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Gibraltar Foundations for Decentralised Crypto Protocols

A Gibraltar Private Foundation is an independent entity established in accordance with the Private Foundations Act 2017 with its own legal personality and being capable of holding and disposing of assets in its own name. To establish a Private Foundation, a person or corporate entity will provide the initial assets of the Foundation (the “Endowment”) and compose a series of overarching deliverables which the Foundation will seek to achieve (the “Purposes”).

With an increasing number of projects wishing to become decentralised in the past few years, the true barriers to decentralisation have become apparent to many. For example, a decentralised protocol is not capable of entering legally binding contracts on its own behalf. Therefore, mundane tasks such as engaging with contractors, opening accounts, and marketing in the physical world become very complicated. Private foundations can offer decentralised protocols a much-needed interface for transactions with the traditional financial and legal world. A sample of the benefits identified include:

Independence 

A Private Foundation is not owned by its founder, or anyone else for that matter. Instead, it is managed by a group of councillors, a professional licensed trustee and a guardian who ultimately work to support the Foundation, which exists only to fulfil its predetermined Purposes.

The Foundation will run on a set of prescriptive rules and Purposes which are set by the founder when the Foundation is created. These will guide those operating the Foundation during its lifespan, which may be infinite.

In Gibraltar, a Private Foundation is required to have a professional licensed trustee on its council. This provides a robust supervisory mechanism for the operation of the Foundation which may give comfort to those interested in the relevant project. In practice, the professional trustee will oversee all operations of the Foundation and agreements which it enters.

Compatible with the decentralised ethos

For many, the idea of relying on a privately owned, commercially driven entity to manage the continuous development or promotion of a project is difficult to digest. Notwithstanding the risk of abuse, a corporate entity which is ultimately owned and controlled by one or more persons, who are free to operate with their own commercial interests at heart, is far from independent. On the other hand, whilst by no means decentralised, a Foundation is not centrally owned. Instead, it is its own creature, and subject to its constitutional Purposes, is controlled to an extent by a number of individuals with differing roles.

Commercially flexible 

Although a Foundation must be managed in pursuance of its Purposes, it can operate as a business and can enter contracts, pay for services, and invest its assets.

Contracting advisors and developers to support and improve a project usually represents an important part of the day-to-day operations of a Foundation. However, these need not be limited and may extend to for example, marketing, education, and support of other projects.

In pursuance of its objectives, a Foundation can be structured to consider decisions made by a decentralised community. For example, when deciding whether to support a new project, or develop a new tool, the Foundation Council may decide to put the question to the community related to the Foundation and come to a decision with the support of direction provided by the community.

Industry familiarity

With several successful and well-known foundations (in various forms) across the globe which cater for the support and development of decentralised projects, the public and industry professionals are comfortable with the term and this type of structure.

Running a Foundation 

Persons supporting the Foundation will include:

  • Councillors with industry experience who represent the particular project which the Foundation has been created to support;
  • A professional councillor, being a licensed trustee who will oversee all activities of the Foundation and administer its contracts, filings, accounts and records; and
  • A guardian who is usually an independent person with industry experience and will act as a final check/veto on the actions of the Council to ensure that the proposed actions of the Council further the Purposes.

Once the Foundation is registered and in operation, the persons identified above will meet (usually virtually) on a regular basis to discuss ongoing matters, including new proposals, contracts to be entered and any application of the Foundation’s assets.

Councillors may consist of any number of persons (legal or natural) and they may be appointed or removed as required during the life of the Foundation to promote the Purposes.

For further info, feel free to contact me: jeremy.requena@hassans.gi

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