POLICY 002: Governor Legal Support

This proposal is to discuss the situation where a Governor Corporation in the Frabric ends up in a legal challenge by either a domestic regulatory body, or other federal/state level challenge, not due to any mistakes or issues that the Governor caused.


Governors have a lot of responsibility, they are legally holding the properties they manage. If there is any kind of interference from regulators, we need to protect them and provide them support and mechanisms for relief - otherwise this could be a deal breaker for wider Governor adoption/growth.


Currently there is no defined Proposal, rather ideas to get conversation started. As a decision becomes fleshed out, this area will change.

Proposal Ideas

  • Providing an insurance fund for Threads to invest into (running expense) that acts as a Facility Insurance organization, providing capital to fight legal battles when necessary.

  • Providing a mechanism for a Governor to release bond if it’s verified that a major litigation is proceeding against a Governor Corp; and allow for them to settle with the held property.

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  • This Policy is ready for onchain ratification
  • More Discussion Needed
  • I don’t think this is a good Policy

0 voters

Who has control over the funds? If the answer is the thread, are these funds being held in a treasury and governed by multi signers? If yes, do we have any power to determine how much signers each fund has to avoid attacks?

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I would support an insurance escrow and elect to have all transactions pay into this insurance fund in case anything goes awry.
I also think that there needs to be a way to mitigate multi-sig risk by using mechanisms such as the Zodiac module (safesnap - where proposals carry executable payloads).
Having said that I’m not sure what safeguards there are to regulate Governors, or have emergency powers to be activated to compartmentalize assets at risk to prevent it being seized. (Speaking of which - what happens when a property is seized IRL - how does this affect the Frabric ecosystem)?

I think we will need more discussions for the entire suite of support policies for Governors, but perhaps we should kickstart as a beginning, a legal insurance (stability) fund. We would also need to determine how and who pays into this fund, and when.

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My thought here is that it’s a Frabric wide governance tool; Governors would make paper proposals requesting aid; and if granted would pull from this insurance pool to fund activities.

Fully agreed on automating and internalizing this fund as a DAO tool.
I would argue that this should be a proposal type that only governors can create; but must be voted upon by the DAO to agree to provide access to.

We should setup a task force to actually scope and build out policy proposals. I will be making more POLICY threads to start conversations.

Agreed - we should probably use the current Governance team members as the task force in the interim and perhaps split into different work scopes once the protocol expands enough to warrant policy in separate spheres.

I suppose a “governor corporation” would first of all be in the form of a limited liability company - taking account taxation issues there. Any real world company will be subject to regulation and accessible, as they have a mailing address - see the Polly case. So an insurance is certainly prudent, e,g, legal protection insurance or/or a directors and officers (D&O) insurance. But such an insurance would have to be set up and funded from the start - ad hoc does not work, as usually the policies have a time component build it: any case the cause of which started before the policy was taken out, would not be covered. Creating a fund would require a lot of capital sitting dormant somewhere. Don’t think the best use of capital. Also, an insurances can be deducted as expenses from tax by the entity.

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There is an conundrum here.
You will need an existing pool of liquidity for the fund but its capital inefficient, but you are on shaky ground if we do launch without such a fund. Should we incorporate some sort of bootstrapping LP for this mechanism (even if we need to provide some sort of nominal yield) ?

It’s not as shaky as it seems. Governors have no connection or relation to the Frabric; and are doing nothing wrong from a corporate governance and property management perspective. If there is some kind of operation that happens where a Governor needs capital to mount a litigation proceeding; we can in the interim allow them to unlock any bond/collateral in order to do so - Frabric will eat the cost.

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