Why the Post-Transition IANA should be a nonprofit public benefit corporation

The comment period for the names proposal developed by the Cross-community Working Group (CWG) on IANA stewardship transition will conclude in a few days.  The CWG has resolved the internal-external debate with a middle ground, a Post-Transition IANA (PTI) that is a legally separate affiliate of ICANN that would manage the DNS root and the numbers and protocols registries. And though some public comments are already complaining about this solution being either too close to ICANN or questioning why we need a separate entity at all, it’s too late to turn back on that model. The PTI is the only framework that makes it possible to move forward. Going forward, debate should center on fleshing out the details of the proposal.

Some of the most important details concern the corporate form, role and composition of the PTI. Currently, two corporate forms are being considered for the PTI, a nonprofit public benefit corporation (PBC) or a limited liability corporation (LLC), with a single member, ICANN, at its outset. PBCs have well-understood governance structures and legal requirements, while LLCs are largely defined by operating agreements thereby offering greater flexibility in governance structure.[1]

Forming the PTI as a PBC will be easier to implement and more likely to ensure various measures of good corporate governance. For instance, a PBC that secures nonprofit status will by default be bound by a nondistribution constraint, prohibition of inurement and private benefit, and restrictions on transfers of its assets upon (possible) dissolution.  If the LLC form was chosen, these constraints and other baseline responsibilities for the PTI board or management would not exist. To create them, the transition process would need to debate them, agree upon them and write them into PTI governing documents. In addition, the CWG would also have to spend a lot of time figuring out a way to ensure that the PTI governing board or management could not simply amend the governing documents to circumvent the constraints. In short, the LLC form makes the implementation of PTI much more complex and risky.

Additionally, the CWG, with broader consultation, should consider expanding the membership of the PTI to include the IETF and RIRs (or their chosen representative legal entities).  As currently proposed, enormous power is concentrated with ICANN the corporation as the sole member.  Particularly if PTI took the LLC form, there is a risk that ICANN could fundamentally alter, abridge or even eliminate PTI board or management responsibilities.[2]  Expanding the membership of PTI would diminish this risk.

Regardless of the corporate form chosen for PTI, its board or management must have duty of loyalty, duty of care and duty of obedience including fiduciary responsibility to the PTI. Doing so will help ensure that the PTI board or management, while still complying with its various contracts with the names, numbers, and protocols communities and limited mission, remains focused on implementation of the IANA registries, and makes decisions in the best interests of the organization. This arrangement would best maintain the separation of IANA registry implementation from DNS policy making currently required by the NTIA contract.

While not explicitly stated in the CWG proposal, the PTI should provide IANA registry services to names, numbers and protocols communities. Given this operational responsibility, the PTI board or management should be composed of representatives from each of the supporting policy making organizations and the PTI itself. For example, the IETF liaison and Address Supporting Organization representative to the ICANN board, along with one representative from the Generic Names and ccTLD Supporting Organizations, in addition to the PTI Executive Director, should compose the PTI board or management.  The selection and removal of these representatives should be determined by the respective organizations (i.e., IETF, ASO, GNSO, ccNSO).  Each of those bodies already appoint individuals to the ICANN board. In this manner, the PTI board or management could be directly accountable to the relevant stakeholders and not be self perpetuating.

[1] See legal advice received by the CWG at http://mm.icann.org/pipermail/cwg-stewardship/attachments/20150505/8f61bbdd/PTI-0001.PDF and Brewer, Cassady V., Nonprofit and Charitable Uses of LLCs (March 18, 2015). Research Handbook on Partnerships, LLCs and Alternative Forms of Business Organizations, Robert W. Hillman & Mark J. Loewenstein, Eds., Edward Elgar Publishing (2015, Forthcoming). Available at SSRN: http://ssrn.com/abstract=2580528

[2] See page 658. Walker, David S., A Consideration of an LLC for a 501(C)(3) Nonprofit Organization (October 8, 2012). William Mitchell Law Review, Vol. 38, pp. 627-77, 2012; Drake University Law School Research Paper No. 12-24. Available at SSRN: http://ssrn.com/abstract=2158907