Re: PROPOSAL UPDATED: Incorporate the Veres One Non-Profit Foundation

**

*Hello Veres One Community,*

*

It sounds like we may have consensus around the proposal to incorporate 
the Veres One Foundation in Canada.


The proposal is more specifically:


“UPDATED PROPOSAL: After doing more research into the various country 
options for incorporation my proposal has changed somewhat. I propose 
that we incorporate in Canada to start with and leave the next country 
of incorporation more open ended. Canada may end up being a good long 
term home for the Veres One Foundation. The CG and the Board can decide 
where, when, and if the Veres One Foundation should migrate to another 
jurisdiction at a later date.”


Since this is the first proposal and decision we are making together as 
a community it might be good to review the decision making process 
<https://veres.one/network/governance/>.


We are in the second stage of the decision making process, 
“consideration”. I would like to request that in order to determine if 
we do in fact have consensus that members reply with +1 to show support 
for the proposal or -1 to express opposition to sending the proposal to 
the Board for ratification.


Anyone with remaining objections or concerns please raise them in the 
next week, by the end of business Thursday the 16th.


If there are not any objections we can send the proposal to the Board of 
Governors for ratification late next week.



Kind Regards,


Adam

*


On 8/6/2018 3:12 PM, Adam Lake wrote:
>
> Dorothy,
>
> I will do my best to fulfill your request. Not being a international 
> nonproft lawyer and the differing definitions and regulations in each 
> jurisdiction make the analysis difficult. My focus has not been on the 
> specific term used for the designation, nonprofit, foundation, 
> society, ect... but the other considerations of startup and operating 
> costs, whether we'll qualify for tax exemption, if the country is 
> stable and viewed as a neutral arbiter, and whether said designation 
> will require that Veres One continue to operate based on it's 
> nonprofit mission.
>
> Generally speaking, as I understand it, nonprofit is a broad term that 
> encompasses the term and designation of "Foundation". The definition 
> of a Foundation differs from country to country.
>
> *Canada*
>
> Unlike the US and Switzerland Canada has a more specific definition 
> for "Foundation"; it is limited to "Charities".  If we choose to 
> incorporate Veres One in Canada it will still have the option of 
> identifying itself as a Foundation (since that is the term most 
> familiar to our prospective Global user base) but Veres One would 
> technically be designated as a Nonprofit "Society" for legal purposes.
>
> Here is a good resource 
> <https://www.canada.ca/en/revenue-agency/services/charities-giving/giving-charity-information-donors/about-registered-charities/what-difference-between-a-registered-charity-a-non-profit-organization.html> 
> that defines Charities and Nonprofits in Canada and following is the 
> essential text from this source:
>
> Registered charities and non-profit organizations (NPOs) both operate 
> on a non-profit basis, however they are not the same.
>
> _Registered charities_ are charitable organizations, public 
> foundations, or private foundations that are created and resident in 
> Canada. They must use their resources for charitable activities and 
> have charitable purposes...
>
> _Non-profit organizations_ are associations, clubs, or societies that 
> are not charities and are organized and operated exclusively for 
> social welfare, civic improvement, pleasure, recreation, or any other 
> purpose except profit.
>
> *Estonia *
>
> Under Estonia law, depending on their purpose, nonprofits can be 
> designated as charities, community associations, charitable projects, 
> civil society organizations, or foundations. I am not finding 
> definitions of these designations but my understanding based on 
> feedback from a contact in Estonia is that the Veres One nonprofit 
