 5, 2021 and which led to the theft of millions in cryptocurrencies. On Nov 21, 2021, the bZx DAO approved a compensation plan for those impacted by the hack, but the FAC ([https://www.law.cornell.edu/wex/amended_complaint First amended Complaint]) alleged complete repayment will take thousands of years. In May 2022, the Plaintiff initiated the class action and in June they filed their FAC.

In deciding the issue, the Court first identified the legal backgrounds:

* «''a claim is plausible'' ''if the factual allegations supporting it permit “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged”''»;
* «''In order to establish negligence under California law, a plaintiff must establish for required elements: Duty; Breach; Causation; Damages''».

* «''“In California, the ‘general rule’ is that people owe a duty of care to avoid causing harm to others and that they are thus usually liable for injuries their negligence inflicts”. However, “liability in negligence for purely economic losses . . . is ‘the exception, not the rule.’” “The primary exception to the general rule of no-recovery for negligently inflicted purely economic losses is where the plaintiff and the defendant have a ‘special relationship.’”''»''.''

Plaintiffs’ theory of liability is premised on the existence of a general partnership among all persons holding BZRX tokens. The FAC contends Defendants are partners of the purported bZx DAO general partnership, and, therefore, jointly and severally liable for Plaintiffs’ injuries. The Leveragebox Defendants argue the FAC fails to plausibly demonstrate the existence of a general partnership. Additionally, they argue the FAC doesn’t sufficiently allege Defendants are members of the purported general partnership.

The Court considered

# whether the FAC includes sufficient factual matter to plausibly allege that the bZx DAO is a general partnership (bZx DAO General Partnership Formation);
# whether the FAC sufficiently alleges that each Defendant is a partner in such a partnership (Partnership Allegations Against Each Defendant).

BZx DAO General Partnership Formation: California law provides that the “association of two or more persons to carry on as coowners a business for profit forms a partnership, whether or not the persons intend to form a partnership.” According to the Court, there is a general partnership among the BZRX token holders, because, among other reasons:

* the organization is controlled by the token holders, who have governance rights in the DAO;
* token holders can share in the DAO’s profits;
* token holders can vote to distribute treasury assets to token holders, like how corporations can authorize dividends.

Partnership Allegations Against Each Defendant: according to the Court, Plaintiffs’ allegations are sufficient to permit the reasonable inference that the defendants hold governance tokens.

Under California partnership law, «''all partners are jointly and severally liable for partnership obligations''».

The Court found that Plaintiffs’ injury is fairly traceable to the bXz DAO general partnership and that they have standing to sue the alleged general partners.

----[1] A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, p. 207.

[2] ''Legal aspects of decentralized autonomous organisations (DAOs)'', available at <nowiki>https://nomoretax.eu/legal-aspects-of-decentralized-autonomous-organisations-daos/</nowiki>

[3] A. Stanescu & T. Velea, SLV Legal, ''The emergence of DAOs: From legal structuring to dispute resolution'', in ''Blockchain & Cryptocurrency Regulation 2023'', Fifth Edition, Global Legal Insight, 2023, p. 207.

[4] S. Reynolds, ''The Liability of DAOs and Their Founders Has Been Put to the Test in Court'', Mar 29, 2023, available at <nowiki>https://www.coindesk.com/business/2023/03/29/the-liability-of-daos-and-their-founders-has-been-put-to-the-test-in-court/</nowiki>

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The organization and governance of Firm Networks (in Italian law)

2023-08-23T16:01:40Z

Moratoc:

The [[Network contract under Italian Law|network contract]] made its entry into the national regulatory landscape by d.l. 5/2009, in whose art. 3, paragraphs 4 ''ter'' - 4 ''quinquies'', the reference discipline is still provided. In part, under paragraph 4 ''ter'' cited, «''with the network contract several entrepreneurs pursue the purpose of increasing, individually and collectively, their innovative capacity and competitiveness in the market and to this end they undertake, on the basis of a common network program, to''» carry out one or more of the following activities:

* «''cooperate in predetermined forms and areas pertaining to the operation of their businesses''»;
* «''or to exchange information or services of an industrial, commercial, technical or technological nature''»;
* «''or else to jointly engage in one or more activities falling within the scope of their enterprise''».

= Firm network organs =
«''The contract may also provide (...) for the appointment of a joint body to manage, in the name and on behalf of the participants, the performance of the contract or individual parts or stages thereof''».

Art. 4 ''ter'', d.l. 5/2009

The only body that is expressly contemplated in the legislative provisions on business networks is the “common body” which is merely eventual, the establishment of which must be provided for in the contract.

In the case it is provided by the parties, it is always the contract that must govern its management and representative powers and the rules regarding its possible replacement.

In general terms, the common body (which can also coincide with one of the member companies) is the one who is in charge of implementing the contract (or certain stages of it) and administering the asset fund (if established). In other words, it has management functions, that may otherwise, by express provision of the parties, be delegated to a so-called management committee in its absence.

When the network benefits from legal subjectivity, the common body acts on behalf of the network

* in negotiated planning procedures with public administrations;
* in procedures inherent in guarantee interventions for access to credit;
* in procedures inherent in the development of the entrepreneurial system in processes of internationalization and innovation provided for by the system.

With respect to the so-called “network-contracts”, on the other hand, the body acts as a representative of the member entrepreneurs, including individual ones, unless otherwise stipulated in the contract.

From what has been said, it can be seen how, both in the case of “network-subject” and in the case of “network-contract”, it is left to the free choice of the parties to provide for an executive body, representative of the network or of the entrepreneurs. In both cases, therefore, there may be no common body with management and representative powers, according to the contractual provisions.

= The common fund and patrimonial autonomy =
«''The contract may also provide for the establishment of a common property fund (…)''»

Art. 4 ''ter'', d.l. 5/2009

«''The provisions of Articles 2614 and 2615, second paragraph, of the Civil Code apply to the common property fund, insofar as they are compatible. In any case, for obligations contracted by the common body in relation to the network program, third parties may assert their rights exclusively on the common fund''».

«''If provision is made for the establishment of the common fund, the network may register in the ordinary section of the business register in whose district its seat is established; with registration in the ordinary section of the business register in whose district its seat is established, the network acquires legal subjectivity''».

Art. 4 ''quater'', d.l. 5/2009

The further profile that is expressly considered by the law concerns the possibility of establishing a common fund. Even in this case, its provision is merely eventual and left to the free determination of the parties, who are allowed to endow the network with an asset fund or not. Where, however, the network is endowed with a common body and an asset fund, [https://www.brocardi.it/codice-civile/libro-quinto/titolo-x/capo-ii/sezione-ii/art2614.html Articles 2614] and [https://www.brocardi.it/codice-civile/libro-quinto/titolo-x/capo-ii/sezione-ii/art2615.html 2615] of the Civil Code, i.e., the rules governing the common fund of [[The consortium|consortia]] with external activities, apply to it (see paragraph 4 ''quater'', no. 2, cited above). This provision also provides that «''in any case, for obligations contracted by the common body in connection with the network program, third parties may assert their rights exclusively on the common fund''».

The combined provisions of the regulations extend to the business network the regime of patrimonial autonomy that characterizes consortia with external activity, regardless of whether the network has legal subjectivity or not.

What has been summarized above reveals the absolute flexibility of the legislative framework, which defers the determination of the organizational and governance profiles of the network to contractual autonomy. Therefore, a further bipartition of networks can be drawn with reference to the chosen organizational structure and in a cross-sectional sense with respect to the articulation between “networks-contract” and “networks-subject”. We can thus further distinguish between:

* structured networks: having a common organization, consisting in particular of the capital fund and the common body. Such must be the networks-subject, in order to achieve autonomous subjectivity, but networks without subjectivity can also be endowed with such an organization (which is, as seen, the rule);
* unstructured networks: having neither a common body nor a common asset fund.

= Decision making processes =
«''For the purposes of the disclosure requirements set forth in subsection 4-quater, the contract must be drawn up by public deed or by notarized private deed (…) and must indicate: (…) f) the rules for taking decisions by the participants on any matter or aspect of common interest that does not fall, when a common body has been established, within the management powers conferred on that body, as well as, if the contract provides for the amendability of the network program by majority vote, the rules on how to take decisions to amend the program''».

Art. 4 ''ter'', d.l. 5/2009

The legislative framework is very meager on this point, if not absolutely silent, limiting itself to deferring to contractual provisions the determination of rules for decision-making by the firms part of the network on any matter or aspect of common interest as well as for changes in contractual provisions.

In order to analyze decision-making mechanisms within the network, a preliminary distinction must be made between

* decision-making by the participants;
* decision-making reserved for the common body.

In this regard, the network contract must provide,

* the rules for the taking of decisions by the participants on any matter or aspect of common interest that does not fall, when a common body has been established, within the management powers conferred on that body, the management power being subtracted from the decisions of the adherents, precisely as a result of the appointment of the Common Body;
* if the contract provides for the modifiability of the Network program by majority vote, the rules on how decisions to modify the program are to be made.

Therefore:

# the decision-making competence of the participants is general in nature; that of the common body is residual in nature;
# the managers are proper agents;
# a position of dominance remains in the hands of the participants with respect not only to contract amendments but also to contract implementation activities.

As a rule, that is, without any other contractual provision,

# decisions are made unanimously on both modification and implementation of the contract;
# decisions have a binding form, that is, they must be drawn up by public deed or notarized writing.

The legal model thus allows room for private autonomy:

# the common body can be given more or less powers;
# its appointment and replacement may not be by unanimity;
# the managers may operate jointly or severally.

In the case of gaps in the parties' provisions on decision-making procedures, some authors suggest the application of the rules provided for resolutions of the assembly of joint stock companies, or more flexible models as in unlimited liability companies or the [[The European Economic Interest Grouping (EEIG)|EEIG]].

As the competence and discretion of the common body grows, a hiatus between ownership and management is determined, although without arriving at true organic representation as is the case in corporations, where [[Agency Theory]] is discussed.

The question is, how far can private autonomy go? Can it even go as far as a reversal of the relationship of participating powers/common body?

Some general principles remain inalienable:

* each participant must be made a participant in the decision-making process;
* in the context of joint initiatives, there is a need for a structure of information and supervision with respect to management performance;
* action for compensation for damage done to the joint initiative and the pooled assets.

= Voice and exit rights =
The provision of voice and exit instruments is indispensable in the governance of the network contract that aspires to be recognized.

The voice right, in particular, consists of

# taking part in the decision-making process;
# to take part in the process of selecting and designating those in charge of the execution phase of the contract;
# carry out monitoring and supervisory activities with respect to the activity of participation in the contract;
# activating reactions in the presence of improper fulfillment of the tasks of implementation and execution of the contract.

The exit right, on the other hand, consists in the dissolution of the individual contractual relationship limited to the individual entrepreneur. Suddite dissolution can be voluntary (withdrawal) or forced (exclusion).

