gm Polkadot Community,
The PCF currently does not have DOT Directors, a service that we already paid for. Here is a brief analysis concerning the appointment of DOT Directors within the PCF.
This short brief addresses several open questions raised in past referenda and forum discussions regarding the appointment process and fiduciary obligations of DOT Directors.
Read the full brief with references via the following IPFS link.
For informational purposes only — not legal advice.
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Appointment of DOT Directors
Overview
The Polkadot Community Foundation (“PCF”) is currently going through a governance challenge due to the absence of appointed DOT Directors, along with the recent failure of two proposals designed to address the matter, creating oversight gaps and limiting the Foundation’s ability to maintain stakeholder confidence. This situation arises primarily from the Polkadot community’s concerns and uncertainties regarding the requirements, procedures, and transparency of the election process. DOT Directors, which are appointed exclusively by Tokenholders through vote, serve as the direct link between the decentralized community and the centralized management of the PCF. Currently, the community does not have presence on the Board, which affects their direct influence over decision-making.
Purpose
This brief provides a comprehensive but non-exhaustive overview of the appointment, powers, duties, and responsibilities of DOT Directors within the PCF according to the PCF’s Memorandum of Association (“Memo”), Articles of Association (“AOA”) and Bylaws (jointly, the “PCF Legal Instruments”). It aims to inform and guide the Community about the Directors’ legal, operational, fiduciary, financial, and compliance obligations, including their role in implementing Tokenholder-approved Proposals, managing conflicts of interest, and maintaining transparency and accountability.
DOT Directors
- What is the composition of the PCF Directors?
There is no limit on the number of appointed Directors for the PCF, however it is mandatory to have at least one. Tokenholders have the authority, through a Tokenholders Vote, to only appoint and replace two DOT Directors on the Board for the oversight and representation in the governance of the Foundation. Currently, the PCF has only three non-DOT Directors.
- What powers/rights do PCF Directors hold?
Appointment and Removal of Directors
Directors have the power to appoint or remove other directors by giving formal notice. However, when it comes to removing a DOT Director, this power can only be exercised for cause and must be approved by a Super Majority of the Directors through a formal resolution.
“For cause” includes situations where a DOT Director fails to act in the best interests of the PCF, breaches fiduciary duties, fails to properly disclose a potential conflict of interest, or engages in any other acts or omissions that the Directors, at their discretion and by Super Majority, determine to justify removal.
Implementation of Treasury Proposals
Also, Directors have the power to carry out activities necessary or appropriate to achieve the Foundation’s objectives and to implement Proposals approved by the Tokenholders, acting at their reasonable discretion. This power is limited by the requirement that all actions must remain consistent with the approved Proposals, the Bylaws, and the AOA.
Amendment Authority
Moreover, Directors have the power to amend the Bylaws when they reasonably believe that such changes would enhance their ability to fulfill their obligations. However, this power cannot be exercised to the detriment of Tokenholders’ rights. Directors must act in good faith and exercise this authority through the Polkadot Community Governance Process, except in cases where amendments must be made at an Emergency Meeting as provided in the Bylaws.
Coordination of Emergency Meetings
Furthermore, Directors have the power to coordinate emergency operations on behalf of the Foundation and to call and hold Emergency Meetings when an imminent security threat arises. These meetings allow the Directors to respond swiftly and effectively to protect the Foundation, and they are governed by the same procedural rules that apply to meetings held under the Foundation Articles (i.e. Memo and AOA).
Veto/Rejection of Proposals
Additionally, Directors have the power to reject Tokenholder-approved Proposals within sixty days if they determine, acting reasonably and in the Foundation’s best interests, that implementation would breach their fiduciary duties, violate the Bylaws, governing documents, or applicable laws, harm the Foundation, or cause contractual breaches. They may also reject Proposals that are insufficiently detailed or lack adequate funding for execution. Proposals not rejected within this period are deemed approved, and those fully implemented are marked as complete.