> model would be designated as a Nonprofit Foundation in Estonia.
>
> I can further search for definitions for the various nonprofit 
> designations in Estonia if it seems necessary to our analysis and 
> incorporation discussion.
>
> Please let me know if you require additional information and I will 
> expand my research.
>
>
> Kind Regards
>
> Adam
>
>
>
> On 8/6/2018 1:16 PM, dorothyg wrote:
>> Kindly explain the difference between Foundations and Not-for-profits 
>> under both Estonian and Canadian law. Thanks in advance.  A quick 
>> table listing features is enough.
>> best
>>
>> On Monday, 6 August 2018, 14:11:31 GMT, Adam Lake 
>> <alake@digitalbazaar.com> wrote:
>>
>>
>> Dorothy,
>>
>> Yes, we can incorporate in Canada even though none of the Board 
>> resides there. It just requires domiciliary services, an address 
>> where papers can be served if for whatever reason we ever get sued. 
>> This is the case for Switzerland and Estonia as well.
>>
>> I was hoping that Estonia would be a more straight forward and 
>> affordable option as well and that we could perform all required 
>> tasks through their online eGoverment services. It turns out that 
>> eGov services are not comprehensive for Foundations like they are for 
>> for-profit entities. That being said, Estonia is my 2nd or 3rd choice 
>> too.
>>
>> I hope we can make a decisions soon as well!
>>
>> Adam
>>
>> On 8/5/2018 3:32 PM, dorothyg wrote:
>> On the basis of the facts you present Canada does make the most 
>> sense. Can you clarify if they are ok with Boards that do not have 
>> Canadians? I was surprised the operating costs were so high for 
>> Estonia. I was leaning that way until your mail.
>>
>> I hope we can come to a decision soon. I go with Canada now, Estonia 
>> would be my second choice.
>>
>> best regards
>> Dorothy
>>
>>
>> On Sunday, 5 August 2018, 15:43:51 GMT, Adam Lake 
>> <alake@digitalbazaar.com> <mailto:alake@digitalbazaar.com> wrote:
>>
>>
>> **
>>
>> *The Veres One Community Group is currently discussing the topic of 
>> where to incorporate the Veres One Foundation. We would like to make 
>> this decision before we go into production. The original proposal was 
>> to incorporate in the US because it is the most cost effective and 
>> presents the least unknowns for those overseeing the incorporation 
>> process. Once incorporated, we would then move the Veres One 
>> Foundation operations to Switzerland once the Foundation’s cash on 
>> hand hit a particular threshold. In response to this proposal, 
>> several other countries were mentioned as candidates for 
>> incorporation. The following details are my findings and analysis to 
>> date. *
>>
>> *
>> *
>>
>> UPDATED PROPOSAL: After doing more research into the various country 
>> options for incorporation my proposal has changed somewhat. I propose 
>> that we incorporate in Canada to start with and leave the next 
>> country of incorporation more open ended. Canada may end up being a 
>> good long term home for the Veres One Foundation. The CG and the 
>> Board can decide where, when, and if the Veres One Foundation should 
>> migrate to another jurisdiction at a later date.
>>
>>
>> Overall, it was not particularly easy to discover the requirements to 
>> incorporate as a Foundation in the various counties identified as 
>> good candidates by the group. I have included data points that I was 
>> able to acquire.
>>
>>
>> I believe it is important to note that while Veres One is a nonprofit 
>> that it is also a lean startup. Cost effectiveness and simplicity are 
>> critical in the early stages. Achieving traction and sufficient 
>> revenue to grow is the first phase. Once Veres One achieves traction 
>> and a stable base of revenue, the community and the Board can always 
>> decide to migrate operations and incorporate in a more preferable 
>> jurisdiction.
>>
>>
>> It would be ideal for Veres One to move forward with incorporation as 
>> soon as possible as not to miss the target of going into production 
