Consultation on Restructuring the IETF Trust from a Virginia Trust to a non-for-profit Delaware Corporation

Results of 2022 Consultation on IETF Trust Restructuring

The IETF Trust conducted a community consultation on restructuring of the IETF Trust from a Virginia Common Trust to a not for profit corporation registered in Delaware.

This IETF Trust published a web page holding materials explaining the motivation, the current IETF Trust Agreement which the Trust operates under, and the proposed bylaws of the new corporation which are based directly on the current Trust Agreement.

The Trustees used the TLP-INTEREST Mailing list to collect feedback and questions on the proposed restructuring.

The Trustees also presented on the restructuring at the IETF113 Plenary, the March 2022 ISOC Board of Trustees meeting, and held on May 23, 2022 an informational Q&A webinar.  The recordings of the webinar and IETF plenary are available on YouTube.

The IETF Trust serves several communities, and we received engagement from many interested parties including IETF community members, the IETF LLC, the Regional Internet Registry (RIR) community including ARIN, and ICANN.

Based on the feedback received during the consultation the IETF Trustees have concluded that the Trust will proceed with the proposed restructuring to a not for profit Delaware corporation.

During the consultation, the IETF LLC asked the Trustees to consider expanding the restructuring scope to include moving the functions of the IETF Trust into the IETF Administrative LLC.  The Trustees have discussed this suggestion and do not believe that it is an appropriate change to make.  Replacing the currently independent IETF Trust with  the IETF LLC, and by association ISOC, would fundamentally alter the proposed restructuring and would greatly expand the scope to include the complex set of issues surrounding the role of the IETF Trust and the assets it manages.

 

The IETF Trust will move forward with the restructuring plan with the next phases to be formally filing the articles of incorporation for the new corporation, applying for IRS 501(c)3 non-profit status, and once obtained conduct the process of transferring the Trust’s current assets, agreements, and licenses to the new not-for-profit corporation.  This is expected to run through 2023. The Trustees will provide updates to the community as the restructuring proceeds.

Thank you to the many people and organizations that participated in this consultation.

IETF Trustees:

Glenn Deen (Chair)
Kathleen Moriarty (Treasurer)
John Levine,
Stephan Wenger
Joel Halpern

Below is the original text of the proposal plan.

The IETF Trust is considering a proposal to update the legal structure of the IETF Trust from a Virginia Trust to a not-for-profit Delaware Corporation.

What is being proposed

IETF Trust would restructure from a Virginia Trust to a not-for-profit Delaware Corporation that continues to provide the same support under the same principles as the current IETF Trust. The May 23, 2022 Webinar Presentation slides have information on the consultation.c

What would stay the same:

  • Role & Support as the current IETF Trust
  • IP licensing would continue as done by the current IETF Trust
  • Price for IP licenses would continue to be zero/free
  • Would remain a non-profit (501c3) entity
  • Selection of Trustees would continue to follow the current process in RFC8714:
    • 5 Trustees: 1 from IESG, 1 from ISOC, 3 from IETF nomcom

What would change:

  • All IETF Trust assets would transfer from the current Virginia Trust to the new entity
  • All current licenses issued by the IETF would transfer to the new entity
  • The new entity will be managed by a Board of Trustees subject to fiduciary duties as directors under Delaware law. The Trustees of the new entity will manage the IETF assets in the same manner as before.
  • The legal registration of the new entity will move from from Virginia to Delaware (same place as the IETF LLC)
  • For efficiency of operation, the new entity will have traditional corporate officers (e.g., a Chair, a Secretary and a Treasurer)

Details of the change:

The IETF Trust as a Virginia Trust operates under the 2018 Second Amended and Restated IETF Trust Agreement.