Given the importance of these rights, an essential question inevitably arises: what sanction applies to the contract that does not provide for them? Nullity? If so, total or partial? Or, rather, non-recognition of the contract?

The doctrine tends to rule out the nullity thesis and consider more appropriate the non-accessibility of fiscal, administrative and financial benefits. This is because compliance with the elements stipulated by law constitutes a burden and not an obligation, insofar as it is functional to obtain a kind of statutory award.

In conclusion, on the point:

# the recognized network contract requires the presence of voice and exit rights;
# the conformation of these rights is left to private autonomy.

= The modification of the network contract =
Wide discretion and freedom is left to private autonomy in establishing the rules of modifiability of the Network contract and program, subject to the limit imposed by the principle of meritoriousness and through recourse to the experience of positive law and contractual practice, which from day to day produces proven dispositive norms.

Such changes may move within the general principles of contracts in general and associative contracts with common purpose, in particular. The decisions, if the Common Body has not been appointed, may concern any matter or aspect of common interest to the Network.

As with any contract, the rule applies that it can be amended with the consent of all the contracting parties, but considering the spread and the possible number of adherents that the Network contract can gather, the law represents the possibility that the Network contract may contemplate in its contractual wording the amendability by majority vote. Hence the need to dictate, in the Network contract, the procedural rules to be applied to make amendments to the contractual regulations.

The transtypity of the Network contract, which means that it isn’t a new type of contract, allows a reference to the rules proper to collaborative contracts, i.e., to the mechanisms provided for in associative contracts, and thus to the assembly method and to all typified regulations concerning the taking of decisions in the consortium and/or corporate sphere, as applicable.

= References =

* P. Benazzo, ''I diritti di'' voice ''e di'' exit ''nei contratti di rete «riconosciuti»'', in ''Rivista delle società'', 2012, pp. 677-710.
* F. Cafaggi, ''Il contratto di rete nella prassi. Prime riflessioni'', in ''I Contratti'', 2011, pp. 511 ss.
* G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 255-291.
* G. F. Campobasso, ''Diritto commerciale'', vol. II, ''Diritto delle società'', UTET Giuridica, Milano, 2022, pp. 640 ss.
* G. F. Campobasso, ''Diritto commerciale'', vol. III, ''Contratti, titoli di credito, procedure concorsuali'', UTET Giuridica, Milano, 2022, pp. 33 ss. and 46 ss.
* A. Caprara, ''Le “modificazioni soggettive” del contratto di rete: spunti di riflessione'', in ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', edited by G. Meruzzi, April 11, 2012, pp. 29 ss.
* M. Ceolin, ''Il contratto di rete tra imprese nella legislazione italiana: rete strutturata e non strutturata tra luci e ombre a dieci anni dalla sua introduzione'', in ''Revista de Direito da Cidade'', 2019, pp. 413 ss.
* F. Cirianni, ''Il contratto di rete'', in ''Notariato'', 2010, pp. 442 ss.
* P. Corrias, ''Cooperazione tra imprese appaltatrici e responsabilità verso terzi'', in ''La responsabilità civile e previdenza'', 2016, pp. 736 ss.
* A. Di Lizia, ''(Contratto di) Rete di imprese. Rassegna e clausole contrattuali'', in ''Notariato'', 2012, pp. 277-296.
* G. Doria, ''Reti di imprese e innovazione tecnologica'', in ''Rivista scientifica trimestrale di diritto amministrativo'', 2020, pp. 305 ss.
* A. E. Fabiano, ''Le reti di imprese: uno strumento giuridico a servizio della sostenibilità?'', in ''La Nuova Giurisprudenza Civile Commentata'', 2022, II, pp. 1364 ss.
* A. Gentili, ''Una prospettiva analitica su reti di imprese e contratti di rete'', in ''Obbligazioni e contratti'', 2010, pp. 87 ss.
* M. Libertini, ''Contratto di rete e concorrenza'', in ''Giustizia civile rivista trimestrale'', 2014.
* G. Meruzzi, ''Notazioni in tema di soggettività giuridica della rete'', in ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', edited by G. Meruzzi, April 11, 2012, pp. 15 ss.
* G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019.
* E. Mugnai, ''“Contratti di rete” e attività di direzione e coordinamento'', in ''Rivista di diritto societario'', 2015, pp. 823 ss.
* P. Saccomanno, ''Il contratto di rete: profili di un’indagine aperta'', in ''Contratto e impresa'', 2017, pp. 673 ss.
* F. Schiavone, Governance'','' ''Reti d’imprese e distretti industriali: considerazioni metodologiche'', in ''EconomiaAziendale'', ''online'' review, www.ea2000.it, 2003.
* P. Zanelli, ''Reti di impresa: dall’economia al diritto, dall’istituzione al contratto'', in ''Contratto e impresa'', 2010, pp. 951 ss.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The consortium

2023-08-23T15:53:45Z

Moratoc:

= Concept and typology =
«''Under the consortium contract, several entrepreneurs establish a common organization for the regulation or conduct of certain stages of their respective enterprises''».

Art. 2602 Civil Code

The definition in the Civil Code, the result of the 1976 reform, is broad and refers to an associative scheme between entrepreneurs that is suitable for encompassing two distinct phenomena:

* anti-competitive consortium: a consortium whose purpose is to regulate and limit mutual competition in the market between entrepreneurs engaged in the same or similar activities;
* coordination consortium: for the performance of certain stages of the respective enterprises. In other words, it is an instrument of inter-firm cooperation.

These forms of cooperation are mainly resorted to by small and medium-sized enterprises in order to achieve and recover market competitiveness through the reduction of overhead costs.

For the first type of consortia, it is important that controls are in place so that forms of monopoly in violation of antitrust law are avoided.

The second type, on the other hand, is favored by the legislature, which in fact provides some tax breaks, as not only do such consortia promote the survival of medium and small enterprises, but also help preserve the competitive structure of the market.

In terms of civil law, a further distinction is important, between:

* consortia with internal activity;
* consortia with external activity.

In both there is a common organization, but in the former such an organization serves only to regulate relations between enterprises. In the latter, on the contrary, the parties establish a common office that carries out activities with third parties in the interests of the participating enterprises.

= The consortium contract =
The consortium contract

* can be concluded only between entrepreneurs;
* is a formal contract, that is, it must be in writing under penalty of nullity;
* must contain certain essential elements stipulated by law;
* is a contract of duration, which can be freely determined by the parties. In the silence of the parties it lasts for 10 years;
* tends to be an open contract, which means that new entrepreneurs can be part of it without requiring the consent of all other participants. However, in order for this feature to be maintained, the parties must stipulate how new businesses are to enter.

= Consortia with internal activity =
Essential structural character of consortia is the creation of a common organization. This organizational structure is based on the presence of

* a body with deliberative functions composed of all consortium members (assembly);
* a body with management and executive functions (governing body).

= Consortia with external activity =
Such consortia are one of the possible organizational forms for the collective exercise of business activities.

The regulation of such consortia aims to regulate the property relations between the consortium and third parties.

These type of consortia differ from the ones with only internal activity mainly for the following reasons:

* there is a legal disclosure regime for them, in the sense that an excerpt of the consortium contract must be registered with the commercial register;
* the contract must specify the persons vested with the presidency, management and representation of the consortium and their powers;
* there is also express provision for the formation of a capital fund, consisting of the initial and subsequent contributions of the consortium members and the assets acquired by such contributions.

The essential rule on liability is as follows:

* for obligations assumed in the name of the consortium, the consortium is exclusively liable, and creditors may assert their rights only against the patrimonial fund;
* for obligations assumed by the bodies of the consortium on behalf of individual consortium members, both the consortium member or members concerned and the consortium fund are jointly and severally liable.

= Reference =
M. Campobasso, Diritto commerciale, vol. 1, Diritto dell'impresa, Utet, 2022, pp. 265-275.

For further details see ''Consortiums: Meaning, Types, and Examples,'' available at https://thestrategystory.com/blog/consortiums-meaning-types-and-examples/#:~:text=A%20consortium%20of%20companies%20refers,pursuit%20of%20a%20specific%20objective.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

SMART CONTRACT AND ESSENTIAL LEGAL ISSUES

2023-08-23T15:52:22Z

Moratoc:

= Definition: contract... =
The phenomenon of smart contract is not very new, and indeed computer scientist Nick Szabo gave the example, in coining the term in 1994, of the beverage vending machine as a means of automatically executing the exchange between the parties.

Today, such contracts can run on blockchains or, more generally, on Distributed Ledger Technologies (DLT), technologies whose use allows all the data and information relevant to the conclusion of an agreement and its execution to be held in a certain and unchangeable way.

DLT allow parties to contact each other directly, without a third party being able to block execution and, therefore, avoiding the possibility of default at the outset.

The smart contract, therefore, constitutes the transposition into computer code of a contract, with the peculiarity that upon the occurrence of a given event (if) the digitally linked effect (then) is produced, which may consist, for example, in the execution of the clauses contained in the contract, or in the adjustment of performance upon the occurrence of unforeseen events.

Smart contracts can also make use of artificial intelligence, but it is important to keep the two concepts distinct.

= ... or mere means of its conclusion? =
The Italian Civil Code defines a contract in Article 1321: "a contract is an agreement by two or more parties to establish, regulate or extinguish between them a legal pecuniary relationship." Therefore, the agreement, according to the majority of interpreters, is an essential element of the contract, as well as one of its requirements according to what is expressly provided for in Article 1325 of the Italian Civil Code.

In the case of the smart contract, the agreement is realized, since the person executing the software adheres, in this way, to the contractual regulation predetermined by the code writer.

More precisely, however, the agreement must have as its object the performances due by the parties under the contract, which in the case of the smart contract are automatically realized. Therefore, it seems more correct to define smart contract as a mode of contract performance. It is, to all intents and purposes, a software that operates through distributed registers, while the actual contract is concluded upstream between the parties, who agree on the use of that code.

In fact, in a decree (Decree Law No. 135 of 2018, so-called Simplification Decree, Art. 8ter), the Italian legislator defined smart contract as "a computer program that operates on technologies based on distributed ledgers and whose execution automatically binds two or more parties on the basis of effects predefined by them."

Having made these considerations, it is important to point out that according to several interpreters, it is possible to apply to smart contracts the same rules that apply to "traditional contracts". However, in addressing smart contract it is necessary to take into account certain legal issues such as: the language to be used, the way the agreement is reached, the possibility of withdrawing from the contract, etc.

= Between human language and computer language =
Among the advantages offered by smart contracts it must be considered the elimination of the uncertainty profiles that result from the inherent ambiguity of human language. Even so, precisely because code is the computer translation of natural language, the ambiguity of the former sometimes ends up following the incompleteness of the latter.