Appointment of Auditors
Likewise, Directors have the authority to appoint or replace auditors at any time through formal resolution. They also hold the power to determine and fix the auditors’ remuneration, giving them control over both the selection and the compensation of the auditors. At the moment, there is no publicly or available information regarding the appointment of a PCF auditor.
Appointment of Non-Voting Observers
On top, Directors have the authority, through formal resolution, to appoint or remove non-voting observers to the Board. Once appointed, Observers may attend all board meetings and receive the same materials as Directors. However, the Directors retain discretion to withhold information or exclude an Observer from any meeting if disclosure could compromise attorney-client privilege, trade secrets, or create a conflict of interest. Observers must also maintain confidentiality regarding all information they receive.
Wind-Up of the Foundation
It is also worth noting that Directors generally do not have the authority to wind up the Foundation Company or apply to the Court for its liquidation. Their power to do so is strictly limited to specific circumstances: (a) if the Foundation becomes insolvent, (b) to carry out a good faith reorganization that allows the Foundation to fulfill its objectives more efficiently, or (c) if there are no current Tokenholders.
Court Application
In addition, Directors have both the duty and power to address governance breakdowns in the Foundation, such as a shortage or inaction of directors or supervisors. If the constitution does not resolve the issue, Directors must apply to the Court, which may then appoint or remove directors, alter constitutional provisions regarding appointments, or take other corrective measures. This ensures that the Foundation remains properly managed and able to fulfill its objectives.
Remuneration
As another point, Directors have the right to receive remuneration for their services, which must be determined by the Tokenholders through a Tokenholder Vote or through an ordinary resolution of the Foundation. The current remuneration for Directors is set at USD 35,000.00.
Indemnity
At the same time, Directors, supervisors, the secretary, and other officers of the PCF are indemnified from personal liability for actions, costs, losses, or damages incurred in the performance of their duties, except in cases of dishonesty, willful default, or fraud. This indemnification is covered by the assets of the Foundation and D&O insurance.
- What are the duties of PCF Directors?
Management and Control
Directors are responsible for managing and overseeing the business and affairs of the PCF. They may exercise all the powers of the company, except for those that the Articles or the Bylaws expressly reserve to the Tokenholders (through a Tokenholder Vote), the Supervisor(s), or any other designated persons or bodies.
Fiduciary
All the more so, Directors are required to comply with the PCF Legal Instruments and must always act in the best interests of the PCF and its purposes. This means that their decisions and actions should promote the company’s goals rather than serve personal or external interests. Directors’ duties are owed exclusively to the PCF. Fiduciary and statutory duties of the directors exist solely toward the PCF as a legal entity, and not toward individual participants or beneficiaries of the structure.
Financial and Accountability
Moreover, Directors have financial and accountability duties toward the PCF and its Supervisors. They must maintain accurate books of account reflecting all funds received, spent, or distributed, as well as the company’s assets and liabilities, ensuring a true and fair view of its financial position. These records must be kept at the registered office and remain open to inspection by Supervisors, or any person granted access under the AOA.
Additionally, Directors are required to provide reports, accounts, and explanations regarding the company’s business, finances, and the performance of their duties whenever requested by the Supervisors or by the PCF.
Transparency
Furthermore, Directors have a duty of transparency and disclosure, requiring them to periodically publish public reports on the Foundation’s activities. These reports must include transactions from the Foundation’s multisignature account, the status of proposals, and the progress of approved initiatives, ensuring accountability and openness in the Foundation’s operations. According to Ref. 1591, the PCF will develop a centralized information hub that will serve as a repository for all proposals processed and successfully completed under PCF oversight, aimed at improving transparency.
Conflicts of Interest
What’s more, Directors have a duty to disclose any direct or indirect interest in contracts or arrangements with the Foundation Company. They may provide a general notice covering potential future interests, and may generally vote on and be counted in the quorum for such matters. Directors may also hold other offices or professional roles with the Foundation, and contracts in which they have an interest are not automatically voidable, nor are they liable to account for profits arising from such contracts, provided their actions comply with the Bylaws and fiduciary duties.