The IETF not-for-profit Delaware Corporation would operate under a set of proposed ByLaws  based on the above Trust Agreement

The following IETF documents would need minor updates:

  • RFC 5377 Introduction text has several references regarding Trustees and IAOC
  • RFC 5378 Section 1.h refers to the IETF Trust as a “Virginia Trust”
  • RFC 8715 Section 2 refers to the IETF Trust as a “Virginia Trust”
  • RFC 8714 Section 2 has a short history of the IETF Trust

Since the selection process for IETF Trustees would remain the same, we do not believe any changes would be required to RFC 8714 selection procedures.

Guiding Principle in Developing the Proposal

The guiding principle in developing the details of the proposal was to follow as closely as possible the current IETF Trust principles, practices, and procedures that it currently operates under.

Motivation

An important difference between a Trustee of a Virginia Trust and a not-for-profit Delaware Corporation is the legal role and liabilities that come with being a Trust Trustee versus serving on a Board of Trustees for the corporation.

Trustees of Virginia Trusts are responsible for the proper management of trust assets, and there are a variety of legal liabilities associated with that role. The IETF Trust carries insurance to offset these personal Trustee liabilities but increasingly the marketplace of insurers that provide coverage to entities like the IETF Trust has undergone a significant reduction in the number of providers as well as limits to the amount of coverage the market is willing to provide. Over the past few years the gap between the insurance amounts the IETF Trust is able to obtain and what the Trustees believe is appropriate coverage has grown and is now at a point which the Trustees believe is putting the Trust and Trustees at inappropriate levels of risk exposure and is now an important problem to address and resolve.

Since the IETF Trust cannot obtain higher levels of insurance coverage, an alternative way to reduce personal liability exposure for Trustees is to change the legal structure to a not-for-profit Delaware Corporation.   This change shifts the nature of the specific legal state provisions regulating the Board of Trustees while keeping the Trustees responsible for the prudent management of the Trust assets in compliance with the Trust purpose. Although we have chosen to call the governing board of the new entity a “Board of Trustees,” the Board members will be subject to the Delaware fiduciary and other duties applicable to members of Boards of Directors while significantly reducing personal liability.  Corporations, unlike Trusts, still enjoy a large insurance marketplace with many more providers and more willingness to provide the appropriate coverage levels.

This change has been proposed to be as minimally disruptive as possible.  The IETF Trust Agreement was used as the foundation for the proposed Bylaws for the new corporation, and the administrative policies and procedures of the IETF Trust were also followed in the drafting of the Bylaws. Details such as the number of Trustees and their appointment process have been carried over from the current IETF Trust. The proposal includes transferring all assets and responsibilities while charging the new corporation with continuing to manage the Trust’s IP assets in the same manner and under the same principles and goals as the current IETF Trust. Language under the old trust which is no longer relevant to current operations or to the corporate form was not carried over.

The goal has been to change how the IETF Trust is legally registered while keeping everything else as close as possible to the way it currently is.

Consultation Goal

The IETF Trustees are seeking constructive input to help the Trustees ensure we have examined and addressed the important aspects that need to be considered in evaluating and possibly implementing the conversion proposal.

Key questions we hope to get input on from the consultation:

(1) Does the proposed change interfere with the Trust’s mission?  If so, how ?
(2) Are there any legal or factual mistakes in the proposed bylaws?
(3) Is there any deviation in the proposed bylaws from the current Trust agreement in either principle or fact, recognizing that some changes in formalities are required by the change from a trust to a corporation?
(4) Will converting expose the IETF Trust’s mission or holdings to new and likely threats that need to be addressed?

Consultation Feedback

Feedback is being solicited on the IETF Trust’s tlp-interest@ietf.org mailing list. (registration as a list member is required to post).

While the May 23 Webinar provides a good format to present the background and high-level aspects of the proposal, we recognize that many comments may be at a level of detailed that does not easily fit into the webinar format. For this reason, please send those more detail oriented comments to the tlp-interest list so that the Trustees can best understand the full details of your comment. These comments will be handled on list.

Duration of the consultation
This consultation will run through June 30th, 2022.

A webinar was held on 23 May 2022 with more details. If you missed the webinar, a recording is embedded here.