[RFC] Incorporation of a legal structure for Balancer Treasury and Finance Operations
Simple Summary
This RFC/Proposal seeks authorization from the Balancer DAO to create a new legal entity (“Balancer Business” name pending) as a subsidiary under the existing Balancer OpCo Limited. This new company is designed to formalize the collection of protocol-generated fees and manage key onchain operations through designated Service Providers (“SPs”). This strategic step aims to enhance legal clarity of the decentralized model and mitigate regulatory and fiscal risks of community contributors, while creating a more robust and transparent framework for managing the protocol-derived revenue and finance-related operational duties.
Abstract
The Balancer protocol-derived fees and operations has matured to a point where relying on an informal DAO multisig for core functions presents increasing challenges, mainly in operational overhead, regulatory uncertainty and potential tax liability. This proposal outlines a plan to establish a for-profit BVI subsidiary, referred to here as “Balancer Business” wholly owned by the existing operating company, Balancer OpCo Limited, also based in the same jurisdiction.
Balancer Business, through the engagement with SPs and multisigners, will be mandated to:
- Collect and distribute protocol-generated fees.
- Liquidity mining distribution
- Governance proposal implementation and payload review
- Distribute revenue upwards to the Balancer Foundation via dividends
- Subcontract or perform other operations as designated by its Directors, the Balancer Foundation board or DAO Governance
This structure is based on legal advice that it would not require VASP (Virtual Asset Service Provider) registration in the BVI and provides a more clear model for managing protocol-derived funds.
The transition would involve retiring the current Balancer Maxi’s role in fee collection directly mandated by the DAO multisig and governance, to be subject to new engagement as Service Providers via “Balancer Business”, marking a significant step toward professionalizing the Balancer ecosystem’s operations.
“Balancer Business” will flow up the DAO revenue portion to the Foundation as dividends or retain collected funds as working capital, as needed. Treasury management of funds will be handled by the designated SP, which will allocate working capital (based on budget and forecast to other SPs) on a quarterly basis, as approved in [BIP-850] and [BIP-843].
After approval, the function of the current Balancer DAO multisig related to the collection of protocol fees will be retired, and a technical payload will be executed to migrate this function to the control of “Balancer Business”.
Motivation
The primary motivation for this proposal is to bring the Balancer’s revenue and operational activities into a better understood legal structure. The key drivers are:
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Regulatory Compliance: Moving fee collection from a decentralized multisig to a formal legal entity mitigates ambiguity and clarifies accountability while reducing the risk to community contributors of being miscategorized as control persons.
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Operational Efficiency: It formalizes the relationship with key contributors, such as KPK and the Balancer Maxis, transitioning to a formal service provider with clear mandates onchain. This professional framework for critical protocol operations provides agility and accountability.
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Banking & Financial Access: A formal corporate structure with clear, auditable financial statements (showing dividends from Balancer Business as a source of funds) is essential for establishing stable banking relationships and engaging with the broader financial ecosystem.
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Risk Mitigation: It separates the high-frequency operational onchain activities (fee collection, reward injection, governance snapshots and white glove services) into a distinct subsidiary, providing a layer of insulation for the Balancer OpCo and the Foundation.
Rationale
New Legal Entity: The Balancer Foundation will be directed to incorporate a new Business Company in the British Virgin Islands, here provisionally named “Balancer Business”, which will be established as a wholly-owned subsidiary of the existing Balancer OpCo Limited, which in turn is a subsidiary of the Cayman Foundation. The structure will be a direct parent-subsidiary stack:
Choice of Jurisdiction (BVI): Legal analysis confirms that a BVI company receiving fees on its own account, without holding assets on behalf of others, is likely to fall outside the VASP framework and thus would not require registration or licensing. The BVI also offers a tax-neutral environment for corporate structures, meaning no taxes are incurred on fund movements between the BVI entities.
Subsidiary “Stack” Structure: A direct parent-subsidiary relationship (Foundation → OpCo → Balancer Business) is preferable to a sister-company structure. This arrangement makes the flow of funds via dividends clear and justifiable, which is highly beneficial for source-of-funds documentation required by banks and other financial partners.
Formalization of Service Providers: The current model relies on anonymous multisigs for critical protocol work. By having “Balancer Business” contract with a formally incorporated service providers, these operations gain legal accountability and professional structure, while allowing the contributors to maintain their independence through service agreements rather than ownership stake, reducing individual risk.
Regulatory Implications: The proposed structure does not trigger VASP regulations in the BVI. The entities will adhere to all necessary local corporate governance and AML/KYC requirements.
Tax Implications: There are no direct tax implications in the BVI for the flow of funds (dividends) between “Balancer Business”, OpCo, and the Foundation. Tax liabilities for individual contributors and Service Providers remain their own responsibility.
Accounting Implications: This structure creates a clear, auditable trail of revenue. Protocol fees will be booked as revenue by “Balancer Business”. The subsequent transfer of funds to the OpCo and Foundation will be formally documented as dividends.
Conflict of Interest: A potential conflict of interest exists where a community member may hold roles in both the Foundation and a Service Provider. This will be managed requiring the community member, such as a conflicted Director, to recuse from any related board decisions and governance resolution voting, with veBAL (or the other independent Directors) making the final determination.
DAO Governance and Control: While this proposal formalizes operations, it is not intended to reduce the ultimate authority of the Balancer DAO. Major decisions will still be subject to governance proposals. Protective mechanisms, such as requiring good-faith reasons for material changes or potential veto powers on certain actions, will be established within the corporate governance framework to ensure the entities act in the best interest of the DAO.
Budget: The total incorporation costs for a BVI company are US$3,950, and the annual renewal fee is currently US$1,825. These costs do not include amounts for any additional legal advice that may be required before or once the company has been incorporated (for example, regulatory analysis, preparing director resolutions to approve transactions entered into, reviewing agreements from a BVI law perspective, etc.). Such assistance is typically charged on a time costs basis and will be required through the Balancer Foundation or corresponding BIPs, whenever necessary.
Resolution
If approved, the Balancer Foundation would proceed with the incorporation of a new BVI subsidiary, “Balancer Business”, under the Balancer OpCo Limited for the purposes of protocol operations as detailed in this proposal, directing to take all necessary legal and administrative steps to implement this corporate structure.
After approval and incorporation, a new proposal would be presented for the current Balancer DAO multisig to be retired (related to the collection of protocol fees and other onchain operations - currently mandated to the Balancer Maxis), and a technical payload will be drafted to migrate these functions, as necessary.
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