What a DAO is and why Georgia has no dedicated DAO statute
A DAO — a decentralized autonomous organization — is an association built on blockchain or similar technological infrastructure, whose governance decisions are, as a rule, taken through automated contracts and member voting. Georgian legislation still contains no dedicated statute for DAOs, so the legal organization of such an association must be constructed from existing civil-law instruments. In practice there are two paths: governance through a web of contracts among the members, or the creation of a lawful "wrapper" — a legal entity — that acts in the DAO's name. In both cases the foundation is the Civil Code, and it is precisely the Civil Code provisions discussed below that define the boundaries of how a DAO may be organized.
Freedom of contract and the DAO's internal rules
Under part 1 of Article 319 of the Civil Code, subjects of private law may freely conclude contracts within the limits of the law and determine their content themselves. Particularly important is that contracts not expressly provided for by law are also permitted, provided they do not contradict it. A DAO's governance document stands directly on this norm: membership conditions, voting procedures, quorum requirements, and the rules for managing and disbursing the treasury are all framed as contractual terms and bind the members to the extent that the contract is in force.
Part 2 of the same article sets limits: where one party to a contract occupies a dominant position in the market, it bears an obligation to conclude contracts in that field of activity and may not groundlessly offer a counterparty unequal terms. Part 3 protects persons who acquire or use property and services for non-commercial purposes or to satisfy essential needs — they may not be unjustifiably refused a contract where the other party acts within its entrepreneurial activity. In the DAO context this means that selling tokens or digital services to ordinary consumers is not a licence for the unlimited exercise of contractual freedom.
The concept of the legal entity: why a DAO needs a wrapper
Under part 1 of Article 24 of the Civil Code, a legal entity is an organized formation created to achieve a defined purpose, holding its own property, independently liable with that property, acquiring rights and obligations in its own name, entering into transactions, and able to appear before a court as plaintiff and as defendant. An unregistered DAO has none of these qualities: its assets formally remain with individual members or an indefinite circle of persons, and the organization cannot transact in its own name or stand in court. That is why, for governance stability, founders often choose to register a legal-entity "wrapper" that concludes contracts and represents the DAO in relations with third parties.
Part 2 of Article 24 establishes that a legal entity may be corporately organized, founded on membership, dependent on or independent of its members' status, and may or may not pursue entrepreneurship. Where the entity's purpose is commercial activity, the entity and its branch must be established under the Georgian Law on Entrepreneurs, while an entity pursuing a non-commercial purpose is registered under the procedure laid down by the Civil Code. When choosing a wrapper for a DAO, this distinction determines which registration route applies and what requirements arise for the founders.
Registering a non-entrepreneurial legal entity and its founding documentation
Article 29 of the Civil Code governs the registration of a non-entrepreneurial (non-commercial) legal entity: an interested person submits to the registering body a partners' agreement and an application. Beyond the mandatory data, the founding documentation must indicate: the purpose of the entity's activity; the procedure for admission to membership, withdrawal and expulsion, where the entity is membership-based; the designation of the organ or person adopting decisions on reorganization or liquidation, together with the decision-making procedure; and the procedure for establishing (electing) the governing organ and the term of its authority. This list gathers nearly the same questions a DAO governance document must answer — the difference is that the law requires them to be fixed in writing and registered with the state.
Upon registration the registering body creates, within the unified electronic portal, an electronic address for the entity, and the entity may maintain a registered telephone number or e-mail address to which an electronic notice is deemed delivered to the relevant person. For a DAO whose communications run almost entirely in a digital environment, this mechanism is a practical way to establish formal points of contact with counterparties, banks and regulators.
Representative authority and DAO delegates
Article 107 of the Civil Code governs authority of representation: it is conferred by an expression of will directed at the representative or at the third party with whom the representation is to take place. Under part 2 of the same article, this expression of will does not require the form necessary for the transaction for which the authority is given — unless a special form is prescribed. DAO administrators and delegates who represent the wrapper entity vis-à-vis third parties receive and are bounded by their authority under precisely these rules: the limits of their actions are set by the expression of will through which the authority was conferred, which is why those limits must be described exactly in the governance document.
Risks and what remains on other norms of the Code
If a DAO is organized purely as a web of contracts, the allocation of assets among the members, the boundaries of liability, and the dispute-resolution procedure are entirely matters of contractual regulation. Cases where the validity of a contract depends on state permission must, where they exist, be regulated by a separate law. The remaining norms of the Civil Code — performance of contractual obligations, consequences of breach, and the examination of disputes — apply under the general rules. Choosing the right legal architecture before launch — a contractual web or a legal-entity wrapper — is therefore the decision that shapes both the members' position and the DAO's relations with its counterparties.
The Legal.ge team assists with drafting a DAO governance document, registering a wrapper entity, and formalizing the representative authority of delegates, so that your project remains maximally protected within the Georgian legal environment.