Proposal forum post: https://forum.inverse.finance/t/inverse-finance-foundation-proposal/605

Summary

This proposal requests an allowance to cover the initial costs of incorporating an independent Inverse Finance Foundation in the Cayman Islands. The formation documents will ensure that the foundation is held accountable to DAO holders by law and can be directly controlled by on-chain votes. Additionally, the foundation will not gain access to any existing DAO treasury assets unless deemed necessary by an on-chain vote. The main purpose of the IFF is to replace some of the DAO working group multisigs, acting as the DAO’s primary executive arm. This transition will be phased over future proposals. This proposal only requests funding to create the foundation and does not grant the foundation any privileges or assets.

Rationale

The proposed foundation will provide two main benefits to the DAO:

1. Consolidate DAO contributors’ efforts into one coordinated, accountable and DAO-controlled entity instead of separate working groups
2. Unlock access to off-chain benefits such as banking, contractual agreements with partners, contributor employment contracts, physical presence, and ownership of off-chain assets such as intellectual property, equity, hosting and domain names.

The legal setup of the foundation will grant DAO voters the highest authority to impose rules, changes and restrictions on foundation directors and employees by a simple on-chain vote. This setup will allow the DAO to delegate on-chain privileges and assets or provide a discretionary budget while ensuring that funds are used in the best interests of the DAO.

At any time and at the DAO’s discretion, the DAO holders may vote to replace directors and employees, require transparency disclosures, liquidate foundation assets and/or return funds to the DAO’s treasury address.

Vision

As the main executive arm of the DAO, the foundation is expected to request a limited discretionary budget funded by the DAO treasury to cover opex spending. The foundation will replace, and take over the operations of, all existing working groups except for the Treasury Working Group. All expenses will be spent through the foundation except for treasury management spending and operations which will remain the responsibility of the Treasury Working Group.

DOLA payroll for existing contributors will continue to be streamed directly from the DAO treasury using the existing Payroll contract. Contributors who choose to become employees or contractors of the foundation will be removed from the Payroll contract and added to the foundation’s budget based on their request. Future contributors are expected to become employees or contractors of the foundation or its subsidiaries or service providers.

The foundation will use its discretionary budget to cover expenses such as server infrastructure costs, security audits, product marketing and advertising, event management, legal counsel, talent and other expenses. This budget will allow the DAO contributors to move swiftly without requiring a governance proposal for every new spending item. The foundation will provide recurring cash flow statements to be reviewed by the DAO in order to ensure transparency.

Subject to DAO approval, the foundation will request a continuously streamed budget from the DAO treasury rather than a lump sum amount. DAO voters will retain the power to cut funding to the foundation at any time without its permission by simply suspending the budget streaming contract.

Incorporation process

Legal Counsel

After exploring multiple options, we intend to retain the Carey Olsen law firm as legal counsel in order to pursue the creation of the foundation. This firm was recommended by some of our close partners who have hired them in the past. Carey Olsen is also retained by some of DeFi’s largest players and has extensive experience in setting up similar structures.

After the incorporation is complete, we expect Carey Olsen to also act as legal counsel for the foundation. However, it is possible to engage with other law firms as well, for example, for matters that relate to jurisdictions or legal areas outside of Carey Olsen’s experience.

Jurisdiction

Carey Olsen has recommended the Cayman Islands as the host jurisdiction for the IFF thanks to the great flexibility of its foundation structures. This choice was confirmed by other legal opinions.

The foundation in the Cayman Islands will be the main entry point for the DAO to manage global assets or entities. The foundation may also create subsidiaries or enter into agreements with other entities in other jurisdictions in the future, if permitted by the DAO.

Structure

The IFF will be an ownerless foundation directed by a single Cayman-based independent director. The director’s privileges will be set by the constitution of the foundation. The constitution will require the director and other employees to act only in accordance with decisions made by the INV token holders via an on-chain vote.

The director will have a fiduciary duty towards the foundation and, therefore, is legally bound to its rules within the bounds of the law. The director may only deny requests made through DAO governance proposals if he interprets them to be illegal. If the director attempts to abuse this exception by misinterpreting the law, the DAO may replace the director by a governance vote. In this case, the independent supervisor role is able to enforce the DAO’s decision by making a filing with the Cayman company registrar without permission from the director.

The director is not required to be in control of assets held by the foundation. On-chain assets provided by the DAO will likely be controlled by a foundation multisig. Multiple signatories may also be required in order to control off-chain assets or to sign legal agreements. The DAO retains full flexibility in deciding these rules thanks to the Cayman foundation structure.

Deliverables

The retained law firm will assist DAO contributors with fulfilling the requirements for the incorporation and operation of the foundation including:

1. Creation of mandatory formation documents and fillings in the Cayman Islands

2. Selection and hiring of an independent director

3. Selection and hiring of a service provider for the registered office and secretary requirements

4. Drafting of the foundation constitution in accordance with the DAO’s requirements

5. Payment of government and third party fees, including:

6. Government fees

7. Independent director fees

8. Independent supervisor fees

9. Other potential services providers e.g. registered office, mandatory secretary services, banking, etc.

10. A cost breakdown of funds spent from the allowance provided by this proposal.

Once these deliverables are complete, they will be presented to the DAO for public review. The foundation will then submit another proposal to the DAO which includes the proposed constitution and the first foundation budget proposal to be adopted by the voters.

Cost estimate

Based on the conversations with Carey Olsen and other legal firms, we estimate that deliverables above may cost around $60,000.

This proposal requests 80,000 DOLA allowance in order to cover the creation of the foundation as well as any additional costs that may be incurred until the first foundation budget proposal is passed.

Disclaimer

The information and details presented in this proposal are non-binding and subject to change. Inverse Finance contributors reserve the right to modify any aspect of this proposal, including but not limited to, the selection of legal counsel, jurisdiction, foundation structure, and the inclusion of additional expense items, at their sole discretion. This proposal serves as an initial outline and does not constitute a final agreement or commitment.

On-chain actions

• Set 80,000 DOLA allowance to the Inverse Deployer address (0x3FcB35a1CbFB6007f9BC638D388958Bc4550cB28)