Bill > H4766

This bill establishes the South Carolina Decentralized Autonomous Organization (DAO) Act, creating a legal framework for blockchain-based organizations that operate through smart contracts and digital governance. The bill defines DAOs as limited liability companies with two primary governance models: member-managed (where members directly vote) and algorithmically managed (where governance is primarily conducted by automated smart contracts). To form a DAO in South Carolina, organizations must file articles of organization with the Secretary of State, adopt an operating agreement specifying governance structures, voting mechanisms, and protocols for handling technical failures, and include "DAO," "LAO," or "LLC" in their name. Members of a DAO are generally protected from personal liability for the organization's debts, except in cases of fraud or willful misconduct. DAOs must file annual reports with the Secretary of State, maintain compliance with federal and state laws, and are subject to potential dissolution for failure to meet regulatory requirements. The bill also emphasizes that DAO token issuances may be subject to securities laws and must comply with anti-money laundering regulations. Importantly, the legislation provides a legal recognition of DAOs while establishing clear guidelines for their formation, operation, and potential legal accountability, reflecting the growing significance of blockchain-based organizational structures.

Business and Industry

https://www.scstatehouse.gov/billsearch.php?billnumbers=4766&session=126&summary=B