Add to this the fact that the writing of a smart contract necessarily requires specific computer programming skills, so that the intermediation of computer scientists and engineers is indispensable in order to draft and sign the store. These professionals, therefore, have the task of gathering the will of the contracting parties, interpreting it and translating it into portions of code, so that between the content intended by the parties and that resulting from the final contract there ends up being, often, a discrepancy. The risk of such a discrepancy is, on closer inspection, that, especially in the case of unilateral preparation of the contract, the one who decides to adhere to it ends up signing an agreement that is not entirely consciously concluded.

At the same time, the semantic barrier represented by the code could be an obstacle to the full judicial protection of the parties, since the courts or arbitrators do not have the necessary knowledge to understand how the algorithm works.

=References =

*P. De Filippi, C. Wray, G. Sileno, ''Smart Contracts'', 18 Nov 2020, available at https://policyreview.info/open-abstracts/smart-contracts.
*G. Farina, ''Gli'' smart contract, in ''Diritto dell’innovazione'', edited by A. Blandini, Cedam, Milano, 2022, pp. 483-484.

*M. Maugeri, ''Smart contracts'', in ''Enciclopedia del diritto. Contratto'', Giuffrè, Milano, 2021, pp. 1132 ss.

*C. Pernice, Smart contract ''e automazione contrattuale: potenzialità e rischi della negoziazione algoritmica nell’era digitale'', in ''Il ragionamento giuridico nell’era dell’intelligenza artificiale'', edited by S. Dorigo, Pacini Giuridica, Pisa, 2020, pp. 163 ss.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

THE FOUNDERS OF A DAO

2023-08-23T15:47:50Z

Moratoc:

== Definition ==
These are the individuals involved in the process of establishing the DAO, who draft a so-called whitepaper containing the rules and objectives of the organization, which is published on the web, particularly on social media, in order to present the idea behind the entity and attract investors. The latter, if interested, can join the proposal by contributing cryptocurrencies, receiving tokens issued by the organization in return.

While, in theory, the procedure of establishing the DAO and distributing its control among those who decide to believe in the initiative appears fully democratic, it has been found in practice to be an unequal takeover phenomenon. In this sense, the founders, together with the early entrants to the system, purchase large quantities of tokens at a cost approaching zero, with the aim of subsequently increasing their price through the management of the DAO, and then trading them on the secondary market and profiting from the difference.

Lastly, the founders are responsible for opening up the open source code of the blockchain and smart contracts underlying the DAO in order to promote forms of collaboration in software development with any [[The core developers of a dao|developers]] interested in this.

== References ==

* R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, p. 373 ss.
* C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda,'' in ''Technological Forecasting & Social Change,'' 2022, p. 3.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

The company group (under Italian law)

2023-08-02T17:06:06Z

Moratoc: Created page with "== The phenomenon == The corporate group is an aggregation of corporate enterprises that are * formally autonomous and independent; * all subject to a unified management. Th..."

== The phenomenon ==
The corporate group is an aggregation of corporate enterprises that are

* formally autonomous and independent;
* all subject to a unified management. This means that all enterprises participating in the group are under the dominant influence of a single company (called the holding company).

The holding company directly or indirectly controls the other companies (called subsidiaries) and directs their activities according to a unified plan, in pursuit of a unified and common purpose, the so-called group interest.

Each of the companies comprising the group may correspond to, as its corporate object,

* a distinct field of activity,
* a distinct stage of the production process,
* a distinct form of industrial use of the same basic substance,
* a distinct market.

Thus, it can be said that in groups there is a single enterprise in the economic aspect, to which correspond several enterprises in the legal aspect, that is, all those that are part of the aggregation.

Groups of companies can take different conformations:

* '''Chain groups''': company A directs company B, which directs company C.
* '''Ray groups''': company A simultaneously directs all the others.

This is a physiological phenomenon that is widespread in practice, especially for large and multinational companies, as well as a reality that the national legislature tends to favor.

The reason why business groups are formed is essentially to combine the advantages arising from the economic unity of the large enterprise (speed and autonomy of decision-making) with those arising from the articulation into several distinct and autonomous organizational structures (separation of business risk). In other words, through groups, needs for greater efficiency in the production system are met.

== The legislation ==
To this date, there is a lack of organic regulations specifically dedicated to groups of companies, but the phenomenon is not completely ignored in legal terms. In particular, in the Civil Code one must consider:

* Articles 2359 et seq. which regulate the notion of control and subsidiary and holding company;
* Articles 2497 et seq. introduced in 2003, which deal with the so-called management and coordination activities of companies.

== The controlled company ==
A controlled company is defined as a company that is, directly or indirectly, under the dominant influence of another company, called the holding company, which can define its activities. This definition is derived from Article 2359 of the Civil Code, according to which control can take several forms:

* '''De jure shareholder control''': the company in which another company has a majority of the votes that can be exercised in the ordinary shareholders' meeting is controlled.
* '''De facto shareholder control''': the company in which another company has sufficient votes to exercise a dominant influence in the ordinary shareholders' meeting is controlled.
* '''Contractual control''': companies that are under the dominant influence of another company by virtue of special contractual ties with it are controlled.

== The activity of management and coordination ==
However, the existence of a corporate control relationship is not sufficient to say that there is a group of companies. Rather, such control gives rise to the presumption that the parent company also exercises management and coordination activity over the controlled company. Indeed, it is in this activity that the essence of the group of companies is embodied.

The notion of management and coordination activity can be traced to an essentially material fact, that is, as the set of activities by which the parent company substantiates the essence of control, in its relationship with the controlled company. As a material fact, the activity is expressed in conduct that is difficult to typify, so the legislator prefers to resort to general clauses in describing it. Normally, management and coordination activity takes the form of the transmission to subsidiaries of decisions that are made by the holding company. This transmission may take place on the basis of formalized procedures, through directives or circulars, or, as is often the case, in the form of confidential directives, which the managers of the holding company send to the managers of the controlled company.

== References ==

* M. Campobasso, Diritto commerciale, vol. II, Diritto delle società, Utet, Milano, 2020, p. 282 et seq.
* F. Galgano, Trattato di diritto civile, vol. IV, Cedam, 2015, p. 770-771.
* G. Meruzzi, Complemento di diritto commerciale, vol. II, Società di capitali e cooperative, Egea, Milano, 2017, p. 111-112.

The DAO

2023-08-02T11:04:21Z

Moratoc: Created page with "== The DAO and its foundation == The DAO was founded in 2016, putting into practice an idea that had been already theorized in 2013, with the goal at the time of establishing..."

== The DAO and its foundation ==
The DAO was founded in 2016, putting into practice an idea that had been already theorized in 2013, with the goal at the time of establishing a ride-sharing platform, that is, one that would connect drivers and users on the basis of a decentralized software architecture (see https://bitcoinmagazine.com/technical/bootstrapping-a-decentralized-autonomous-corporation-part-i-1379644274).

While it is interesting to analyze the characteristics of The DAO, it is important to keep in mind how each [[Decentralized Autonomous Organization|decentralized organization]] is different from the other, as much on the basis of the different cryptocurrencies that can be used, as on the strength of the wide elasticity and variability in the way they are [[The governance of DAOs|governed]]. Several initiatives, in fact, followed this initial experimentation between 2016 and 2017, based on proceedings of [[Initial Coin Offerings (ICOs): legal issues according to Italian law|ICOs]], demonstrating the interest of non-professional investor start-up initiatives in legal forms other than traditional corporate finance models<ref>P. Ortolani, ''Decentralized Autonomous Organizations'': inquadramento giuridico ''de jure condito'' e prospettive ''de jure condendo'', in Blockchain ''e'' Smart Contract. ''Funzionamento, profili giuridici e internazionali, applicazioni pratiche'', a cura di R. Battaglini, M. T. Giordano, Giuffrè, Milano, 2019, p. 405.</ref>.

The establishment of The DAO was, indeed, quite simple, following a process that can be usefully broken down into the following stages:

# a 28-day "creation" phase, during which investors had the opportunity to trade ETH for tokens issued by the DAO, raising a sum of Ether cryptocurrency of about $150 million, from more than 11,000 private investors. During this period, the price of the tokens grew, in part to incentivize the riskiness of the initial, information-free investment. These tokens contained a disclaimer that they would not qualify as shares or other forms of corporate participation.
# After this initial period, tokens were no longer issued, although it was still possible to trade existing ones on secondary markets. Suddite tokens allowed for both publishing proposals and voting on them, directly controlling the structure of the organization and managing it democratically. In this sense, The DAO constituted a full experimentation of that decentralization which, while it could be graduated until it came considerably closer to the mechanisms of a traditional corporation, is an essential character of the typical DAO. During this "static" phase a [https://hackingdistributed.com/2016/05/27/dao-call-for-moratorium/ white paper] was also published by some experts identifying some of the risks involved in investing in and using the DAO.
# [[The token holders|Token holders]] were able to vote on several proposals, among which "Slock.it," a project aimed at establishing a platform in accordance with the model of the so-called sharing economy, functional to connect property owners with potential landlords, gained wide acceptance. Transactions and relationships between contractors were handled automatically, minimizing intermediation, on the basis of smart contracts.
# An update of the system on which DAO was based was developed and proposed, functional to prevent cyber attacks whose danger had been pointed out by several experts, and which had been tested on another DAO project (MakerDAO). Several developers of the platform, in fact, had detected the presence of some programming errors in the smart contract on which The DAO was based.
# A [https://hackingdistributed.com/2016/06/16/scanning-live-ethereum-contracts-for-bugs/ second warning] about the vulnerability of The DAO was issued on June 16.

== The attack and the "hard fork" ==
In June 2016, an anonymous cyber attack was launched on the organization, similar to the one whose risk had been identified and analyzed. Figuring that the hacker's goal was to convert the stolen cryptocurrency into legal tender, an attempt was made to block trading. However, fearing reputational repercussions and thus a loss in the value of crypto, not everyone agreed to freeze the market immediately. Within a short time, about a third of the capital put into the platform was taken away.

It was decided not to initiate a court proceeding for a technical reason: the dispossession by the anonymous attacker had transferred the ether deposit codes into his own material possession, gaining exclusive control of them and making a contrary transfer by enforcement impossible. A court proceeding, therefore, could have led only to an abstract pronouncement that was materially unrealizable. Moreover, the impossibility of recovering the misappropriated ethers would have been without prejudice to any claims by the fund's investors for the platform's negligent conduct, consisting of its failure to control the defective program and thus contrary to the duty of care. The directors of The DAO were then faced with the alternative of whether to suffer the consequences of the breach or to activate a technical solution that could reduce losses<ref>M. L. Perugini, Distributed Ledger Technologies e sistemi di blockchain. Digital currency, smart contract e altre applicazioni, Key, 2018, p. 85.</ref>.

In the following weeks, thanks to the political clout of the founder and the Ethereum Foundation, a "hard fork" version of the Ethereum software, considered as the best technical solution, was developed and released to [[The miners|miners]]. This system fork allowed the blockchain to be recalculated to the block prior to the attack, resulting in the loss of validity of the blocks containing the stolen ethers.

