Welcome to the DAO Legal Guide focusing on the ADGM DLT Foundation, an integral segment of the Pontinova Global Top 100 DAO Legal Report.
Delve into this comprehensive guide to gain insights into the legal set up requirements and the regulatory compliance framework surrounding ADGM DLT Foundations. Explore the other jurisdictions to understand why they excel at fostering DAO initiatives and navigating the intricacies of decentralized governance structures.
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Legal Requirements
Legal
DLT Foundations are incorporated under the DLT Foundations Regulations 2023.
Constitution
DLT Foundation Charter, Declaration of Compliance, Statement of Initial Beneficial Ownership and Control, Certificate of Registration, one or more Founders who may be either individuals or companies and who need not to be residents of ADGM, Application for Commercial License.
Regulatory Board
Financial Services Regulatory Authority (FSRA)
Administration, Management
Registered Office, Bank Account, Company Service Provider who is licensed to provide company services, Foundation Council consisting of at least two councilors who must be the Founder, a Beneficiary, a Tokenholder, or a legal person, an optional Guardian supervising the actions of the Foundation Council, Tokenholders if the DLT Foundation issues tokens.
Reporting, Accounting, Auditing
Reporting, Accounting, Auditing are mandatory.
Please note that the DLT Foundation must have a minimum initial asset value of USD 25’000 which should be paid in within 6 months from the date of the DLT Foundations’ incorporation. The registration fee is USD 500. To obtain the commercial license, the DLT Foundation must pay licensing fees of USD 8’000. These fees are recurring and must be paid annually. The incorporation fees should include legal fees and other administrative fees, such as data protection fees. The incorporation duration is approximately 3 weeks.
Taxation
9% of Corporate Income Tax. However, the DLT Foundation may qualify for a 0% tax rate if it is a free zone person with a taxable income up to AED 375’000 or a qualifying free zone person with qualifying income.
Regulatory Compliance Framework
The Registration Authority of the free zone ADGM of the emirate Abu Dhabi has enacted on October 2, 2023, the Distributed Ledger Technology Foundations Regulations 2023 implementing rules for distributed ledger technology foundations and DAOs. The rules were published on November 1, 2023.
Financial Services and Markets Regulations [A /VA I]
Applicable, if the token qualifies as a digital security. The issuance of digital securities requires the issuance of an approved prospectus, unless the security is an exempt offer. An exempt offer is an offer that is directed at professional clients other than natural persons or that is directed at fewer than 50 persons in any 12-month period, excluding professional clients who are not natural persons, or whose total consideration to be paid by a person to acquire securities is at least USD 100’000, or an equivalent amount in another currency.
Financial Services and Markets Regulations [P,A / VA S]
Applicable to digital securities activities of market intermediaries and market operators that must be licensed by the FSRA as a financial services permission holder (FSP), a recognized investment exchange or a recognized clearing house. It is also applicable to virtual assets activities of market intermediaries, multilateral trading facilities and custodians that must be licensed by the FSRA. Please note that ancillary virtual assets activities do not need to be licensed by the FSRA if the entity merely uses virtual assets as a medium of exchange to facilitate the transfer of fiat currencies on behalf of clients across jurisdictions, and if the entity demonstrates that the ancillary use of the virtual asset is fit for purpose. However, an entity that offers its clients the service of exchanging virtual assets for fiat currencies must apply to and be authorized by the FSRA to use virtual assets as part of its business. In addition to the aforementioned requirements, entities must comply with capital requirements equal to 6 months of operational expenses plus an additional buffer of up to another 6 months of operational expenses, substance requirements within ADGM, virtual asset risk disclosures, and requirements relating to market abuse, transaction Reporting and misleading impressions.
Federal Anti-Money Laundering and Countering the Financing of Terrorism Laws [P, A / VA S]
Applicable to all VASPs operating within ADGM.
Foreign Account Tax Compliance Act and Common Reporting Standard Regulations [P, A / VA S]
Applicable to all VASPs operating within ADGM.
Check the other DAO Jurisdictions:
• Switzerland - Foundation
• Switzerland - Association
• Lithuania - Private Limited Liability Company
• Marshall Islands - DAO (Non-Profit) Limited Liability Company
• Cayman Islands - Foundation
• British Virgin Islands - Limited Liability Company
• Liechtenstein - Foundation
• Ras Al Khaimah Digital Assets Oasis - DAO Association
