Dissolution & Cancellation#

A DAO LLC may need to close because its members vote to dissolve it, a time or event in its governing documents occurs, all members resign, its fixed duration ends, or the Registrar orders dissolution in limited circumstances. MIDAO assists with submitting the required documents to the Registrar of Corporations, but clients remain responsible for complying with their own governance documents and obtaining legal, tax, accounting, or regulatory advice as needed.

Cost of Closing a DAO LLC#

Routine corporate support for dissolution or cancellation is included in MIDAO's annual fees — there is no additional MIDAO cost.
Separate costs may still apply for third-party services: legal advice, tax advice, accounting, banking, exchange accounts, asset transfers, smart contract work, or treasury operations.

What Dissolution Means#

Dissolution is the start of the DAO LLC's closure, not the end of it. Closing a DAO LLC has three stages: dissolution (the decision or event that starts the closure), winding up (settling the DAO LLC's affairs), and cancellation (the final filing that ends the DAO LLC's legal existence). A DAO LLC usually needs to:

confirm that a valid dissolution event or approval has occurred;
submit the required dissolution filing to the Registrar;
wind up its affairs, including debts, obligations, treasury assets, grants, tokens, and contracts; and
complete cancellation of its Certificate of Formation when winding up is complete.

Before You Start#

Before requesting dissolution, the DAO LLC should review:

its Certificate of Formation;
its Operating Agreement or limited liability company agreement;
any smart contracts that set governance, voting, treasury, or dissolution rules;
any member vote, quorum, notice, or approval requirements;
any remaining assets, liabilities, grants, vendor contracts, bank or exchange accounts, tax matters, or regulatory obligations; and
whether the DAO LLC is non-profit or for-profit, because asset distribution rules differ.

Common Grounds for Dissolution#

A DAO LLC may be dissolved where one of the following applies:

the period fixed for the DAO LLC's duration has expired or will expire;
the members have voted to dissolve the DAO LLC in accordance with the DAO LLC's governing documents and applicable law;
a time or event specified in the smart contracts, Certificate of Formation, Operating Agreement, or limited liability company agreement has occurred;
all members have resigned; or
the Registrar orders dissolution because the DAO LLC is deemed to no longer perform a lawful purpose or is no longer under the control of at least one natural person.

Dissolution Process#

Complete the Statement of Intent to Dissolve (Form 3) (opens in new tab) to start the dissolution process, following Part IV, Section 10 of the Decentralized Autonomous Organization Regulations 2024 (opens in new tab). MIDAO will provide the applicable form and instructions.
Provide evidence that the dissolution process or event contained in the DAO LLC's Operating Agreement, limited liability company agreement, Certificate of Formation, or smart contracts, as appropriate, has been followed.
If dissolution is approved by members, provide evidence that the required vote, quorum, or approval threshold has been met under the DAO LLC's governing documents and applicable law. Where the governing documents do not specify a process, the statutory defaults apply: for non-profit DAO LLCs, a ⅔ majority under Section 225 of the Non-profit Entities Act 2020 ("Voluntary Dissolution"); for for-profit DAO LLCs, the written consent of all members — or, where there is more than one class or group of members, approval by each class or group, in each case by members owning more than ⅔ of the interests in profits — under Section 46 of the Limited Liability Company Act 1990 ("Dissolution").
If dissolution is based on a specified time or event, provide evidence that the time or event has occurred.
MIDAO will submit the Statement of Intent to Dissolve and supporting documents to the Registrar of Corporations using the process accepted by the Registrar, who will verify and determine the dissolution.
If the DAO LLC holds assets, settle or make reasonable provision for debts and obligations before distributing remaining assets during winding up (see Winding Up below).

Information Needed for the Statement of Intent to Dissolve#

The Statement of Intent to Dissolve should generally include:

the official name of the DAO LLC, matching the Registrar's records;
the proposed effective date of dissolution;
the reason for dissolution;
the name, citizenship, address, and capacity of the person signing;
confirmation that the signer is acting as the Representative Agent or other authorized signer, as applicable; and
the signer's declaration and signature.

Winding Up and Assets#

After dissolution, the DAO LLC should carry out only the activities necessary to close its affairs. This may include collecting assets, closing treasury operations, settling contracts, paying creditors, making reasonable provision for known liabilities, distributing remaining assets where permitted, and closing or updating bank, exchange, website, domain, and service provider accounts.

Non-Profit DAO LLCs — refer to Section 228 of the Non-profit Entities Act 2020 as a guideline for distributing assets; there is a 3-year period following dissolution to do so. Be especially careful not to distribute assets in ways that create private benefit where such distribution is not permitted.
For-Profit DAO LLCs — refer to Section 49 of the Limited Liability Company Act 1990 as a guideline for distributing assets, and follow your governing documents and applicable law.

Clients should obtain professional advice where assets, grants, tokens, community funds, creditors, tax issues, or regulated activities are involved.

Cancellation of Certificate of Formation#

Cancellation is the final step in the registry process after dissolution and winding up. Dissolution starts the closing process; cancellation ends the DAO LLC's legal existence by canceling its Certificate of Formation — until then, the DAO LLC continues as a separate legal entity.

A Certificate of Cancellation should be filed after the DAO LLC has completed winding up, or where another permitted reason for cancellation applies. Under the Limited Liability Company Act, a certificate of cancellation generally covers:

the official name of the DAO LLC;
the date the DAO LLC's Certificate of Formation was originally filed;
the reason for cancellation;
the future effective date or time of cancellation, if cancellation should not be effective immediately upon filing;
if applicable, the name of the entity into which the DAO LLC has been converted;
any other information required by the form or determined by the authorized filer; and
the signature of an authorized person.

The Registrar's current form (Form 13, available below) is a simplified declaration covering the key items — the DAO LLC's name, the original filing date and registration number, confirmation that dissolution and winding up are complete, and the authorized signer's declaration. MIDAO will provide the current form and instructions and will assist with submitting the cancellation filing to the Registrar. Before cancellation is filed, the DAO LLC should confirm that its winding-up steps are complete and that records needed for legal, tax, compliance, accounting, treasury, or member purposes have been preserved.

After Cancellation#

Once cancellation is effective, the DAO LLC should not present itself as an active Marshall Islands DAO LLC. The DAO LLC should notify relevant third parties, such as banks, exchanges, service providers, counterparties, auditors, tax advisers, or community-facing platforms, as appropriate.

Records After Dissolution or Cancellation#

Some records may need to be retained after the DAO LLC closes. This may include governance approvals, member votes, smart contract records, treasury records, transaction records, asset-distribution records, accounting records, tax records, KYC/KYB records, and beneficial ownership information.

Where DAO actions, transactions, votes, and decisions are recorded on a distributed ledger, human-readable explanations should remain publicly available for the required recordkeeping period, where applicable. Clients should seek professional advice before deleting, restricting, or making records unavailable.

Important Notes#

MIDAO is not a law firm and does not provide legal, tax, accounting, banking, or regulatory advice — see our Legal Disclaimer.
Dissolution and cancellation may have consequences in other jurisdictions where founders, members, tokenholders, users, assets, contracts, or service providers are located.
Clients should obtain independent advice before dissolving or canceling a DAO LLC that has assets, tokens, grants, creditors, active users, regulated activities, or unresolved disputes.