This solution created heated debates in the community. Specifically, a portion of miners believed that majority consensus was a necessary and sufficient element to proceed with the reorganization; while an opposing current of thought emphasized that the very immutability of the blockchain generated the market trust necessary for the success of the project. In other words, the historical reconstruction of transactions could not be altered<ref>M. L. Perugini, Distributed Ledger Technologies e sistemi di blockchain. Digital currency, smart contract e altre applicazioni, Key, 2018, p. 85.</ref>!

A portion of hubs, in fact, rejected this modification, resulting in a parallel blockchain (Ethereum classic), while the majority voted in favor of executing the fork.

Eventually, the majority of miners implemented this new software, so that after a few months the blockchain registry was updated to effectively delete the DAO, and tokens issued from it were delisted from secondary markets.

== References ==

* Q. DuPont, ''Experiment in algorithmic governance. A history and ethnography of “The Dao”, a failed decentralized autonomous organization'', in ''Bitcoin and beyond. Cryptocurrencies, blockchain, and global governance'', edited by M. Campbell-Verduyn, 2018, p. 159 et seq.
* P. Ortolani, ''Decentralized Autonomous Organizations'': inquadramento giuridico ''de jure condito'' e prospettive ''de jure condendo'', in Blockchain ''e'' Smart Contract. ''Funzionamento, profili giuridici e internazionali, applicazioni pratiche'', edited by R. Battaglini, M. T. Giordano, Giuffrè, Milano, 2019, p. 403 et seq.
* M. L. Perugini, ''Distributed Ledger Technologies e sistemi di blockchain. Digital currency, smart contract e altre applicazioni'', Key, 2018, p. 85.

The firm network contract and other forms of business cooperation

2023-07-29T13:56:39Z

Moratoc:

The comparison between [[Firm networks: essential legal issues|firm network contracts]] and other forms of business cooperation is functional to:

# identify possible sources useful in filling the many gaps in the legislation on firm networks;
# identify (and regulate) possible phenomena of transformation into firm network contracts of pre-existing different forms of cooperation between enterprises, also in order to make a functional distinction depending on whether the network contract serves to

* begin a collaboration between previously unrelated enterprises;
* stabilize a pre-existing collaboration;
* respond with aggregation to forms of crisis;
* bringing together business entities that are different from each other.

We consider the following institutions, all provided for Italian legislation.

= [[The consortium]] =
This is an associative scheme between entrepreneurs that is suitable for encompassing two distinct phenomena of reality, namely the anti-competitive consortium and the coordinating consortium. Again, fundamental is the distinction between a consortium carrying out purely internal activities and a consortium with external activities.

While the substantive differences from the firm network contract are minimized, the two cases are not fully overlapping either. In particular, it is possible to identify a substantial identity of regime between the two legal figures in the case where the network members have a common patrimonial fund and a common office for the execution of the network project. In such a case, in fact, the network members assume the status of an organizational group, which is in turn a necessary condition for the group to be given legal subjectivity.

In particular, the differences between the two institutions include the following profiles:

'''Purpose of the contract'''

The firm network contract is signed for the pursuit of a specific purpose: to individually and collectively increase its innovative capacity and competitiveness in the market, to be achieved through collaboration or information exchange activities. On the other hand, the consortium contract is signed for the purpose of regulating or carrying out certain stages of the respective enterprises.

'''Joint organization'''

It is provided as an essential element only for the firm network contract. In the event that the definition of the common program of the network provides for the establishment of the common fund and a common body, it must be concluded that we are faced with an organized group and therefore characterized by the presence of legal subjectivity.

'''Profit-making purpose'''

While the consortium purpose is akin to the mutualistic purpose, the network contract can have, indifferently, a mutualistic or lucrative purpose depending on the activity carried out and indicated in the program (i.e., depending on whether the intent of the network enterprises is to share profits or to achieve a direct advantage in terms of lower costs or higher revenues).

'''Provisions about formalities'''

Only the written form is needed for the consortium (and only for consortia with external activities a form suitable for registration in the Commercial Register).

= Industrial Districts (ID) =
A district is an agglomeration of enterprises, generally of small and medium size, located in a circumscribed and historically determined territorial area, specialized in one or more phases of a production process and integrated through a complex network of economic and social interrelations.

Compared to districts, first formally recognized by Law No. 317 of 1991, business networks are distinguished in that they disregard two elements that are instead essential to the former, namely specialization and territory.

The typical characteristics of so-called industrial districts, which only partially coincide with those proper to the network contract, can be summarized as follows:

* there is a need for high specialization in a specific manufacturing sector or industry (typically so-called made in Italy);
* there is typically a high presence of small and medium-sized enterprises;
* the district essentially operates by breaking down production processes into different stages of reduced optimal size. This means that each enterprise included in the district realizes a specific segment of the value chain;
* sub-supply contracts are typically concluded to regulate relations between enterprises in the district;
* common production and organizational know-how is developed.

For further details about industrial districts see "[https://cros-legacy.ec.europa.eu/system/files/the_definition_of_industrial_districts.pdf The definition of Industrial Districts]" written by S. Lombardi on Jun 15-16, 2016.

= [[THE COMPANY GROUP]] =
It is governed by Articles 2497 et seq. of the Civil Code and differs from the network contract in that

* coordination among group companies is vertical, pyramidal, hierarchical in nature: one or more companies, called "''holding'' companies," perform management and coordination activities pursuant to Article 2497''sexies'' of the Civil Code over the other companies. According to this rule, it is presumed that the enterprise that is required to prepare annual financial statements in a peculiar manner, or the enterprise that exercises control over the other enterprises, performs management and coordination activities over them, i.e., gives them directives to influence their activities.
* In the network contract, on the other hand, no enterprise assumes the role of main contractor, such that it can be defined as eminently "horizontal". At most, there could be a sort of leadership in the head of one or more network enterprises, varying in competence, that is, for reasons of greater specialization or experience.

= [[Joint ventures|JOINT VENTURES]] =
These are forms of temporary and occasional cooperation between enterprises put in place to jointly carry out a complex work or affair, particularly used in the area of large public and private contracts. A stable organization is not established, but rather a set of mandated relationships in which the various participants take on the guise of principals except for one: the so-called "leader," who is entitled to act ''vis-à-vis'' the principal in the name and on behalf of all concerned.

The essential characteristics of joint ventures are as follows, indeed not to be considered extraneous to the network contract:

* joint ventures are formed for the implementation of a single work of a complex business;
* the individual enterprises that are part of a joint venture also maintain their autonomy during the execution of the contract, not giving rise to any form of joint exercise of an economic activity.

The distinction, more precisely, lies in the circumstance that the objective of a joint venture is a project, not an activity, such as that regulated with the network program, which is functional for the growth of the individual participating enterprise.

= [[The European Economic Interest Grouping (EEIG)]] =
The EEIG, introduced by Legislative Decree 240/1991, is a plurilateral associative contract with a common purpose, necessarily transnational and made up of subjects carrying out heterogeneous activities (not necessarily commercial entrepreneurs), the purpose of which is to facilitate cross-border cooperation by developing the economic activity of the members, leaving ample autonomy to the contracting parties in outlining its organization and discipline.

The essential distinction from business networks is easy to identify:

* at least two members must have their central administration and/or must carry out their economic activity in states other than the European Union;
* while it has legal subjectivity, it lacks patrimonial autonomy, resulting in the unlimited liability of its members.

= Franchising (or affiliation contract) =
It is a contract between legally independent parties, by virtue of which one party ('''franchisor''') grants the availability to the other party ('''franchisee'''), in exchange for remuneration, of a set of industrial or intellectual property rights. In this way the '''franchisee''' is included into a system consisting of a plurality of other franchisees distributed throughout the territory, in order to market certain goods or services. This is, indeed, quite different from the network contract: in the affiliation contract a plurality of services typical of other named contracts (license to use distinctive signs, administration, service contract, lease or commodity loan of movable or immovable property) converge, unitedly aimed at achieving full economic integration between franchisor and franchisees.

For further details about franchising see "[https://www.investopedia.com/terms/f/franchisee.asp#:~:text=Examples%20of%20well%2Dknown%20franchise,Block%20(NYSE%3A%20HRB). Franchisee: Definition, Examples, Benefits, and Responsibilities]".

For some examples see "[https://mktoolboxsuite.com/franchise-examples/ 10 Brilliant Franchise Examples to Learn From (in 2022)]".

= References =

* F. Cafaggi, ''Il contratto di rete nella prassi. Prime riflessioni'', in ''Contratti'', 2011, pp. 511 et seq.
* G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 255-291.
* G. F. Campobasso, ''Diritto commerciale'', vol. II, ''Diritto delle società'', UTET Giuridica, Milano, 2022, pp. 640 et seq.
* G. F. Campobasso, ''Diritto commerciale'', vol. III, ''Contratti, titoli di credito, procedure concorsuali'', UTET Giuridica, Milano, 2022, pp. 33 et seq.
* P. Corrias, ''Cooperazione tra imprese appaltatrici e responsabilità verso terzi'', in ''Responsabilità civile e previdenza'', 2016, pp. 736 et seq.
* A. Gentili, ''Una prospettiva analitica su reti di imprese e contratti di rete'', in ''Obbligazioni e contratti'', 2010, pp. 87 et seq.
* M. Libertini, ''Contratto di rete e concorrenza'', in ''Giustizia civile rivista trimestrale'', 2014.
* G. Meruzzi, ''Notazioni in tema di soggettività giuridica della rete'', in ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', edited by G. Meruzzi, 11 aprile 2012, pp. 15 et seq.
* E. Mugnai, ''“Contratti di rete” e attività di direzione e coordinamento'', in ''Rivista di diritto societario'', 2015, pp. 823 et seq.
* P. Saccomanno, ''Il contratto di rete: profili di un’indagine aperta'', in ''Contratto e impresa'', 2017, pp. 673 et seq.
* P. Zanelli, ''Reti di impresa: dall’economia al diritto, dall’istituzione al contratto'', in ''Contratto e impresa'', 2010, pp. 951 et seq.

The principle of collegiality

2023-07-24T07:56:32Z

Moratoc: Created page with "The collegial principle operates, in general terms, as a criterion for regulating decision-making processes within bodies that are, precisely, collegial in nature, that is, co..."

The collegial principle operates, in general terms, as a criterion for regulating decision-making processes within bodies that are, precisely, collegial in nature, that is, composed of a plurality of members.

More precisely, a body is defined as collegial when the exercise of its function is delegated to a plurality of persons, who express their will through the adoption of a decision, which in turn is formalized through an act called a "resolution" or "deliberation."

This act

* on the one hand, synthesizes, that is, reduces to unity, the wills of the individual members of the organ;
* on the other hand, and precisely because of this, it is imputed to the organ as a subject distinct from its members.

In order for the resolution to be validly passed, it is necessary that the so-called '''''constitutive quorum''''' be reached, which consists of the number (or percentage) of individual members, with voting rights, who must be present at the vote in order for the body to be considered regularly constituted.

