Following the work that we are @christiancdpetersen is doing on designing a legal structure for RWA (here and here), we are soon to release the documents describing a Cayman Foundation and a MIP to formalize the communication between the DAO and the Cayman Foundation (the WIP MIP is located here but not finished yet).
While SolarX is used for the proof of concept, this structure could be used for most RWA collaterals where the MIP6 isn’t addressing the legal structure. This component should speed up RWA onboarding a lot.
This post is a way to get feedback from the community on the overall structure and on some open questions in order to be able to change the structure if needed. What is presented here is already the 3rd iteration. I would recommend that we keep it high level, leaving discussion on details with the MIP post (which should go live in early August).
The overall structure is to have a Cayman Foundation holding SPVs (Special Purpose Vehicle), most likely one per project. The SPV will be simple structures like member-managed Delaware LLC (i.e. the Cayman Foundation controls and manage the SPV).
The Cayman Foundation is the bridge between the real world and DeFi (Maker Protocol and MakerDAO).
For the management, the current plan is to have servicing companies taking the role of supervisor and director (those are distinct roles, but we can summarize that both run the Foundation). How much power they will have is a discussion point. Nevertheless, while it remains to be seen what they agree to do, one can expect that they will not take any non-obvious action anyway and request guidance.
Those servicing companies can be supplemented by a committee of MakerDAO members. Those will be able to instruct the directors to act on some predefined items. They will not have any power to represent the Foundation by themselves.
Here is a list of actions we suggest the committee could instruct the directors
- Notify the borrower of a default;
- Take any time-sensitive measures to protect lender rights;
- Immaterial (non-monetary) waivers under financing agreements;
- Immaterial (non-monetary) amendments under financing agreements;
- Administrative matters to maintain SPV security (UCC filings, renewals);
- Authorize payments of administrative fees, costs and expenses for loan management.
There are also some items that the servicing companies will not want to carry, especially for things that are outside of their jurisdiction. For that, we introduce the authorized signers. Authorized signers can sign for the Foundation for things that are delegated to them. It can be a one-time delegation (like open a bank account) or something open-ended. There is also a cost element to it as using directors to do things might be way more expensive.
It is our view that we need at least to give delegate power to supervisors and directors to pay the bills and do whatever is need to keep the lights on in the Cayman Foundation (and the underlying SPVs).
More tricky is the power delegation to the committee and the authorized signers. We can make that evolve with time. But do we start a bit too wide to get things running or by not even having a committee nor authorized signers?
If MakerDAO confirms 6S in the interim, should we start with similar specific powers to authorized signers?
Who should be on the committee? Who should be authorized signers?
The proposed structure gives full power to MakerDAO through executed spells. We haven’t figured any reason why that would be risky but this is a point that worries me. But if someone can execute a MakerDAO spell against the will of MKR holders, what happens for the Foundation is probably not our main problem.
A provision like having the ability for the committee to delay directors’ actions by one week might be enough. Happy to have other thoughts on this one.
There is a plan to add resolutions for the case where MakerDAO is not responding or is no longer alive. For instance, if MakerDAO fails to appoint a director that is resigning, the supervisor will appoint an interim director (and vice-versa).
I would say one is enough as it is unclear what protection have duplicate bring. This reduces cost (as a % of “assets under management”) as well with scale. But it doesn’t cost much to leave room for an upgraded version of the legal construct.
Happy to discuss others topics as well related to this legal structure.