Legal Organisations and Technology Arrangements

Following on from earlier presentations at local events on blockchain, Dr. Max Ganado, Senior Partner at GANADO Advocates, gave a more detailed presentation on legal personality for blockchain at a FinanceMalta “My Blockchain” event held last week at the Maritime Museum in Birgu.

The context is the proposal by the government of Malta to address the possibility of setting up a Legal Person for technology arrangements such as DLT platforms, smart contracts and similar software architecture. Dr Ganado explained what the proposal envisaged – A legal personality would be a newly designed legal organisation that would cater to innovative technology as its main asset and will be sensitive to the context of blockchain and smart contracts which are built on new technological structures.

The presentation focused on the following ideas:
– all legal organisations have common elements being a purpose, a patrimony, administrators who apply the patrimony to the purpose. Two forms exist : associations of persons or a pool of assets.
– a technology arrangement has a purpose, it is a pool of assets and is administered mostly by technology itself but also partially by persons. Legal analysis indicates that this state of fact can imply the existence of a legal organisation, such as a partnership, and Dr Ganado quoted some international publications demonstrating the point.
– not addressing the matter has two negatives: it increases the legal uncertainty on several aspects, in particular liability and misses the opportunity to address issues which need clarity, so why not address this situation?

Dr Ganado then analysed each type of legal entity to see how this works in the context of owning a technology arrangement which is automated to varying extents: Companies, partnerships, cooperatives, private associations, public benefit associations and foundations. Companies have very rigid rules on shares, members, capital, directors, partnerships. Cooperatives have a dynamic of collaboration by members, rules on joint liability and rules on management. As we move to associations and foundations, particularly purpose ones (usually social purposes but could be other purposes under Maltese law), we start finding convergence and the benefits of a technology arrangement where there will be no owners, specific purposes and smart contract automation on governance, more flexibility and less specific rules on participants. We also have features such as segregated cells which help with structuring assets like the software away from liability and liability solutions like insurance policies in separate compartments.

After highlighting certain qualitative aspects of existing legal organisations, Dr Ganado concluded with the suggestion of “forking” the Maltese purpose foundation with segregated cells and creating a new form of foundation, with governance, compliance and liability smart contracts.This will fit nicely with the proposed certification of the technology arrangements, the reviews by systems auditors and continuing support by technical administrators as proposed in the law currently being finalised by Malta.

To view the presentation, click here.