Again, a so-called '''''deliberative quorum''''', which is the number of affirmative votes required for the resolution to be validly passed, must be achieved.

Once the mentioned ''quorums'' have been reached, the discussion phase among the members of the body is essential, at the outcome of which the resolution, as a formal and legally relevant act, is issued.

Each body may, also by its own rules of procedure, establish its own ''quorums''.

Typically, the ''deliberative quorum'' alternatively refers to the criteria of unanimity, absolute majority, simple or relative majority, or even qualified majority.

An '''absolute majority''' is reached when affirmative votes exceed half of those eligible to vote.

A '''simple majority''' is reached when the votes in favor exceed half of those voting.

A '''relative majority''' is achieved when the votes in favor exceed those received by any other proposal.

Finally, it is possible to provide, as mentioned above, for a '''qualified majority''', that is, it requires that the affirmative votes exceed a percentage of those voting or eligible to vote greater than half.

The collegial method does not, as a rule, require that the majority criterion be met, since it more generally constitutes a principle of organizing the decisions of collective formations.

A clear example of multi-person bodies are corporate bodies: shareholders' meeting, board of directors and supervisory board of a limited or unlimited liability company under Italian law.

On closer inspection, the multipersonal nature of the body does not necessarily imply that it operates according to the collegial method. With regard to the board of directors, for example, the Civil Code dictates different rules depending on whether the company is a joint-stock company or a different form of limited liability company. Only in the former, in fact, it is necessarily provided for the adoption of the collegial method if the body is multi-person. For the second type of company, Article 2475, paragraph 4 of the Civil Code provides that the company's statute may stipulate that decisions of the directors shall be made "''by written consultation or on the basis of consent expressed in writing''".

Two ways of voting are inferred from this: written consultation and express consent in writing. In both cases, it can be understood how the discussion phase among the members of the body is eliminated.

Still different from the collegial method is the mode of operation of directors of unlimited liability companies, who can decide whether to act '''jointly''', with the limitation of the individual director's ability to make decisions necessary in order to avoid an urgent danger to the company, or '''disjunctively''', where each director can make decisions necessary for the accomplishment of the company's object (Articles 2257 and 2258 of the Civil Code).

DAOs: essential legal issues

2023-07-23T19:41:05Z

Moratoc:

= DAOs: an essential definition =
DAOs can be defined as "''non-hierarchical organizations that perform and record routine tasks on a peer-to-peer, cryptographically secure, public network, and rely on the voluntary contributions of their internal stakeholders to operate, manage and evolve the organization through a democratic consultation process''<ref>Y. Hsieh, J. P. Vergne, P. Anderson, K. Lakhani, M. Reitzig, ''Bitcoin and the rise of decentralized autonomous organizations'', in ''Journal of Organization Design'', 2018, p. 2.</ref>" .

The operation of the DAO, its structure, organization and the interactions that its participants enact, are contained within a blockchain.

DAOs are also described, as suggested by the same acronym, as decentralized, autonomous and organized organizations, and it is precisely from the integration of these principles that the phenomenon emerges as a "''new organizational design''<ref>C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 3.</ref>".

Some peculiar features of DAOs, considered by a large proportion of scholars as advantageous elements, are:

* stability: every transaction is recorded and stored;
* anonymity: participants can register with their usernames, avoiding exposing their identities;
* knowability: transactions are validated and can be easily verified;
* transparency: the proposals made, the decision-making process, and the allocation and content of powers and duties among participants are knowable.

== Distributed and decentralized ==
Decentralization is imposed by the use of DLTs (Distributed Ledger Technologies) and operates on two distinct levels:

* on the one hand, it eliminates the need for an intermediary in product placement procedures;
* on the other, it marginalizes the role of the corporate model in the conduct of business activity.

The revolutionary profile of DAOs lies in the second of these issues, considering that [[The token holders|the token-holders]] – i.e., those who have obtained, as a counter-performance of the made contribution of cryptocurrencies, tokens attributing the right to vote – directly control the organization and the management of the entity, without the said function being delegated to another entity, tending to be different from the owner, and thus eliminating those so-called [[Agency Theory|agency relationships (and costs)]] that characterize corporations.

In other words, hierarchical and centralized authority (typically the managers) is dispensed with a structure based on cooperation and equality of its participants.

It is precisely the decentralized nature of the DAO that allows to distinguish (partially) such organizations from the increasingly common entities established through [[DAO formation|Initial Coin Offerings]] or through [https://economiapertutti.bancaditalia.it/chiedere-prestito/crowdfunding/index.html?com.dotmarketing.htmlpage.language=3 crowdfunding] activities.

== Autonomous and automated ==
DAOs operate according to the rules contained in the whitepaper, drafted and signed by [[THE FOUNDERS OF A DAO|the founders]], which are encoded in a [[SMART CONTRACT AND ESSENTIAL LEGAL ISSUES|smart contract]] that in turn is executed automatically using the blockchain protocol. Essentially, the smart contract is a computational program consisting of a series of provisions that are applied automatically and autonomously, irreversibly, and which, thanks to blockchain technology, are recorded and stored over time. The rules contained in the code, therefore, enable the operation of the organization without the need for human intervention and coordination.

In other words, the smart contract constitutes the foundational element of the DAO, which defines the [[The self regulation of a DAO|DAO's self-regulation]], according to the fundamental rule-of-code principle, and preserves its assets by tracking its movements.

Again, the automatisms arising from this technology enable the implementation of trust in the organization while reducing transaction costs and costs related to the exchange of information between participants.

== Organized and ordered ==
Blockchain technology, together with the clearly defined rules on it, allows for full transparency regarding the powers and duties of both members of the organization (token holders) and other [[The stakeholders|stakeholders]]. This transparency allows for increased trust in the functioning of the organization and efficiency of management.

= The distinction between DOs and DAOs =
Part of the doctrine distinguishes between DAOs and DOs: in the former, the functions are automatic and self-executing, as the blockchain and smart contracts constitute the communication protocol to enable interaction between algorithmic systems; in the latter, the decision-making and consultation role of the human being is included, while the algorithm acts only as a function of streamlining and automating the governance of the group.

Some authors distinguish instead between “'''''participatory DAOs'''''” in which smart contracts are used to collect votes from participants, and “'''''algorithmic DAOs'''''” organizations that are entirely algorithmic in their operation.

= DAO formation =
The establishment of a DAO is a complex procedure, carried on by the so-called [[THE FOUNDERS OF A DAO|founders]], as it involves an intersection between empirical-technological profiles, concerning the elaboration of the underlying IT structure of the DAO, and purely legal profiles.

For further details see: [[DAO formation]].

= DAO governance =
The peculiarities of DAOs, deriving in particular from its decentralized nature, are reflected in the decision-making processes of its participants, which constitute the essential core of Corporate Governance. The horizontal structure of the organization actually has advantages and disadvantages, and its specificities with respect to traditional corporations still need to be explored.

What is certain is that if, on the one hand, an attempt has been made to identify certain essential rules of its functioning, such as the principle of collegiality, the principle of one-token-one-vote or the principle of the rule of code, it is also true that some of them suffer inevitable exceptions, which constitute full demonstration of the complexity of the structure.

For further information see: [[DAO Governance|DAO governance]].

= DAO subjects =
According to some scholars, a fundamental challenge in the elaboration of a good governance scheme “''is the creation of clearly delineated organs whose members have certain rights and duties''<ref>P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, p. 25.</ref>”. In this sense, DAOs should establish organs for [[The core developers of a dao|core developers]], [[The miners|miners]], and [[The token holders|token holders]].

= The legal status of the DAO: doctrinal proposals =
DAOs, a phenomenon that has developed essentially online without serious reflection on their legal structure, often operate without a clear and predetermined legal status. This leads to uncertainties about the relationship between token holders and between them and the DAO, with the risk that, as they carry out business activities, they are qualified as partnerships. Consequently, there is a risk that the participants will find themselves subject to unlimited liability for corporate obligations, in the absence of adequate awareness of this. It is therefore appropriate that a legally secure framework be created, or at least employed, primarily for the consumers themselves who participate in the business of the DAO.

Most common solutions:

* Establishment of DAOs in the form of corporate entities. Among [[Corporations (under Italian Civil Code)|corporations]], the creation of DAOs in the form of a joint stock company seems more difficult, while creation as a limited liability company seems feasible. Obstacles may arise from the impossibility of representing quotas by means of tokens, which would introduce a circulation mechanism similar to that for shares. An assimilation to one of the [[Partnerships (under Italian civil code)|partnerships]] is suggested.
* Establishment of DAOs in the form of a foundation. The DAO is comparable to the [[Foundation (under Italian Civil Code)|foundation]] by the tendency of immutability of purpose (in the one, the founder's purpose; in the other, the purpose set out in the code) and autonomy from the founder and developers. Among the most commonly used jurisdictions for establishing DAOs as foundations are Switzerland, which has a more flexible foundation law, and the Cayman Islands.

= The purpose of the organization =
The analysis of the legal models used for the establishment of DAOs and the sectors in which they are concretely employed suggests that DAOs can be used for the pursuit of both lucrative and non-lucrative purposes.

In particular, those entities that could potentially benefit by operating as a DAO are:

* '''Charities or other non-profit organizations'''. The lack of transparency in modern charitable organizations is a significant concern, leading to a loss of trust between donors and these organizations. However, DAOs offer a solution to this problem, since they operate transparently on a blockchain, making all activities and transactions visible and auditable by donors.
* '''Financial industry'''. As the case study of MakerDAO suggests, DAOs could address some of the challenges in traditional banking systems. DAO-based currency systems have the ability to connect the vast number of unbanked individuals worldwide, estimated to be around 1.7 billion adults. This connectivity could enable these individuals to participate in investment and borrowing activities. Although financial DAOs are unlikely to replace traditional financial institutions entirely, they provide a new avenue for investing and engaging in financial activities, resembling traditional financial markets.
* '''E-government systems'''. In this sector, DAOs could offer significant benefits, since current government systems are often complex, centralized, and prone to errors due to human involvement. These systems lack transparency and often involve lengthy and costly processes. By incorporating DAOs into government services, operations can be automated, leading to increased efficiency and improved transparency, accountability, and resource management.
* '''Healthcare industries'''. In healthcare, a blockchain-based health information exchange (HIE) could reduce transaction costs and data errors. It would enable efficient sharing of patient medical records among healthcare providers, giving patients control over their data sharing.
* '''Insurance industry'''. In this sector, applying a decentralized and autonomous approach can reduce information asymmetry, administrative and operational costs and enables regulators to detect suspicious transaction patterns. Automation of insurance business processes can improve security by ensuring confidential client data accessible only to authorized parties.

Limits to the purpose that can be pursued may be imposed by individual national jurisdictions. This means that depending on the jurisdiction and the legal form in which the DAO is incorporated, there may be specific limitations to the purpose.

