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Derivative Actions Under the Texas Business Organizations Code
The fiduciary duties of directors or other governing persons of an entity and its officers are generally owed to the corporation, limited liability company (“LLC”) or limited partnership (“LP”) entity they serve and not to any individual owners. Thus, a cause of action against a director or other governing persons of an entity and its officers for breach of fiduciary duty would be vested in, and brought by or in the right of, the entity. Statutes in both Texas6 and Delaware authorize an action brought in the right of the entity by a stakeholder against its Board for breach of fiduciary duty.8 Such an action is called a “derivative action.” The TBOC was amended in the 2019 Legislative Session to make consistent derivative proceedings provisions governing for profit corporations with those governing LLCs and LPs by House Bill No. 3603, which became effective on September 1, 2019.
The Convergence of Artificial Intelligence and Distributed Autonomous Organizations: (Auto)Generating New Legal Issues
Artificial intelligence is all about decision-making. We use ChatGPT to let the computer decide what we want to say, or how we want to say it. We use other forms of AI to handle sometimes complex tasks without human intervention in a dynamic fashion that accommodates a given situation. Currently, however, DAOs employ “static” decision-making because the smart contracts (code) that makes up the DAO is immutably set on the blockchain, and thus the DAOs decision-making is intended to be determinative. This notion that DAOs are deterministic is an underlying assumption made by investors and legislatures when selecting or devising corporate forms for DAOs. However, technologically, there is nothing to prevent the combination of DAOs with AI, but that combination makes the DAO indeterminate and thus that combination calls into question the underlying assumptions implicit in current statutes.