May 11 2020
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Question is supporting a number of Blockchain foundations to ensure they avoid potential issues arising from non arm’s length behavior that may create a substantial risk to the foundation and its stakeholders. Small issues can become big problems in terms of: 

  • Misconduct or negligence resulting in media scrutiny, reputational damage and in personal liability claims against the foundation council members;
  • Conflicts of interest by foundations council members and service providers creating a fertile ground for allegations of fund misappropriation;
  • Inadequate monitoring of R&D activities such as budgeting, progress and costs resulting in inefficient allocation of assets;
  • Disputes over de facto project control due to insufficient technical capabilities within the foundation council;
  • Lack of transparency towards auditors and the annual reporting obligation to the authorities (e.g. ESA);
  • Neglected compliance with regulatory requirements creates potential for future disputes.

Arm’s length conduct between the foundation, service providers and the ecosystem minimizes conflicts of interest and protects the ecosystem from undue influence. Robust transfer pricing (“TP”) governance (i.e. “arm’s length behavior”) will help your organization build trust with its stakeholders, demonstrate compliance with regulatory requirements, and avoid damaging conflicts of interest and personal liability claims. For a further discussion on this topic, please contact Stephen Alleway or Chris Whitehouse directly. 

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