The Coalition of Automated Legal Applications (COALA)’s “''Model Law for Decentralized Autonomous Organizations (DAOs)''”, recently published in its finalized version, expressly acknowledges that a DAO may not only be a for profit entity, but may be used for multiple non-commercial purposes. For this reason, it suggests that “''the DAO is a legal entity than can be used for commercial, mutualistic, social, environmental or political purposes, the nature of which will be specified in its By-Laws''” (Article 1).

= The applicable law and jurisdiction =
A further issue of complexity concerns the difficulty of identifying the jurisdiction to which the DAO belongs.

As regards the determination of the applicable law, two criteria can be abstractly followed: criterion of incorporation or criterion of actual seat.

The problem is that if the DAO is not incorporated in a particular place, as is the case for companies, the first criterion cannot be applied. At the same time, with respect to DAOs, the second is difficult to apply, as they typically do not have a physically identifiable material organization in a given place; they are managed by nodes from all over the world; they are not connected to servers that could serve to identify a physical place of activity since they run on the nodes of a blockchain, and thus everywhere and nowhere. They are structurally 'open to the world': naturally vocated to attract participants from all over the world and to operate worldwide via distributed nodes. They are therefore by their very vocation opposed to the traditional search for a spatial center of gravity, to the law of which to subject them.

The same problem arises with regard to the identification of the competent judge in disputes involving them.

= Current form of regulation of DAOs: an overview =
In order to solve the uncertainties relating to the absence of a clear legal form and the identification of the applicable law and court of jurisdiction, there has been a tendency to set up DAOs according to clear legal models. In this sense, DAOs are sometimes established in the form of a company or a foundation, thus relying on general models that, due to their characteristics, are suitable for incorporation of DAOs. Moreover, in recent years, several countries have introduced ad hoc forms of regulation of the phenomenon, such as:

* Wyoming Decentralized Autonomous Organization Supplement (Wyoming, U.S.A.), which regulates the so-called DAO Limited Liability Company;
* Decentralized Autonomous Organization Act (The Republic of the Marshall Islands), which instead introduces the so-called MIDAO LLC.

For further details see: [[DAOs’ current forms of regulations: an overview|DAOs' current forms of regulations: an overview]].

= Case study: The Dao =
The DAO was “''the first high-profile realization''<ref>Q. DuPont, ''Experiment in algorithmic governance. A history and ethnography of “The Dao”, a failed decentralized autonomous organization'', 2018, p. 160.</ref>” of a decentralized autonomous organization (DAO) running on the Ethereum platform, the history of which, with its splendors and failures, could be read on “[[The DAO]]”.

= References =

* C. Bellavitis, C. Fisch, P. P. Momtaz, ''The rise of decentralized autonomous organizations (DAOs): a first empirical glimpse'', 2022, pp. 2-5, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4074833
* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, p. 25.
* Y. Hsieh, J. P. Vergne, P. Anderson, K. Lakhani, M. Reitzig, ''Bitcoin and the rise of decentralized autonomous organizations'', in ''Journal of Organization Design'', 2018, p. 2.
* G. Kondova, R. Barba, ''Governance of Decentralized Autonomous Organizations'', in ''Journal of Modern Accounting and Auditing'', 2019, p. 406.
* R. Lener, S. L. Furnari, ''Prime riflessioni su DAO e principi generali del diritto dell’impresa'', in ''Riv. dir. priv.'', 2022, p. 335 ss.
* B. Mienert, ''How can a decentralized autonomous organization (DAO) be legally structured'', in ''E-Zeitschrift für Wirtschaftrecht & Digitalisierung'', 2021, Rn. 336 ss.
* R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, pp. 373 ss.
* C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 3.
* B. Schneider, R. Ballesteros, P. Moriggl, P. M. Asprion, ''Decentralized Autonomous Organizations – Evolution, Challenges, and Opportunities'', in ''Workshop and Models at Work Papers'', 23-25 Nov 2022, p. 3.
* N. Tse, ''Decentralised Autonomous Organisations and the Corporate Form'', in ''Victoria University of Wellington Law Review'', 2020, p. 313 ss.
* A. Wright, ''The rise of decentralized autonomous organizations: opportunities and challenges'', in ''Stanford Journal of Blockchain Law & Policy'', 2021, p. 156.
* F. Zatti, ''Nuove tecnologie e modelli di governance nello sport: le'' Decentralized Autonomous Organization, in ''Nuovo diritto societario'', 2022, pp. 2155 ss.
* Coalition of Automated Legal Applications (COALA), ''Model Law for Decentralized Autonomous Organizations (DAOs)'', 2021, available at: https://coala.global/wp-content/uploads/2022/03/DAO-Model-Law.pdf

Joint ventures

2023-07-15T17:02:51Z

Moratoc: Created page with "== The phenomenon == Joint ventures are temporary and occasional forms of cooperation between enterprises set up to jointly carry out a complex work or business. For the most..."

== The phenomenon ==
Joint ventures are temporary and occasional forms of cooperation between enterprises set up to jointly carry out a complex work or business. For the most part, these are large public or private works that exceed the operational capacity of a single enterprise but, at the same time, have characteristics that allow for the cooperation of several separate enterprises in their implementation.

It is a widely spread phenomenon in the international arena.

The firms that join together want yes to join forces and cooperate with each other in the execution phase of the work, but at the same time they want to retain their operational autonomy. They each want to execute directly, with their own means and organization, a part of the work.

The enterprises concerned present themselves to the other party as separate but related enterprises. They submit a joint bid and jointly undertake to execute the overall work, entrusting one of them (parent company) with the task of jointly managing relations with the client and coordinating the work in the execution phase. Each enterprise retains full legal and economic autonomy in the completion of part of the work and is directly accountable to the client for the part under its responsibility.

Such forms of cooperation constitute, according to case law, unnamed associative contracts, an expression of the contractual autonomy of the parties under Article 1322 of the Civil Code. These phenomena, in fact, have not yet received, in Italy, an organic and unified discipline that considers both internal and external profiles of their activity.

== Liability regime ==
A distinction must be made according to whether the work is divisible or not.

'''Non-splittable work''': the companies are all jointly and severally liable for the entire work. The division of work in the execution phase is only of internal relevance.

'''Unsplittable work''': only the so-called parent company is liable for the entire work. The other combined enterprises are only liable for the execution of the part under their responsibility.

== Relations between companies ==
The legislature gives full freedom to the combined enterprises with regard to relations among themselves and toward third parties (other than the client).

Enterprises are free to maintain the minimum functional connection that derives from the collective mandate or to set up a common organization of a consortium type, intended to coordinate and regulate the execution of the work.

In addition, companies may establish a company among themselves, which automatically takes over the execution of the work, without the need for the client's authorization.

However, the liability regime of the combined companies is retained.

== Reference ==
G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 287-292.

The firm network contract and other forms of business cooperation

2023-07-15T16:21:00Z

Moratoc: Created page with "The comparison between firm network contracts and other forms of business cooperation is functional to: # identify possible sources..."

The comparison between [[Firm networks: essential legal issues|firm network contracts]] and other forms of business cooperation is functional to:

# identify possible sources useful in filling the many gaps in the legislation on firm networks;
# identify (and regulate) possible phenomena of transformation into firm network contracts of pre-existing different forms of cooperation between enterprises, also in order to make a functional distinction depending on whether the network contract serves to

* begin a collaboration between previously unrelated enterprises;
* stabilize a pre-existing collaboration;
* respond with aggregation to forms of crisis;
* bringing together business entities that are different from each other.

We consider the following institutions, all provided for Italian legislation.

= [[The consortium]] =
This is an associative scheme between entrepreneurs that is suitable for encompassing two distinct phenomena of reality, namely the anti-competitive consortium and the coordinating consortium. Again, fundamental is the distinction between a consortium carrying out purely internal activities and a consortium with external activities.

While the substantive differences from the firm network contract are minimized, the two cases are not fully overlapping either. In particular, it is possible to identify a substantial identity of regime between the two legal figures in the case where the network members have a common patrimonial fund and a common office for the execution of the network project. In such a case, in fact, the network members assume the status of an organizational group, which is in turn a necessary condition for the group to be given legal subjectivity.

In particular, the differences between the two institutions include the following profiles:

'''Purpose of the contract'''

The firm network contract is signed for the pursuit of a specific purpose: to individually and collectively increase its innovative capacity and competitiveness in the market, to be achieved through collaboration or information exchange activities. On the other hand, the consortium contract is signed for the purpose of regulating or carrying out certain stages of the respective enterprises.

'''Joint organization'''

It is provided as an essential element only for the firm network contract. In the event that the definition of the common program of the network provides for the establishment of the common fund and a common body, it must be concluded that we are faced with an organized group and therefore characterized by the presence of legal subjectivity.

'''Profit-making purpose'''

While the consortium purpose is akin to the mutualistic purpose, the network contract can have, indifferently, a mutualistic or lucrative purpose depending on the activity carried out and indicated in the program (i.e., depending on whether the intent of the network enterprises is to share profits or to achieve a direct advantage in terms of lower costs or higher revenues).

'''Provisions about formalities'''

Only the written form is needed for the consortium (and only for consortia with external activities a form suitable for registration in the Commercial Register).

= Industrial Districts (ID) =
A district is an agglomeration of enterprises, generally of small and medium size, located in a circumscribed and historically determined territorial area, specialized in one or more phases of a production process and integrated through a complex network of economic and social interrelations.

Compared to districts, first formally recognized by Law No. 317 of 1991, business networks are distinguished in that they disregard two elements that are instead essential to the former, namely specialization and territory.

The typical characteristics of so-called industrial districts, which only partially coincide with those proper to the network contract, can be summarized as follows:

* there is a need for high specialization in a specific manufacturing sector or industry (typically so-called made in Italy);
* there is typically a high presence of small and medium-sized enterprises;
* the district essentially operates by breaking down production processes into different stages of reduced optimal size. This means that each enterprise included in the district realizes a specific segment of the value chain;
* sub-supply contracts are typically concluded to regulate relations between enterprises in the district;
* common production and organizational know-how is developed.

For further details about industrial districts see "[https://cros-legacy.ec.europa.eu/system/files/the_definition_of_industrial_districts.pdf The definition of Industrial Districts]" written by S. Lombardi on Jun 15-16, 2016.

= [[THE COMPANY GROUP]] =
It is governed by Articles 2497 et seq. of the Civil Code and differs from the network contract in that

* coordination among group companies is vertical, pyramidal, hierarchical in nature: one or more companies, called "''holding'' companies," perform management and coordination activities pursuant to Article 2497''sexies'' of the Civil Code over the other companies. According to this rule, it is presumed that the enterprise that is required to prepare annual financial statements in a peculiar manner, or the enterprise that exercises control over the other enterprises, performs management and coordination activities over them, i.e., gives them directives to influence their activities.
* In the network contract, on the other hand, no enterprise assumes the role of main contractor, such that it can be defined as eminently "horizontal". At most, there could be a sort of leadership in the head of one or more network enterprises, varying in competence, that is, for reasons of greater specialization or experience.

