[CCWG-ACCT] Fwd: [Acct-Legal] Memo--Responses to June 11 Follow-up Questions on Unincorporated Associations

[Malcolm Hutty]

On 16/06/2015 07:45, Mathieu Weill wrote:
> Dear Colleagues,
> 
> Please find attached a follow-up legal memo on unicorporated
> associations, 

Dear Leon and the Legal Team,

Thank you for the very helpful memo of 15th June.

I have some supplementary questions, that ask you to expand on the
following statement in the memo:

"Neither the Chart nor this summary address possible alterations or
constraints to member rights that could be accomplished through other
legal mechanisms. For example, while members have a statutory right to
“bring suit” under the California Nonprofit Public Benefit Corporation
Law, this can be limited through bylaw provisions and member agreements
that provide for internal dispute mechanisms to be utilized first and/or
provide for binding arbitration, instead of litigating in court".

Read in isolation, without a clear understanding of this statement, the
chart appears to describe statutory powers for members that are quite
restrictive. However while we have analagous statutory provisions here
in the UK, we also often make use of membership agreements (in private
non-listed companies anyway) that significantly alter the practical
effect of the statute.

Moreover, here in the UK at least, companies that work this way usually
require people to enter into such an agreement as a precondition for
being admitted into membership of the company. The "membership
agreement" effectively becomes just another form you must sign when
being appointed as a member, but having signed it you are bound by its
provisions.

Before reading too much into the Chart, I think we need to understand
what is possible in Californian law in this respect.

By way of example, the chart suggests that members cannot give up the
power to dissolve the company. This rule, as stated, is likely to
severely limit the range of structures for membership that we would
consider appropriate for ICANN, and may well persuade some people that a
membership model should not be considered at all. However, if a
membership agreement could waive this power, or set a stiff requirement
such as "95% of members voting in favour" or "unanimous consent of all
members" then that looks very different, and much less likely to
constrain our decision.

Similarly, the powers to appoint and remove directors run directly into
potential conflict with the powers we are creating in the Bylaws, which
would perform that same function in a different manner. However, if the
members, by way of a membership agreement, can delegate these powers
then there need be no conflict with the structure we are designing.

So my questions are:

Q1. Can the powers set out in section 1 ("Mandatory Member Rights that
Cannot Be Altered or Constrained") be waived, delegated, or the manner
of their exercise be otherwise regulated by members by means of a
membership agreement, or are they utterly immutable and inalienable in
all respects?

Q2. If a membership agreement can regulate the use of members' statutory
powers, is there a general rule that covers how a membership agreement
may regulate the use of members' statutory powers (for example, that
members are free to make any such arrangements as they may agree to)?

Q3. If question 2 cannot be answered generally, what are the
restrictions on what a membership agreement might say in respect of the
use of each the powers in section 1?

Q4. Can the Bylaws or Articles directly include a requirement that no
person shall be admitted to membership of the company without first
entering into an identified membership agreement? Can this take
precedence over other provisions in the Bylaws giving certain persons a
right to be admitted to membership (or a right to appoint someone to
membership)?

Q5. Alternatively, can the Bylaws or Articles include a requirement that
no person shall be admitted to membership of the company without the
consent of the Board? And if so, can the Board condition their consent
on whether the prospective member first enters into the membership
agreement?

Q6. Can such a membership agreement be irrevocably binding, in the sense
that a member who has agreed to it cannot subsequently denounce it and
then exercise the statutory powers of membership in a manner consistent
with the statute but inconsistent with his commitments unders the
membership agreement?

Q7. Can such a membership agreement be self-modifying?


Thank you for your consideration of these questions,

Respectfully yours,

Malcolm Hutty.



-- 
            Malcolm Hutty | tel: +44 20 7645 3523
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