Re: [Ianaplan] cwg legal review

[Milton L Mueller <[e-mail]>]

From: Ianaplan [mailto:[e-mail]] On Behalf Of Ted Hardie

Thanks for the pointers to these.  If I am reading these correctly, Sidley Austin appears to strongly favor a Delaware LLC structure as more flexible and less likely to cause tax headaches by requiring a separate determination of tax-exempt status; further, they favor a single-member LLC because that causes it to be a "disregarded entity" for tax purposes.  Separately, they favor an insider board because they believe an outsider board would cause PTI to be sufficiently distinct that ICANN would  not be responsible for PTI's actions or, thus, accountable for them.  As a result, separate accountability methods are needed for PTIs board.
Does this match your/others' reading?
Ted

Have we read the same document? https://community.icann.org/download/attachments/52891634/Comparison%20of%20PBC%20vs%20LLC.pdf?version=1&modificationDate=1431531191000&api=v2

The side-by-side comparison emphasizes the flexibility of the Delaware LLC construct, but with that flexibility comes increased risk and implementation costs, as the transition process would have to carefully negotiate a management agreement that could not be abused or manipulated. The LLC structure could be captured and milked and its directors/managers have no fiduciary duty to the corporation.

The Public Benefit Corp comes with built-in protections against inurement and private benefit, and cannot be forced into bankruptcy. It has to apply for and achieve nonprofit status from the IRS, but it would be very hard for what IANA does to be considered profit-making, and once it has that status certain protections and benefits go along with it.

To put things in a nutshell, in the LLC form everything depends on what goes into the LLC Operating Agreement, which means that CWG’s proposal is not complete until it spends the next 8 months defining that Operating Agreement.

I will add that the CWG had a discussion of this issue Thursday and the trend was toward a PBC with an insider board (i.e., a board the majority of which is appointed by ICANN).