Re: [Ianaplan] cwg legal review

[Ted Hardie <[e-mail]>]

On Mon, May 18, 2015 at 12:02 PM, Milton L Mueller <[e-mail]> wrote:

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> *From:* Ianaplan [mailto:[e-mail]] *On Behalf Of *Ted
> Hardie
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>   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.
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> Does this match your/others' reading?
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> Ted
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> 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
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​I was looking at two other documents from the set:

https://community.icann.org/download/attachments/52891634/PTI%20Entity%20Structure_13May.pdf?version=1&modificationDate=1431893995000&api=v2

and


https://community.icann.org/download/attachments/52891634/Memorandum%20-%20Post-Transition%20IANA%20Board%20Stress%20Tests_13May.pdf?version=1&modificationDate=1431893980000&api=v2

In that context, it is possible I misunderstood their preference for
flexibility.
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>  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.
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> 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.
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​This is a point I had not understood from the other documents, which
appear to state that IRS's determination of non-profit status was hard to
predict.​

 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.
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​Would I be correct in inferring that if LLC were to construct an operating
agreement, you believe it would convey responsibilities and limitations on
the directors​ which would be similar to the public benefit corporation?



>  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).
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​Thanks for this additional data.

regards,

Ted​