Liability Models by Legal Form
The risk to the personal property of the members of a decentralized autonomous organization depends directly on the legal form in which the project is wrapped. The Law on Entrepreneurs shows two poles. On the one hand, under Article 94, a society with joint and several liability is an entrepreneurial society whose partners carry out entrepreneurial activity jointly under a common firm name and are liable to creditors for the society's obligations directly and unlimitedly, as solidary debtors; such a society must have at least 2 partners.
On the other hand, under Article 123, a limited liability company is an entrepreneurial society whose capital is divided into shares and in which the partners' liability for the society's obligations is limited: the company is liable to the creditor with all its property, while the company is not liable for the obligations of its partners. The practical consequence is clear: in a joint-liability form every partner risks all of their property for every obligation of the society, while in a limited form the member's risk remains within the share.
Liability for Pre-registration Actions
A particular danger lies precisely at the start of a project: any transaction carried out in the society's name before its registration. Under Article 10, for obligations incurred in the society's name before registration, the founding partners and those who carried out the action that gave rise to the obligations are liable directly and unlimitedly, as solidary debtors — unless otherwise agreed with the creditor.
The law also provides a way out of this risk: rights acquired and obligations incurred in the society's name before registration become the rights and obligations of the society where the society approves them; in that case the founders and the actors are released from these obligations — again, unless otherwise agreed with the creditor. For a decentralized project this means: early obligations born from smart contracts, subscriptions or other sources remain with the members until the wrapper society formally approves them.
How the Limited Form Reduces the Member's Risk
The architecture of the limited liability company protects the member in both directions. The society's creditors can reach only the society's property — the member's personal bank account, home or other assets remain untouched by the society's debts. In parallel, the society is not liable for the obligations of its partners — one member's personal litigation or tax problems do not spill over onto the other members or the society's assets. From the creditor's perspective this too is a transparent rule: it knows exactly whose property it can reach in a dispute — the society's, and not a fluctuating circle of members.
This protection, however, is not absolute: it operates only where the wrapper is properly built and the organization's real activity is carried out in the society's name. Where an obligation arose before registration and the society subsequently did not approve it, unlimited and solidary liability remains with the members — which is why documenting the early stage of the project is as important as the choice of the form itself. Experience shows that the early stage is precisely the most vulnerable: an enthusiastic team often concludes contracts in the name of a future society, nobody keeps a record of who agreed to what, and when a debt emerges, the liability spreads over all the founders.
Frequently Asked Questions
Which form is most dangerous for a member?
The joint and several liability society: its partners are liable to creditors for the society's obligations directly and unlimitedly, as solidary debtors, and such a society must have at least 2 partners.
Who answers for transactions concluded before registration?
Under Article 10 — the founding partners and those who carried out the actions, directly and unlimitedly as solidary debtors, unless otherwise agreed with the creditor.
How do these obligations pass to the society?
Upon the society's approval — they then become its rights and obligations, and the founders are released, unless otherwise agreed with the creditor.
Does an LLC shield a member from all risk?
It protects their property from the society's debts and the society from the members' debts; but pre-registration obligations not approved by the society still remain with the members — which is why every early transaction should be fixed in writing.
How We Help on Legal.ge
Managing the liability of members proceeds at three key points: the choice of form, which determines the liability regime; the early stage of the project, where pre-registration obligations remain with the members; and the approval procedure, which transfers those obligations to the society. Each of these points demands documentary precision, and when all three are arranged together, the member's personal property and the society's assets remain reliably isolated from one another.
The lawyers working on Legal.ge will help you choose the form, structure the early transactions, prepare the acts of approval, and draft the clauses that keep the member's personal property protected. Contact us for a consultation — a risk you account for at the start never reminds you of itself at the end.