= [[JOINT VENTURES]] =
These are forms of temporary and occasional cooperation between enterprises put in place to jointly carry out a complex work or affair, particularly used in the area of large public and private contracts. A stable organization is not established, but rather a set of mandated relationships in which the various participants take on the guise of principals except for one: the so-called "leader," who is entitled to act ''vis-à-vis'' the principal in the name and on behalf of all concerned.

The essential characteristics of joint ventures are as follows, indeed not to be considered extraneous to the network contract:

* joint ventures are formed for the implementation of a single work of a complex business;
* the individual enterprises that are part of a joint venture also maintain their autonomy during the execution of the contract, not giving rise to any form of joint exercise of an economic activity.

The distinction, more precisely, lies in the circumstance that the objective of a joint venture is a project, not an activity, such as that regulated with the network program, which is functional for the growth of the individual participating enterprise.

= [[The European Economic Interest Grouping (EEIG)]] =
The EEIG, introduced by Legislative Decree 240/1991, is a plurilateral associative contract with a common purpose, necessarily transnational and made up of subjects carrying out heterogeneous activities (not necessarily commercial entrepreneurs), the purpose of which is to facilitate cross-border cooperation by developing the economic activity of the members, leaving ample autonomy to the contracting parties in outlining its organization and discipline.

The essential distinction from business networks is easy to identify:

* at least two members must have their central administration and/or must carry out their economic activity in states other than the European Union;
* while it has legal subjectivity, it lacks patrimonial autonomy, resulting in the unlimited liability of its members.

= Franchising (or affiliation contract) =
It is a contract between legally independent parties, by virtue of which one party ('''franchisor''') grants the availability to the other party ('''franchisee'''), in exchange for remuneration, of a set of industrial or intellectual property rights. In this way the '''franchisee''' is included into a system consisting of a plurality of other franchisees distributed throughout the territory, in order to market certain goods or services. This is, indeed, quite different from the network contract: in the affiliation contract a plurality of services typical of other named contracts (license to use distinctive signs, administration, service contract, lease or commodity loan of movable or immovable property) converge, unitedly aimed at achieving full economic integration between franchisor and franchisees.

For further details about franchising see "[https://www.investopedia.com/terms/f/franchisee.asp#:~:text=Examples%20of%20well%2Dknown%20franchise,Block%20(NYSE%3A%20HRB). Franchisee: Definition, Examples, Benefits, and Responsibilities]".

For some examples see "[https://mktoolboxsuite.com/franchise-examples/ 10 Brilliant Franchise Examples to Learn From (in 2022)]".

= References =

* F. Cafaggi, ''Il contratto di rete nella prassi. Prime riflessioni'', in ''Contratti'', 2011, pp. 511 et seq.
* G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 255-291.
* G. F. Campobasso, ''Diritto commerciale'', vol. II, ''Diritto delle società'', UTET Giuridica, Milano, 2022, pp. 640 et seq.
* G. F. Campobasso, ''Diritto commerciale'', vol. III, ''Contratti, titoli di credito, procedure concorsuali'', UTET Giuridica, Milano, 2022, pp. 33 et seq.
* P. Corrias, ''Cooperazione tra imprese appaltatrici e responsabilità verso terzi'', in ''Responsabilità civile e previdenza'', 2016, pp. 736 et seq.
* A. Gentili, ''Una prospettiva analitica su reti di imprese e contratti di rete'', in ''Obbligazioni e contratti'', 2010, pp. 87 et seq.
* M. Libertini, ''Contratto di rete e concorrenza'', in ''Giustizia civile rivista trimestrale'', 2014.
* G. Meruzzi, ''Notazioni in tema di soggettività giuridica della rete'', in ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', edited by G. Meruzzi, 11 aprile 2012, pp. 15 et seq.
* E. Mugnai, ''“Contratti di rete” e attività di direzione e coordinamento'', in ''Rivista di diritto societario'', 2015, pp. 823 et seq.
* P. Saccomanno, ''Il contratto di rete: profili di un’indagine aperta'', in ''Contratto e impresa'', 2017, pp. 673 et seq.
* P. Zanelli, ''Reti di impresa: dall’economia al diritto, dall’istituzione al contratto'', in ''Contratto e impresa'', 2010, pp. 951 et seq.

The European Economic Interest Grouping (EEIG)

2023-07-15T13:59:01Z

Moratoc: Created page with "= General features = The EEIG is a legal institution set up by the European Union to facilitate cooperation between entrepreneurs belonging to different member states, also in..."

= General features =
The EEIG is a legal institution set up by the European Union to facilitate cooperation between entrepreneurs belonging to different member states, also in order to remove obstacles in this regard posed by the diversity of individual national laws.

The institution is governed by '''[https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:31985R2137 EU Regulation No. 2137 of 1985]''', which is directly applicable in all member states. In order to better understand the essential characteristics of European acts (regulations, directives, decisions..) see the page "[https://www.law.ox.ac.uk/legal-research-and-mooting-skills-programme/eu-legal-sources EU Legal Sources]" available at University of Oxford site.

Each national legislature has since issued specific supplementary rules, applicable to groups headquartered in individual member states.

The structure and function of the EEIG largely coincide with those of consortia with external activities.

In particular,

* parties to the contract establishing the EEIG may be only natural or legal persons engaged in economic activity, who, however, unlike in the consortium, need not be entrepreneurs. The EEIG may also be formed by intellectual professionals, provided that the grouping is not used to directly engage in freelance practice.
* At least two members must have a central administration or must carry out their activities in different states of the Union.
* The EEIG is an associational body that has external relevance, which means it can assume rights and obligations in its own name. It also has procedural capacity. In other words, it constitutes an autonomous center of imputation of legal relations distinct from its members.
* New members can be added but their admission must be decided by unanimous consent.

The function of the EEIG is to facilitate and develop the economic activity of its members. Therefore, the group does not aim to make profits for itself.

= EEIG's formation =
The constitutive contract must be in writing under penalty of nullity and is subject to legal publicity, i.e. it must be

# registered in the Commercial Register: it has constitutive effect, which means that the EEIG acquires legal personality with such registration;
# published in the Official Gazette of the Republic: it has declaratory effect, which means that this procedure is necessary in order to grant enforceability against third parties.

= Organization and decision-making processes =
The internal organization and operating rules of the EEIG are largely left to private autonomy.

Two bodies are provided:

# assembly;
# administrative body.

The members of the group can collectively adopt any decision for the realization of the object of the group.

The most important decisions, specified in Article 17 of the Regulation<ref>Art. 17, second paragraph:

"''A unanimous decision by the members shall be required to:''

''(a) alter the objects of a grouping;''

''(b) alter the number of votes allotted to each member;''

''(c) alter the conditions for the taking of decisions;''

''(d) extend the duration of a grouping beyond any period fixed in the contract for the formation of the grouping;''

''(e) alter the contribution by every member or by some members to the grouping's financing;''

''(f) alter any other obligation of a member, unless otherwise provided by the contract for the forma tion of the grouping;''

''(g) make any alteration to the contract for the forma tion of the grouping not covered by this paragraph, unless otherwise provided by that contract''".</ref>, must be made unanimously, while for others the contract sets the required majorities. Unless otherwise stipulated by the participants, all decisions are made unanimously.

Each member has only one vote, but the contract may give more votes to some members, provided that no one member alone has a majority of votes.

The management of the EEIG is entrusted to one or more administrators, appointed by the founding contract or by decision of the members. A legal person may also be appointed as administrator.

= Liability regime =
Profits that result from the group's activities are considered directly as profits of the members and distributed among them according to the proportion provided for in the contract or, in the silence of the parties, in equal parts.

There is no compulsory formation of initial assets, and any fund established is not an independent asset in any case. However, the liability regime for obligations is very strict.

Obligations assumed by the group: all members of the group are jointly and unlimitedly liable, in addition to the group with its own assets. This strict discipline has been a strong disincentive to the formation of this type of group.

The liability of the members is subsidiary to that of the EEIG, which means that creditors of the group must first turn to the group itself to obtain payment and only if payment is not made do they turn to the individual members.

= References =

* https://eur-lex.europa.eu/IT/legal-content/summary/european-economic-interest-grouping.html#
* G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, pp. 281-286.

Firm networks: the phenomenon

2023-07-15T13:35:27Z

Moratoc: Created page with "The '''network contract''' made its entry into the national regulatory landscape by d.l. 5/2009, in whose art. 3, paragraphs 4 ''ter'' - 4 ''quinquies'', the reference discipl..."

The '''network contract''' made its entry into the national regulatory landscape by d.l. 5/2009, in whose art. 3, paragraphs 4 ''ter'' - 4 ''quinquies'', the reference discipline is still provided. In part, under paragraph 4 ''ter'' cited, «''with the network contract several entrepreneurs pursue the purpose of increasing, individually and collectively, their innovative capacity and competitiveness in the market and to this end they undertake, on the basis of a common network program, to''» carry out one or more of the following activities:

* «''cooperate in predetermined forms and areas pertaining to the operation of their businesses''»;
* «''or to exchange information or services of an industrial, commercial, technical or technological nature''»;
* «''or else to jointly engage in one or more activities falling within the scope of their enterprise''».

== The relevance of the phenomenon at a European level ==
The aggregative phenomenon between enterprises is aimed at greater growth and increased competitiveness. It has stimulated the reflections of European institutions on several occasions with regard to small and medium-sized enterprises (SME), from the following different points of view.

* '''[https://www.sba.gov/sites/default/files/files/Small%20Business%20Act.pdf Small Business Act (SBA)]''' of 2008.

This is a European Commission Communication containing a sort of decalogue in support of SMEs, in which the development of models favoring cooperation between enterprises (including the Italian firm networks and the German cluster networks) is cited as an example of good practice.

* '''[https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2011:011:0001:0072:EN:PDF Guidelines on the Applicability of Article 101 TFEU to Horizontal Cooperation Agreements]''' (2011/C 11/01).

These guidelines typify the following categories: research and development agreements; joint production agreements; cooperation agreements in patent matters (patent pools); joint purchasing or selling agreements; reciprocal service provision agreements; cooperation agreements in promotional activities. The antitrust matter, only mentioned here, is indeed a separate issue, since, it should be noted, the network contract is not typified and regulated as relevant as an agreement restricting competition.

== The relevance of the phenomenon at a national level ==

* Statute of Enterprises (l. 180/2011): Art. 1 (2) explicitly states that the aim pursued is to ensure the full application of the SBA, while Art. 2 (1) (n) indicates among the general principles “''the promotion of policies aimed at aggregation among enterprises, also through the support of clusters and enterprise networks''”.

* Decree-Law No. 78/2010, Article 42 (2''quater'') which provides for tax benefits.