>> by the end of Q3 2018. It is also imperative that Veres One become an 
>> independent organization and that decision making authority related 
>> to governance be separated from Digital Bazaar.
>>
>>
>> The country of incorporation provides a legal framework for the 
>> organization to operate but it does not have a lot of weight in 
>> shaping the character of the organization. The Community, Advisors, 
>> the Board, and the Foundation’s governing principles shape the 
>> character of the organization. While the country of incorporation is 
>> important it is not likely to determine the success of the project.
>>
>>
>> Following are the notes on the costs and considerations for 
>> incorporating in each country mentioned. Note, all cash values are in 
>> USD.
>>
>>
>>
>> Canada
>>
>>
>> Costs: Startup, $5K-10K, more likely closer to $5K, with assistance 
>> from an Canadian law firm.
>>
>>
>> Operating, $5.5 - $7.8K at most for first year, less after that 
>> because we will better understand the compliance requirements and 
>> won’t need as much legal advisement.
>>
>>
>> Tax Rates: Tax Exempt, but we can’t issue tax receipts to 
>> individuals. Organizations and foreign foundations can still donate 
>> to the Veres One Foundation and write the donation off of their 
>> taxable income.
>>
>>
>> Familiarity: Familiar, we have a point of contact and an advising law 
>> firm.
>>
>>
>> Neutral: Yes
>>
>>
>> Stability: Excellent
>>
>>
>> Human Rights: Excellent
>>
>>
>> Pros: One of the positives of starting in Canada vs the US is that we 
>> may want to continue operations there, whereas if we incorporate in 
>> the US we expect to later transfer operations from the US to 
>> Switzerland or some other country.
>>
>>
>> Cons: $2K-$7K more to incorporate and $4.5K - $6.8K more to operate 
>> in first year than in the US.
>>
>>
>> United States
>>
>>
>> Costs: Startup $3K, Operating $1K/year
>>
>>
>> Tax Rates: Tax Exempt
>>
>>
>> Familiarity: Very Familiar, fewest unknowns
>>
>>
>> Neutral: Somewhat
>>
>>
>> Stability: High, but potentially litigious
>>
>>
>> Human Rights: Good
>>
>>
>> Pros: United States is an attractive option because it is familiar to 
>> those that will be incorporating and administering the Veres One 
>> Foundation and because the startup and operating costs are low.
>>
>>
>> Tax exemption is easy to obtain, good for early donations if the 
>> opportunity arises.
>>
>> Political concerns should not affect the Foundation.
>>
>>
>> Incorporating in the US where startup costs are approximately $3K and 
>> operating costs for low revenue foundations are less that $1K per year.
>>
>>
>> Cons: The United States is not generally viewed as a neutral arbiter. 
>> There is historical baggage associated regarding governance of 
>> technical infrastructure for the Internet (e.g. ICANN)..
>>
>>
>>
>> Estonia
>>
>>
>> Costs: Startup, ~$1000, includes drawing up the articles of 
>> association and other documentation as well as state fee, does not 
>> include applicable translations. Operating Costs, $8.4K-$11.3K/year
>>
>>
>> Tax Rates:20% VAT, would likely get tax exemption
>>
>>
>> Familiarity:Somewhat familiar, some unknowns
>>
>>
>> Neutral: Yes
>>
>>
>> Stability: Good
>>
>>
>> Human Rights:Good
>>
>>
>> Estonia is not known for being a neutral country or for its civil 
>> rights but there doesn’t seem to be any red flags or concerns in 
>> these areas either.
>>
>>
>> Pros:Estonia is increasingly known for its innovation in digital 
>> services including it’s eGovernment  and eResidency programs. Veres 
>> One being incorporated in Estonia could increase the chances that the 
>> Estonian government would use Veres One identifiers but country of 
>> incorporation is unlikely to be a significant factor in their adoption.
>>
>>
>> Incorporation can be settled in a matter of days once all the 
>> paperwork is prepared.
>>
>>
>> Cons: Tax exemption is likely but not guaranteed.
>>
>>
>> Estonia has not automated, through their eGovernment services, all 
