[CPWG] [registration-issues-wg] [GTLD-WG] Fwd: ISOC sells PIR

[Zak Muscovitch]

Alan, while it is certainly an open question whether ICANN will take any action in response to the announced sale of PIR, it doesn't appear to be debateable whether or not selling PIR would constitute a "change of control" under the .Org Registry Agreement.

Pursuant to Section 2.9(b) of the .org Registry Agreement:

"For the purposes of this Agreement..."control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person or entity, whether through the ownership of securities, as trustee or executor, by serving as an employee or a member of a board of directors or equivalent governing body, by contract, by credit arrangement or otherwise."

ISOC clearly stated in its Press Release that "Ethos Capital will acquire PIR and all of its assets from the Internet Society", and obviously such a sale wherein Ethos would take over PIR is a change of control, as understood by both Section 2.9(b) and as this term is widely understood in business and in law. For example, this is how the Corporate Finance Institute defines a change of control:

"In finance, a Change of Control occurs when there is a material change in the ownership of a company. The exact criteria that determine such a change can vary and are defined by law and through contractual agreements. A change of control clause is often included in creditor pacts<https://corporatefinanceinstitute.com/resources/templates/financial-modeling/debt-schedule/> and executive employment agreements to protect investors<https://corporatefinanceinstitute.com/resources/knowledge/accounting/stockholders-equity-guide/> and managers from major changes in how the company is run." (see : https://corporatefinanceinstitute.com/resources/knowledge/deals/change-of-control/)

Indeed the change of control provision in the .Org Registry Agreement was ostensibly included precisely to provide ICANN with protection in the event that ISOC purported to sell the .Org registry, i.e. a change of control. Section 7.5, as you pointed out below, specifically prohibits any assignment of the agreement, and deems any direct or indirect "change of control" to be an assignment. The Agreement does however, only enable ICANN to "reasonably" withhold its approval. In the circumstances, it would be eminently reasonable to withhold approval, given the facts that; a) this sale was apparently unknown at the time of the recent renewal of the Registry Agreement which inter alia, removed price caps and imposed URS despite it not being a Consensus Policy; and b) selling the .Org registry to a private capital company would appear to be contrary to the original intention in awarding the .Org registry, home of nonprofits, to ISOC.

Zak Muscovitch
General Counsel, ICA
InternetCommerce.org






From: CPWG <cpwg-bounces at icann.org> On Behalf Of Alan Greenberg
Sent: November-16-19 12:54 PM
To: lists at christopherwilkinson.eu; cpwg at icann.org
Subject: Re: [CPWG] [registration-issues-wg] [GTLD-WG] Fwd: ISOC sells PIR

The delegation and agreement is with PIR, not ISOC, and PIR will continue to exist.

However, the contract includes: 7.5 Change of Control; Assignment and Subcontracting. Except as set forth in this Section 7.5, neither party may assign any of its rights and obligations under this Agreement without the prior written approval of the other party, which approval will not be unreasonably withheld. For purposes of this Section 7.5, a direct or indirect change of control of Registry Operator or any subcontracting arrangement that relates to any Critical Function (as identified in Section 6 of Specification 10) for the TLD (a ?Material Subcontracting Arrangement?) shall be deemed an assignment.

Perhaps selling the entire PIR corporation could be construed as an "indirect change of control". I personally doubt that ICANN would invoke such an interpretation. Certainly it has not in the past when TLD corporations were sold.

Alan

At 16/11/2019 12:14 PM, lists at christopherwilkinson.eu<mailto:lists at christopherwilkinson.eu> wrote:


I would also query whether the delegation of .org to ISOC gave rise to ownership with a right to sell.
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