Ready to streamline corporate governance with blockchain technology? Make sure to understand your compliance obligations first.
As top business & corporate law attorneys in Seattle, we’re intimately familiar with the ways in which emerging technologies affect a company’s legal obligations. When you need help ensuring compliance, By Design Law is here for you. Schedule a consultation to learn more .
If you’re like most people, you first encountered the concept of blockchain technology after Googling “what is Bitcoin.” Although this data-sharing method is crucial to cryptocurrency systems, its uses, benefits, and risks are not limited to crypto.
In simple terms, blockchain technology is a decentralized and distributed digital ledger. By recording transactions across multiple computers, it ensures that data is kept secure, transparent, and immutable. These features make blockchain technology ideal for various corporate governance processes.
However, it’s important for anyone considering blockchain to understand the legal considerations, compliance obligations, and possible risks associated with this technology. Not sure where to get started? Don’t worry — By Design Law is here to help.
This article will explore the most important legal considerations for WA businesses that have or plan to implement blockchain, as well as the necessity of working with an experienced business and corporate law attorney throughout the process.
At By Design Law, we have deep knowledge of business, data privacy, and IP protection law — all of which are critically important when it comes to ensuring compliance with state and federal business laws. Ready for a top-tier, customized strategy? Contact us online to get started .
Blockchain Applications in Corporate Governance
The main features of blockchain technology — decentralization, transparency, immutability, and security — make it an attractive tool for improving corporate governance practices. Although it has numerous possible applications in the corporate world, blockchain is most commonly used in the following:
- Shareholder voting. Recording shareholder votes on a blockchain allows a company to streamline and secure the voting process, which can increase shareholders’ participation and confidence in meetings.
- Smart contracts. With terms that are directly written into code, smart contracts are self-executing and can automate various processes, thus reducing administrative overhead and decreasing the risks associated with human error.
- Record keeping. In the context of corporate record keeping, blockchain plays an invaluable role in handling meeting minutes, compliance records, and financial statements, simplifying the burdens associated with audits and regulatory reporting.
- Transparency and reporting. Blockchain is an excellent tool for enhancing transparency in a company’s operations and financial reporting and providing real-time data on corporate activities to pertinent parties.
Using blockchain technology in these tasks can offer numerous benefits to any organization. These advantages include enhanced trust among corporate parties, increased efficiency, more enthusiastic engagement among shareholders, and tighter security. However, those advantages quickly dissipate when companies fail to consider the legal implications.
Legal Considerations for Businesses in Washington State
Understanding blockchain technology is difficult enough for most people. Evaluating the intersection between blockchain applications and regulatory obligations can get extremely complicated very quickly, which is why it’s beneficial to work with an experienced attorney throughout the process.
A dedicated legal partner can elucidate the following legal considerations associated with blockchain technology and corporate governance:
- Securities laws. Businesses using blockchain applications must ensure that blockchain-based securities transactions meet standards outlined by the U.S. Securities and Exchange Commission and state securities laws.
- Washington State regulations. Businesses in WA must adhere to state-specific regulations, including those outlined in the Washington Securities Act .
- Bylaws and articles of incorporation. When a company incorporates blockchain technology into corporate governance processes, it may also need to amend its bylaws and articles of incorporation, specifying this technology’s role.
- Board and shareholder approvals. A company typically needs to get board approval to make significant changes to governance structures, such as the implementation of blockchain-based voting systems. Failure to comply with and document these requirements may result in legal disputes.
- Compliance with privacy laws. Companies implementing blockchain technology may need to consider the privacy laws outlined by various regulatory bodies, including the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA), depending on where their customers reside.
- Data privacy and security. Although inherently very secure, blockchain technology is not impenetrable. Businesses should still use robust cybersecurity approaches to protect against breaches and ensure data privacy.
- Smart contract validity. Even smart contracts need to be legally enforceable. In Washington, smart contracts must meet the same legal criteria as traditional documents and should include arbitration clauses and dispute resolution mechanisms.
- IP rights management. Washington businesses that use blockchain technology to keep records of IP ownership and licensing agreements must ensure their use of this technology complies with federal and state regulations.
- Tax reporting. Blockchain transactions can have significant implications for tax reporting, which is why companies should prioritize accurate reporting of digital transactions and compliance with IRS requirements. WA businesses must also meet state tax requirements, including the Business and Occupation tax obligations.
Ultimately, there are numerous legal factors to consider when integrating blockchain technology with corporate governance processes. Fortunately, you don’t have to do it alone.
By Design Law: Top Business & Corporate Law Attorneys in Seattle, WA
When you’re ready to leverage the many benefits of blockchain technology to streamline your corporate governance, you need to consider the legal ramifications. The legal professionals at By Design Law have the expertise, resources, and experience to guide you through a seamless implementation. Contact us online to get started .