>> aspects of starting and operating a nonprofit Foundation like they 
>> have for for-profit entities. This means that some of the 
>> administrative tasks such as filing certain documents and bookkeeping 
>> would need to be done within Estonia. This results in higher costs 
>> than what was previously estimated when we thought we could start and 
>> operate the Foundation exclusively through their eGovernment services.
>>
>>
>> If all board members are foreigners, appointment of a contact person 
>> in EE is required.
>>
>>
>>
>> Switzerland
>>
>>
>> Costs: Startup, $65K Operations, $10K/year
>>
>>
>> Tax Rates:Tax Exempt within 6 months
>>
>>
>> Familiarity: Not particularly familiar but have done a lot of due 
>> diligence and feel comfortable with incorporating here if we decide to
>>
>>
>> Neutral:High
>>
>>
>> Stable:Very
>>
>>
>> Human Rights:High
>>
>>
>> Pros: Switzerland is globally viewed as a neutral country and is home 
>> to many international non-profits and UN agencies. Swiss cultural 
>> support for civil society organizations is strong.
>>
>>
>> They have been easy to work with and I feel comfortable executing on 
>> incorporation in Switzerland if and when the Veres One Community 
>> decides that it's the appropriate course of action.
>>
>>
>> Cons: Swiss incorporation requires $65K USD in startup costs and up 
>> to $10K USD per year in operating costs. This includes $50K for a 
>> capital requirement that could be placed in a Swiss bank account and 
>> used for operations.
>>
>>
>> Swiss incorporation also presents additional regulatory risks since 
>> the Maintainer/Founders (Digital Bazaar) are US-based and the 
>> nonprofit Foundation would be Swiss-based. The risks are minimal and 
>> the additional costs are not astronomical but it would be far more 
>> lean and cost effective to incorporate in the US or Canada, or 
>> Estonia to start with.
>>
>>
>>
>> Liechtenstein
>>
>>
>> Costs: N/A
>>
>>
>> Tax Rates: N/A
>>
>>
>> Familiarity:Low
>>
>>
>> Neutral: Good
>>
>>
>> Stable:Very
>>
>>
>> Human Rights: Good
>>
>>
>> Pros:Liechtenstein has a favorable environment for blockchain and 
>> cryptocurrencies.
>>
>>
>> Cons: It is a monarchy which does not send the right message for a 
>> multistakeholder global public utility.
>>
>>
>>
>> Iceland
>>
>>
>> I had trouble getting information about Iceland. I could not find 
>> basic details about starting a Foundation in Iceland. The attorneys 
>> that I corresponded with were not willing to provide me with many 
>> details without first giving them a retainer. It does sound like it 
>> is possible to incorporate the Veres One Foundation there but it’s 
>> unclear what value Iceland provides over other countries that would 
>> be worth going through the extra trouble and costs of incorporating 
>> there.
>>
>>
>>
>> Umbrella Org, Internet Governance Forum or Internet Society
>>
>>
>> The idea of operating the Veres One Foundation under another 
>> foundation, more specifically the Internet Governance Forum and the 
>> Internet Society was mentioned. The advisement I received on this 
>> option was “ whether the Veres One Foundation could be incorporated 
>> under ISOC or the IGF: the answer to the latter is not, as legally 
>> this would not be possible (the IGF has no separate legal entity - it 
>> is a platform convened by the UN Secretary-General). ISOC could be an 
>> option in theory, I suppose, but it would be too mind bogglingly 
>> complex to consider.
>>
>>
>> Multi-country
>>
>>
>> It is an option to incorporate the Veres One Foundation in multiple 
>> countries. This is more of a phase II option.
>>
>>
>> -- 
>> Adam Lake
>> Director, Business Development
>> Digital Bazaar
>> Veres.io
>> 540-285-0083
>>
>> -- 
>> Adam Lake
>> Director, Business Development
>> Digital Bazaar
>> Veres.io
>> 540-285-0083
>
> -- 
> Adam Lake
> Director, Business Development
> Digital Bazaar
> Veres.io
> 540-285-0083

-- 
Adam Lake
Director, Business Development
Digital Bazaar
Veres.io
540-285-0083