Directors must identify, disclose, and manage potential conflicts arising from their own, family members’, or controlled entities’ transactions. They must recuse themselves or issue a Conflict Notice when a potential conflict exists. Non-conflicted Directors evaluate the notice, vote on whether a conflict exists, and, if approved, ensure the transaction is fair and in the Foundation’s best interests, documenting all deliberations. Directors must also quarterly disclose net trading activity and long-term positions in Tokens or digital assets to prevent trading on non-public information.
Legal and Regulatory Compliance
Notably, Directors must comply with the Bylaws to the extent permitted by the Memo and the Cayman Islands law (“PCF Regulatory Framework”), ensuring that such compliance does not exceed the Foundation’s legal or financial capacity.
In the same vein, Directors have compliance and anti–money-laundering duties to ensure that the PCF cooperates by providing any information required under the Proceeds of Crime Act (2025 Revision), the Terrorism Act (2018 Revision), and the Anti–Money Laundering Regulations (2025 Revision). They must ensure that no asset contribution is accepted without the secretary’s prior clearance under applicable regulatory laws. In essence, the Directors are responsible for ensuring full compliance with financial crime legislation, protecting the Foundation from unlawful transactions and guaranteeing that all contributions meet regulatory standards.
Audit
Equally important, Directors have a duty of cooperation and transparency in facilitating the audit process, ensuring that the auditor has unrestricted access to all necessary information and can verify the Foundation Company’s financial integrity without interference.
- What liabilities may Directors have?
Directors have a legal liability for ensuring that the Foundation Company does not make prohibited distributions. If a Director knowingly and willfully authorizes or allows such a distribution, they commit an offence and may face a maximum fine of $15,000.00, imprisonment for up to five years, or both. The Foundation itself is also liable to a maximum fine of $15,000.00.
Directors are protected from personal liability for any actions, costs, losses, or damages arising from the performance of their official duties. This indemnification is provided by the Foundation’s assets, meaning that Directors are not personally financially responsible for mistakes or losses incurred in good faith. However, this protection does not apply in cases of dishonesty, willful default, or fraud, where Directors may still be held personally liable.
Particular Issues – Appointment of Directors
- Is the appointment of a specifically designated DOT Director required?
NO. Neither the PCF Legal Instruments nor the PCF Regulatory Framework require the appointment of a specifically designated DOT Director for the PCF to be operational. It is also not mandatory that the minimum required director be a DOT Director. The binding requirement is that the PCF must at all times maintain at least one director in office—whether DOT or Non-DOT—to ensure continuity in management and operations.
- Is the appointment of DOT Directors important?
YES. The significance of the appointment of DOT Directors lies in their representative function on behalf of the Tokenholders, serving as the direct link between Polkadot’s decentralized community and the centralized management of the PCF.
- What remedies are available to Tokenholders concerning the appointment of DOT Directors?
Tokenholders have the authority to appoint and replace DOT Directors through a Tokenholder Vote. However, given their lack of presence on the Board, their ability to influence decisions is currently limited. Tokenholders must rely on governance mechanisms and engage the Board through other forms of communication to ensure representation and accountability. While they cannot directly remove PCF Directors without cause, Tokenholders may trigger removal procedures for valid reasons under the AOA, including breaches of fiduciary duties, failure to disclose conflicts of interest, or actions contrary to the Foundation’s best interests. These tools allow Tokenholders to exercise oversight and encourage Board responsiveness.
Conclusion
The appointment and active participation of DOT Directors is essential to bridging the decentralized Polkadot community with the centralized management of the PCF. The current governance challenge—where Tokenholders lack presence on the Board—heightens the importance of DOT Directors as representatives of the community. Directors hold broad powers and responsibilities and they are indemnified for actions taken in good faith but remain liable for dishonesty, willful default, or fraud. Ensuring timely appointment and engagement of DOT Directors strengthens decision-making, and preserves stakeholder confidence, ultimately supporting the PCF’s mission and long-term sustainability.
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