[apnic-talk] Re: comments on legal documents
Maruyama-san,
>>Technically, I suppose it could be argued (although I'd disagree). One
>>alternative structure would be to issue shares to all members which means a
>>large amount of additional complications
>I think there is another alternative. That is, to define the relation
>between APNIC and "APNIC corporation" as a contract.
APNIC is the membership, that is, each individual member, and as such has
no legal standing as an independent body outside of the APNIC corporation
(or so I am led to understand), thus APNIC itself can make no contracts.
That's the whole reason APNIC was incorporated in the first place.
Perhaps you mean contracting out the Secretariat function? This would be
feasible, however I mentioned the disadvantages that led us to decide
against that option in previous mail and would require a radical
restructuring of the existing APNIC legal structure.
>it is little bit hard for me to understand the "Declaration of Trust".
I suspect legalese is hard to understand in any language :-).
>Why don't you use trust agreement to define the relation between the
>beneficiaries(=Executive Council) and the trustee(=David)?
That is, in fact, what the Trust Statement does.
>I think it's more effective for the beneficiaries to control the corporation.
They do.
"1. The Trustee [David Conrad] acknowledges and declares that the Trust
Property [the single share of APNIC Pty Ltd] is held on trust by the
Trustee [David Conrad] as a trustee for the benefit of the Beneficiaries
[the APNIC Executive Council], the Beneficiaries [the APNIC Executive
Council] being the sole beneficiaries of this trust."
My translation (standard not-a-lawyer disclaimers apply):
"I agree that I hold the share of APNIC for the EC and will do what they say."
>So the structure is highly dependent on the effectiveness of the Trust
>Statement, I understand. Here "effectiveness" means that: whether or
>not lots of rights and responsibilities of the shareholder and
>directors of "APNIC Pty Ltd" are well controlled by the
>beneficiaries(=Executive Council). I think this is a quite hard
>question to answer.
Not really. If 3 out of 5 of the EC members think the Trustee [the DG]
screws up, he is by definition in violation of the trust agreement and bad
things happen (e.g., fired, temporary or permanent reduction in pay,
flogging with a wet noodle, etc).
>Does "existing APNIC structure" mean "the Seychelles based" structure?
Yes.
>I think the proposed "Australia based" structure still have same wart,
>and needs to be fixed.
As I have tried to explain, the Trust Statement essentially transfers
control of the APNIC Pty Ltd to the Executive Council. As such, the sole
shareholder issue is no longer relevant since the sole shareholder can act
_only_ "for the benefit of the Beneficiaries". Since the EC is directly
elected by the membership and the membership always has veto power over any
EC decision, the end result is the membership controls APNIC (which is, I
think you'll agree, the most approrpriate situation).
>>As I believe I explained in the meeting in Manila when you brought this up,
>>it is my understanding that the concept of "non-profit" applies only to
>>charitable organizations in Australia and APNIC has not applied for
>>charitable status, thus I believe it safe to say that APNIC is _not_ a
>>non-profit organization under Australian law.
>I think your understanding is wrong, and it's better to check this
>point with lawyers.
I have spoken with both the lawyers and with KPMG on this issue, thus my
understanding, however I will get a verbatim quote for you by Tuesday
afternoon.
> I understand ISOC is a non-profit organization
>under Virginia law, and I suppose there is a similar legal framework
>in AU.
No. My impression is that the US is somewhat unique in its 501c3 and 501c6
corporations and the relative ease in which those corporations are
established. Australia does not have a similar corporate construct -- what
a corporation does with its profits is up to it. As APNIC has defined
itself to be non-profit and has indicated (AoA, 15.1,2) that it will not
pay or declare dividends, it would seem it is as non-profit as is
necessary. Australia does have a concept of a charitable organization,
however that classification generally applies only to organizations such as
hospitals, orphanages, etc. I gather APNIC's chances of obtaining
charitable status (which confers the ability for other organizations in
Australia to take tax deductions for APNIC fees) are on par with what we
were told our chances of getting non-profit status in Japan as a company
providing services outside of Japan, that is, _extremely_ small.
>>It is, however, tax exempt for all member derived income (a little over 98%
>>of our income) by virtue of the Australian interpretation of "the doctrine
>>of mutuality".
>Could you give me a reference to this. What's the name of the law this
>assertion grounded on?
I will get the exact reference, however I will fax you the official
document from the Australian Tax Office that documents the granting of tax
exemption in Australia for (initially) 5 years after which the tax
exemption will be reviewed before reissuance.
>In many countries, whether the government treats the organization
>non-profit or not is an essential factor in taxation and other
>things.
Not in Australia. My understanding is that APNIC's tax exemption is based
on the concept of having a group of entities paying into a common pool for
the benefit of all with no entity being able to take out of that pool any
more than they put in. The model is that of a sports team, where everybody
gives one person a bunch of money to go out an buy equipment for everybody
else. Australia doesn't feel it is appropriate to tax the person getting
all the money. Australia is the first country I've found that allows the
entities to be corporations (profit or non-profit) rather than individuals.
>The tax problem is a one issue, and might be resolved by "the doctrine
>of mutuality" you mentioned, and I think we must investigate if there
>is any other issues related to "non-profitness".
In discussion with KPMG yesterday, whether an organization is non-profit
is, as mentioned, its own decision. Taxation is, as you say, as separate
issue. Non-profit organization can be taxed, however as I have mentioned,
APNIC has already received tax exemption for its membership fees.
>I said that the proposed
>structure works "to some extent" but I can not believe it is perfect,
>so I would like to propose to add some "safety codes". Perhaps I will
>write about this today or tomorrow.
Perfection is notoriously difficult to attain.
While I understand and agree with your position, I will again say that
there are a few things that are waiting right now on the finalization of
these legal documents such as finalizing visas, hiring a new director
general, removing the existing APNIC wart, etc., and I feel those issues
are somewhat critical (particularly the new DG part :-)), thus the desire
to complete the legal formalities.
Given you agree that APNIC works "to some extent", perhaps the most
efficient way forward would be to complete the legal documents and
establish a committee to review the APNIC legal structure and come up with
a set of proposed revisions. Those revisions could then be put up to the
membership for a vote at the next Annual General Meeting. In that way, you
and anyone else interested can spend as much time as necessary to come up
with appropriate "safety codes" while at the same time APNIC can finalize
its relocation to Australia which was agreed upon by the EC and the
membership almost 1 full year ago.
Would this be acceptible to you?
Thanks,
-drc
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