Blockchain technology and corporate law

Publication type Article
Status Published
Occupation: Head of Centre for Legal Research of Digital Technologies
Affiliation: State Academic University for the Humanities
Address: Russian Federation, Moscow, Maronovskiy pereulok, 26
Occupation: Head of Laboratory
State Academic University for the Humanities
FRC “Computer Science and Control” of RAS
Address: Russian Federation, Moscow, Maronovskiy pereulok, 26
Journal nameLaw & Digital Technologies
EditionVolume 2 №2

The article analyses legislative initiatives aimed at regulating the use of blockchain in corporate governance. The tokenisation equity opens up new opportunities for companies to attract investment. As a result, many traditional companies are interested in converting traditional securities into security tokens. Countries aspiring to lead the blockchain industry are seeking to establish a legal framework for security tokens and a blockchain-based registration system for them. The use of blockchain brings with it not only the digital transformation of companies, but also the emergence of a new type of organization - decentralized autonomous organization (DAO). Existing legal forms are not appropriate for the DAO, which requires the creation of a new type of legal entity.  Changes to corporate law that address these trends will eliminate legal risk and drive digital transformation of companies

Keywordsblockchain; security token; tokenisation equity; decentralized autonomous organisation; DAO.
Publication date03.02.2023
Number of characters21361
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Corporate law is actively evolving globally influenced by digitalisation. Digitalisation usually includes a rather wide range of processes resulting from the introduction of digital technologies in various spheres. At the same time, researchers justify the need to distinguish between the concepts of digitisation and digitalization (Ross 2017; Savić 2019). Digitisation means the conversion of analogue data into a digital format required for the further digitalisation of business processes. Digitalisation involves deeper business transformation processes. Ritter and Pedersen (2020) define digitalisation as “the application of digital technologies that brings about changes in business-to-business firms and business markets caused by digitization”. Thus, digitalisation of a company should be considered, on the one hand, as a process of implementing digital technologies into the company’s processes and, on the other hand, as a result of this implementation, which implies a significant, fundamental change in the business processes.
2 One of the important elements of company digitalisation is the use of new digital technologies in corporate governance, such as distributed ledger technologies (DLT), including blockchain and artificial intelligence (AI). (Laptev & Feyzrakhmanova 2021). These technologies are expected to help companies deal with corporate governance challenges more effectively. However, their implementation is impeded by legal uncertainties caused by the slowness and wariness of the legislature. An appropriate legal framework would significantly mitigate the legal risks associated with the application of digital technologies in corporate governance. Therefore, the experience of countries leading in legislating the use of digital technology in corporate governance is in high demand.
3 Blockchain technology has had the biggest impact on corporations. This article analyses the legislation of blockchain-friendly countries to identify the trends in changes in corporate law due to the use of blockchain technology in corporate governance.


Blockchain-based digital assets have opened up opportunities for traditional corporations. The tokenisation of corporate capital enables companies to attract investment more efficiently. The key benefits of tokenisation are increased liquidity, faster settlement and lower costs (Heines et al. 2021; Benedetti and Rodríguez-Garnica 2020).
5 Companies tokenize their assets by issuing security tokens on the blockchain. Tokens can be equity or debt financial instruments. Debt tokens are aimed at raising funds for the company from investors. The company issuing these tokens takes on the obligation to repay them at the end of a certain time period by paying a fixed amount or an amount determined according to the terms of the issue (for example, at the market value of the token).
6 Equity tokens, such as traditional stocks, give their holders voting power, partial company ownership, entitlement to dividends and other benefits, depending on the type and design of the token. Equity tokens can be used both by crypto projects and traditional companies. The use of tokens can significantly reduce the costs of issuing them, therefore tokens are usually issued by tech start-ups on the blockchain. Traditional companies can tokenise shares already issued in a traditional form. Quadrant Biosciences, for example, converted all ordinary shares into Quadrant Token tokens on the Ethereum platform in 20181 Which each Quadrant Token representing one ordinary share of the company with all typical rights associated with it. 1. >>>>
7 The conversion of ordinary shares into equity tokens is not an isolated case. The Capital Markets and Technology Association (CMTA) has developed legal standards for the tokenisation of shares for Swiss corporations. According to the DLT Act 2020 in Switzerland, the tokenisation process does not involve issuing shares in the form of tokens, implying that shares and tokens would be the same instrument. Rather, the DLT Act provides an instrument to associate newly issued or existing shares with digital tokens, so that the shares legal title can be transferred only via the tokens transfer via the distributed ledger2. 2. >>>>
8 There is a difference in approach to defining equity tokens. Some lawyers define equity tokens as “traditional shares issued and maintained in a digital form on a blockchain and all transfers and settlement of such shares are recorded on the blockchain” (Dilendorf et. al 2019). Others claim that a security token is a “digital representation” of an investment product, not the product itself (Lambert et al. 2022).
9 In our opinion, the definition of a token depends on the legislation of the particular country. The US Securities and Exchange Commission, for example, requires the application of securities laws to security tokens (Goforth 2022; Guseva 2021). However, most countries have taken the direction of creating specific legislation. A special category of tokenised rights called “uncertificated registered securities” (Registerwertrechte) has been introduced in the Swiss Code of Obligations (CO), along with «simple» uncertificated securities (einfache Wertrechte; droitsvaleurs simples). The foundation of the Liechtenstein Blockchain Act is the Token Container Model. A security token contains a real asset, which can be a share or a bond.

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