SIP-2: The Sandbox Foundation

🎯 Past SIPs Implemented
1

Council recommendation: Positive :slightly_smiling_face:

TLDR

What

In this SIP we want to recognize the role of, and to approve the steps taken to form, The Sandbox Foundation (the “Foundation”) as the legal entity supporting The Sandbox DAO (the “DAO”).

The vote (Snapshot) will be:
- Yes - Approve
- No - Reject
- Abstain - Cannot decide

Why

  • The DAO exists for members of The Sandbox community to exercise their voice in the development and operation of The Sandbox ecosystem by voting their SAND and/or LAND tokens (and potentially at a later date Avatars and other Assets affiliated with The Sandbox).
  • The Foundation provides the tools and resources necessary to execute and implement the resolutions of the DAO.
  • The Sandbox Foundation has been formed as a Cayman Islands foundation and corresponding expenses have already been incurred for legal counsel and personnel including the Foundation’s director and other legally required roles.

How (The Foundation will be supported by):

  • A professional independent director.
  • Supervisor.
  • Secretary and registered office provider.
  • Legal and compliance counsel.

When

The Sandbox Foundation will continue to exist as long as the Sandbox DAO (see SIP 1) does

Where

https://forum.sandboxdao.com/

Who

The authors of this SIP are Arasakio and The Sandbox.

SIP Details

Background/Context

This is a proposal to:

  • Formally recognize the Foundation as the Cayman Islands legal entity aligned with and supporting The Sandbox DAO.
  • Ratify the constitutional documents of the Foundation.
  • Ratify the engagement of the law firm Travers Thorp Alberga (”TTA”) as legal counsel to the Foundation.
  • Ratify International Corporation Services Ltd. as the professional provider of secretary and registered office services to the Foundation.
  • Ratify International Protectors and Advisors Ltd as the founder and supervisor to the Foundation.
  • Ratify the legal expenses related to the formation of the Foundation.
  • Ratify the engagement of Michael Robinson as the professional independent director of the Foundation and associated fees.

Description

  • The Foundation is a Cayman Islands foundation company limited by guarantee without any share capital that was formed on November 20, 2023.
    • If this proposal is passed, the DAO will ratify the formation of the Foundation.
  • The Foundation was formed by filing the attached Articles of Association (see Appendix).
    • If this proposal is passed, the DAO will ratify the Articles of Association.
  • The initial member of the Foundation adopted the Memorandum of Association (see Appendix) and appointed Michael Robinson as the sole professional director of the Foundation before resigning as a member of the Foundation.
    • If this proposal is passed, the DAO will ratify the Memorandum of Association and the appointment of Michael Robinson as sole director of the Foundation.
  • The Memorandum of Association establishes the following objects for the Foundation:
    • to independently support, educate and encourage the use and adoption of The Sandbox ecosystem and related infrastructure and digital assets including SAND, LAND and other NFTs;
    • to act as a holding company and investment company, with no restriction on the objects or operations of its subsidiaries or on the nature of its or their investments;
    • to provide financial assistance or benefits to beneficiaries designated under the Articles of Association; and
    • to do all such things as in the opinion of the directors are or may be incidental or conducive to the above objects or any of them.
  • Cayman law requires a supervisor for all foundation companies, as well as a company secretary to provide registered office and other services. International Protectors and Advisors Ltd (”IP&A”) is the Founder of the Foundation and the Foundation has engaged IP&A to serve as supervisor and has engaged International Corporation Services Ltd. (“ICSL”) to serve as secretary and registered office provider under the Articles.
    • If this proposal is passed, the DAO will ratify the appointment of IP&A as founder and supervisor and ICSL as corporate secretary under the Articles.
  • The Foundation has engaged TTA to advise on the Foundation’s formation and on legal matters relating to Cayman Islands law going forward. Professional directors require experienced legal counsel to be engaged to advise them and the Foundation on proposed activities and to prepare legal documents. TTA has extensive experience in the formation and operation of DAOs and is qualified to serve in this capacity.
    • If this proposal is passed, the DAO will ratify the appointment of TTA as Cayman Islands legal counsel to the Foundation.

Rationale and Benefit

  • A legal entity is required to assist the DAO to formally engage with third parties and to implement and execute the proposals of the DAO. The use of a legal entity may limit the liability of the members of the DAO community voting on any particular proposal. The Cayman foundation is widely recognized as among the most effective means of achieving these goals.
  • The Foundation requires the service providers and roles described to perform its operations and remain in compliance with Cayman law.
  • The service providers selected all have the requisite experience to provide them in an effective and cost-efficient manner on behalf of the Foundation and the DAO.

Risk Analysis

  • A Cayman foundation is not a guarantee that DAO members will not be found liable for actions taken by the Foundation based on the vote of such members.

Implementation Plan

  • The actions described have already occurred, including the formation of the Foundation and the engagement of:
    • Michael Robinson a director,
    • TTA as Foundation legal counsel as to matters of Cayman Islands law,
    • IP&A as founder and supervisor,
    • ICSL as secretary,
  • This proposal will ratify these actions by confirming the approval of the DAO community.

Resources Required

  • Legal Expenses and related Fees: [US$50,000]
    • This includes but is not limited to:
      • [legal fees already incurred and anticipated fees in connection with proposed revisions to the Articles.]
      • Registered office fees
      • Supervisor fees
      • Founder fees
      • Secretary fees
      • Registrar of Companies fees
    • If this proposal is passed, the DAO will ratify the payment of these amounts from the DAO treasury.
  • Director Services: US$30,000 annually
    • If this proposal is passed, the DAO will ratify the payment of the director fees from the DAO treasury.

Metrics for Success

  • The Foundation is ratified with the necessary personnel to provide the resources and tools necessary to operate the DAO.

Voting Options

  • Voting Options

    The vote (Snapshot) will be:

    • Yes - approve
    • No - reject
    • Abstain - Cannot decide

  • Voting Period: 14 days

Appendix

3 Likes
3

The quoted sentence from the SIP-2 risk analysis is a bit concerning and needs to be addressed properly because not everyone is a legal expert and not everyone in the TSB community is aware of the Cayman Islands laws which might bring everyone involved in the legal crossfire between Foundation and the government (If any) that might occur in the future.

4 Likes
4

A DAO is an entity of its own.

A DAO (and its member) is responsible for what the DAO votes upon. However, whatever your foundation is doing is another story.

You will be liable for any wrongdoings if the DAO voted against your proposal. Don’t try to merge both entities together, this is not how it works.

A DAO is usually considered as an LLC of its own.

5

Could you elaborate on the potential liabilities that DAO members may face due to their voting actions? Additionally, could you shed light on the challenges surrounding these liabilities and identify which countries are subject to them, as per the risk analysis ?

Thank you @Geraldine

3 Likes
6

Hello @DrMetaverso. This is an excellent question – without a simple answer.
The laws on these points remain untested in many jurisdictions and there has been some case law (in particular in the US) that suggests there could be risks in certain circumstances. Unfortunately we can’t give legal advice on these questions and each DAO member is encouraged to conduct their own analysis of the potential legal, tax and regulatory (and other) risks involved in becoming a DAO member and being involved in DAO votes.

1 Like