* Decree-Law No. 5/2009, which contains the main rules about the organization of firm networks. For the essential elements of this law see "[[Firm networks and essential legal issues]]".

== Practical implications: sustainability and digitalization ==

==== The network as a legal instrument to support sustainability. ====
Given its neutral connotation, the network may well be functional to instances of sustainability in any economic sector. They acquire a particular value to the extent that they implement innovation in the production process, thus following the same guidelines of the sustainable development model: innovation of production cycles, product innovation, implementation of eco-innovations and environmental innovations.

In particular, consider the extension of the network tool to agrifood companies (legislative decree 83/2012). In this sector, there is a phenomenon of so-called sustainable intensification, by which is meant a management of the land and natural resources that makes it possible to produce, with scarce resources and minimal environmental impact, at the same time food and positive environmental externalities (biodiversity, landscape, etc.).

==== The network for promoting technological innovation. ====
Significantly, the Italian Court of Cassation, 21 January 2009, no. 1465, with reference to a joint venture stated that “''the development and exploitation of technologies is one of the fields in which the need for cooperation between companies is most significantly manifested, so that the extent of the necessary investments, the consequent financial commitment in relation to the often very long timeframes for execution and exploitation, and the high risk of failure of the initiative lead to the “sharing” of burdens and risks between several companies''”.

== The phenomenon in data ==
Main features of existing firm networks in Italy:

'''a)''' '''Wide variety of sectors involved''': 22% agribusiness, 13.2% trade, construction 13.1%, tourist services 10%, professional services and mechanics 12%.

'''b) Strong incidence of small enterprises''': 51% micro enterprises, 20% small enterprises.

'''c) Enterprise density primarily below 10 enterprises''': almost 52% are micro-aggregations (2-3 enterprises). The data show a progressive polarisation of network contracts on the extreme levels of entrepreneurial density.

'''d) High degree of geographical concentration''': compared to the experience of industrial districts, networks in many cases also include enterprises located in very distant areas, and indeed interesting forms of aggregation have developed between enterprises operating in different geographical divisions. However, networks between enterprises tend to develop mainly within the same geographical area (81.8%) (uniregional networks constitute 71.60%, within which uniprovincial networks constitute 50.9%).

'''e) Degree of inter-sectoral heterogeneity of network enterprises declining''': almost 61 % of networks involve enterprises operating in different sectors. However, this figure is declining and unisectoral enterprises, now 39.1 %, are gradually increasing (in 2014 they were only 16.2 %). Bi-sectoral networks stand at 33.9%, showing the reluctance of entrepreneurs to attempt productive, instead, multi-sectoral relationships. It should be noted, however, that the level of sectoral heterogeneity is higher among the subject-networks.

'''f) 10% of the network-companies are multi-sectoral''': they are present in at least two network-contracts.

'''g) Prevalent location in the Centre''': 35% Central regions, 26% South, 21% North-East, 18% North-West.

'''h) Prevalence of corporations''': they are 52% (48.4% are srl), compared to 25.5% of sole proprietorships (very widespread in the Centre), 13.6% of partnerships (very widespread in the North-East) and 6.9% of cooperatives.

Summary remarks:

* The direction seems to be towards broader aggregations on the territory, within differentiated production systems.
* Within the single networks, sectoral differentiation is progressively decreasing: the aim seems to be to increase the competitiveness of single Italian enterprises, as seen predominantly micro and small, instead of building relationships between complementary sectors. On the other hand, the prevailing sector remains the agrifood one, networks in the tertiary sector are less widespread.

Essential documentation is available on the following web pages:

* [https://www.retimpresa.it/wp-content/uploads/zf_documents/1642755291rapporto_Reti_2021.pdf National Observatory on Enterprise Networks 2022];
* [https://www.retimpresa.it/wp-content/uploads/zf_documents/1627935349foto_reti_primosem_2021.pdf Photo of enterprise networks, 1 semester 2021].

Corporate governance

2023-07-12T13:46:39Z

Moratoc:

== Definition of corporate governance ==
According to Cadbury Code of 1992, the first [[Corporate governance code|Corporate Governance Code]], “''Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations, and the shareholders in general meeting''”.

In general, the term, a U.S.-derived expression, refers, literally, to the governance of companies and, even more precisely, to companies in the form of corporations. These companies are characterized, in Italian law but indeed also in most legal systems, by the presence of different bodies having different functions. There tends to be a body that deals with the management of the company's business (the directors or board of directors), the shareholders' meeting, which is composed by the owners of the shares issued by the company, and a control body.

It is often believed that corporate governance concerns mainly large companies, but this is not the case.

The expression indicates, on the one hand, the set of rules, laws, and processes on the basis of which the proper management of the enterprise is ensured, on the other hand, the activity itself of administration and control of the corporation.

More precisely, therefore, the phenomenon is directed to regulate, on the one hand, the balance of power between the functions (and the bodies in charge) of administration and control, and on the other, the relations between shareholders. In this sense, the aim of corporate governance is to achieve a high degree of systematicity.

Again, corporate governance can be understood as an element of risk for investors, whose interests may not be protected in case of ineffectual or corrupt managers, and for employees, communities, lenders, suppliers, and costumers as well. And indeed, it is precisely corporate governance, with its rules and procedures, that must respond effectively and efficiently to a decisive challenge: "''how to grant managers enormous discretionary power over the conduct of the business while holding them accountable for the use of that power''"<ref>R. A. G. Monks, N. Minow, ''Corporate governance'', John Wiley & Sons, Ltd, England, 2008, pp. 3, 225.</ref>.

It seems clear, at this point, the difficulty of identifying a unified definition of corporate governance, a concept that has indeed attracted the interest of multiple academics, even more so where its complexity is intended to be fully grasped by such a definition. Therefore, it seems useful to propose, briefly, several possible externalizations of it, which in turn are the manifestation of different points of view and interests.

* '''From an operational perspective'''<ref>B. Tricker, ''Corporate governance. Principles, Policies, and Practices'', Second Edition, Oxford, 2012, p. 29.</ref>: corporate governance concerns the actions of shareholders, the board of directors and management, and the control body.

* '''From a relational perspective'''<ref>B. Tricker, ''Corporate governance. Principles, Policies, and Practices'', Second Edition, Oxford, 2012, p. 30.</ref>: the governance structure implies a precise distribution of powers, duties and responsibilities among the different corporate bodies, identifies the rules underlying the decision-making processes and, consequently, the relationship between the parties involved.

* '''From financial and economic perspective'''<ref>B. Tricker, ''Corporate governance. Principles, Policies, and Practices'', Second Edition, Oxford, 2012, p. 30.</ref>: corporate governance concerns, also, the way in which shareholders obtain a return for their investment.

* '''From a societal perspective'''<ref>B. Tricker, ''Corporate governance. Principles, Policies, and Practices'', Second Edition, Oxford, 2012, p. 31.</ref>: governance also aimed at balancing economic and social goals, individual and collective interests.

The governance arrangement, in other words, must be functional in ensuring the efficient use of resources. In this sense, beyond, albeit important, ethical and philosophical reflections around the relationship between the individual, the state and the enterprise, there is to be noted an increasingly strong attempt to involve the instances of subjects outside the corporate apparatus and who are also bearers of interests related to business activity (so-called stakeholders), such as employees, consumers, suppliers and banks.

Lastly, it is possible to look at how “Corporate governance” is differently defined by the Corporate governance codes of different nations, as can be found on [https://documents1.worldbank.org/curated/ar/194571468330288811/pdf/346690v20Corporate0governance0Rationale.pdf ''Global Corporate Governance Forum'', ''Vol. I'', ''Rationale'']''.''

== Corporate governance in Italian legislation ==
A fundamental role, in the definition of such a vision, is to be found in the Reform of Company Law set forth in Italian Legislative Decree No. 6 of 2003, whose most salient features, with reference to the company's system of administration and control, can be described as follows.

* Strengthening of the powers of the directors, who are entrusted exclusively with the management of the company.

* Central role attributed to information and transparency, as the basis for the proper actions of the directors, also so as to trace their behavior and the decisions taken by them and assess their possible liability.

* Punctualization of the specific powers and duties in charge of the directors of the joint-stock company, regulating their management role in an innovative way, through a systematic articulation of its content and proceduralization of the techniques adopted.
* Attenuation of the dependence of the directors with respect to the majority in the shareholders' meeting, i.e., with respect to those shareholders who participate the company to a greater extent, who have appointed them and who retain the power to revoke them, or to bring a liability action against them.
* Elevation of the principles of proper administration as a general clause of conduct for directors.
* Importance of the system of internal controls as the essential core of corporate governance.
* Possibility of choosing among three different models of administration and control: the traditional, dualistic, and one-tier models.

== From corporate governance to platform governance ==
So far, reference has been made to companies in a hierarchically structured corporate form, oriented toward achieving the corporate purpose stated by the shareholders and maximizing their profit, through the distribution of profits and the increase in the value of the shares.

However, it is interesting to draw attention to the ongoing development of new organizational forms, characterized by a horizontal and more democratic dimension, notably through the use, in the most diverse corporate functions, of new technologies (artificial intelligence and distributed ledgers).

The phenomenon, known as CorpTech<ref>L. Enriques, D. Zetzsche, ''Corporate Technologies and the Tech Nirvana Fallacy'', in ''Hastings Law Journal'', 2020, p. 72.</ref> (from a crasis, precisely, of the terms "corporate" and "technology"), is allegedly bringing about a deconstruction of the typical architectures of corporate governance, leading first to phenomena of so-called platform governance, and finally to community-driven governance. These organizations are managed through digital platforms, open to the community and marked by a decentralization of decision-making hubs.

For further details see "[[Platform governance]]".

== References ==

* D. Corapi, ''Corporate governance'', in ''Riv. dir. comm.'', 2019, pp. 1 ss.
* L. Enriques, D. Zetzsche, ''Corporate Technologies and the Tech Nirvana Fallacy'', in ''Hastings Law Journal'', 2020, p. 72.
* M. Fenwick, J. A. McCahery, E. P. M. Vermeulen, ''The End of “Corporate” Governance: Hello “Platform” Governance'', in ''European Business Org. Law Review'', 2019, pp. 171 ss., available at https://link.springer.com/article/10.1007/s40804-019-00137-z
* P. De Filippi, B. Loveluck, ''The invisible politics of Bitcoin: governance crisis of a decentralized infrastructure'', in ''Journal of Internet Regulation'', 2016, p. 2.
* R. A. G. Monks, N. Minow, ''Corporate governance'', John Wiley & Sons, Ltd, England, 2008, pp. 3, 225.
* P. Montalenti, ''Amministrazione e controllo nella società per azioni: riflessioni sistematiche e proposte di riforma'', in ''Rivista delle società.'', 2013, pp. 42 ss.
* B. Tricker, ''Corporate governance. Principles, Policies, and Practices'', Second Edition, Oxford, 2012, pp. 29-31.