Monday, June 04, 2018

Vermont permits LLCs to operate blockchain technology business

By Jay Fishman, J.D.

The Vermont General Assembly’s House and Senate passed a bill signed by Governor Phil Scott on May 30, 2018 permitting Vermont-based limited liability companies to use blockchain technology for a material part of their business operations. The law, effective July 1, 2018, allows LLCs to become blockchain-based limited liability companies (BBLLCs) by: (1) specifying in their respective articles of organization the election to be a BBLLC; and (2) meeting the requirements of the new law.

A BBLLC may be entirely or partly governed by blockchain technology by providing in its operating agreement:
  • A summary of the BBLLC’s mission and purpose; 
  • The decision whether the BBLLC’s consensus ledger or database will be fully or partially decentralized and whether the ledger or database will be fully or partially public or private, including the extent of participants’ access to information, as well as read and write permissions regarding protocols; 
  • Voting procedures; 
  • Proposals to upgrade software systems and protocols and to amend the operating agreement;
  • Protocols addressing system security breaches or other unauthorized actions affecting the blockchain technology’s integrity; and 
  • The rights and obligations of each participant group within the BBLLC. 
Lastly, a BBLLC may adopt reasonable algorithms setting forth the consensus processes for validating records, conducting operations and deciding the blockchain technology to be used. In addition, a BBLLC can modify the existing processes or substitute new ones.