DAO legal wrappers for India-founded protocols: Cayman foundation, BVI TokenCo and the founders’ ODI leg
You set up a Cayman foundation or BVI wrapper for a DAO with founders in India as two entities, in a fixed order. A Cayman foundation company holds the governance and the treasury; once running it may cease to have members, so nobody owns the DAO. A BVI company limited by shares, the TokenCo, issues the token and signs the contracts, and the foundation owns it. A founder who takes no shares makes no overseas direct investment into the foundation, because a memberless foundation has no equity capital to acquire. A founder who subscribes for TokenCo shares does make ODI, and Schedule III of the Overseas Investment Rules 2022 lets a resident individual make ODI only in an operating foreign entity, outside financial services, that has no subsidiary where the individual has control. So the foundation, not the founders, holds the TokenCo.
Two more Indian questions follow: place of effective management under section 6(10) of the Income-tax Act 2025, and the FIU-IND perimeter for a wrapper running a swap, bridge or launchpad for users.
Neighbouring questions are linked, not repeated: jurisdiction choice, five questions before you incorporate; the India-origin launch sequence and the issuer, launching a token from India; the two remittance regimes, LRS versus ODI; the securities question, is my token a security.
Two entities, two jobs
The wrapper separates the thing that must have no owner from the thing that must sign contracts.
| Point | Cayman foundation company | BVI TokenCo |
|---|---|---|
| Owners | Optional; may cease to have members if a supervisor remains (s.8(2)) | Shareholders on the register of members (s.41(1)); in the standard wrapper, the foundation |
| Token holders | Beneficiaries have no rights over the company or its assets (s.7(4)(e)); vote mechanics sit in bylaws (s.12) | Not members; contract rights under the token terms |
The Cayman foundation company: what the Act requires
A foundation company is a company. The Foundation Companies Act (2025 Revision) applies the Companies Act to it with Schedule 1 changes (s.3(2)) and the Beneficial Ownership Transparency Act 2023 (s.3(5)). Section 4(1) asks for a memorandum that states it is a foundation company, describes its objects, provides for surplus assets on winding up and prohibits distributions to members; adopted articles; and a secretary who is a qualified person licensed under the Companies Management Act (2025 Revision), whose business address is the registered office (ss.2(1), 13(1)).
Section 8 makes it ownerless. The company may cease to have members if its memorandum permits and it keeps at least one supervisor; cessation does not affect its existence, capacity or powers; once memberless it cannot re-admit members or issue shares unless the constitution expressly allows (s.8(2) to (5)). A supervisor is a non-member with an unconditional right to attend and vote at general meetings (s.2(1)), and the register of supervisors is updated within sixty days, on pain of up to CI$500 a day (s.14).
Token holders named as beneficiaries get nothing by default: a beneficiary has no powers or rights over the company, its management or its assets (s.7(4)(e)). Rights go to members, directors, supervisors, founders or others through the constitution (s.7(1)), and token-vote procedures sit in bylaws, which third parties dealing in good faith need not check (s.12(3), (4)). Section 15 gates every payout: no disposition that would leave the company unable to pay its debts as they fall due; a knowing recipient repays, and a director who knowingly authorises it faces up to CI$15,000 and five years’ imprisonment.
Beneficial owners are individuals at 25 percent or with ultimate effective control; where nobody qualifies, the senior managing official is identified as the contact person (Beneficial Ownership Transparency Act 2023, s.4; in force 31 July 2024). A public sale of newly created virtual assets in or from the Islands needs CIMA registration and an approved issuance request, with direct public issuance capped at a prescribed threshold (Virtual Asset (Service Providers) Act (2024 Revision), ss.4, 7); the 2024 amendment was not read for this page, so verify the threshold with CIMA. Government fees, not Infinilex fees: CI$500 to apply under the Fees Regulations 2017, and CI$700 (USD 853.66) to register the exempted company with authorised capital up to CI$42,000 under the registry schedule from 1 January 2025; annual fees are a verify item.
The BVI TokenCo: formation, records and the register
The TokenCo is a company limited by shares under the BVI Business Companies Act (Revised Edition 2020) (s.5). Only the proposed registered agent incorporates it (s.6(1)), and it keeps a registered office and agent in the Virgin Islands at all times (ss.90(1), 91(1)).
It keeps a register of members (s.41(1)), is managed by its directors (s.109(1)) and retains its records for at least five years (s.98(1)). Under section 98A and the Financial Return Order 2023 (SI 2023 No. 18) it files an annual return, a summary balance sheet and profit and loss, with its agent within nine months of the due date. Beneficial owners, natural persons at 10 percent or with other control, are filed with the Registrar within 30 days of incorporation and of becoming aware of a change (Beneficial Ownership Regulations 2024, regs 2, 17(1), 22(1); in force 2 January 2025); with the foundation as sole shareholder, expect the agent to ask which individuals control the foundation; confirm the filing with the agent.
The Virtual Assets Service Providers Act 2022, in effect since 1 February 2023, bars any virtual assets service business in or from the BVI without FSC registration (s.5(1)), and its section 2 list includes financial services relating to the issuance, offer or sale of a virtual asset. On our reading, issuing its own token for its own account is outside the for-another-person test; exchange, custody or placement for others is inside it. Government fees, not Infinilex fees: USD 550 to incorporate with up to 50,000 authorised shares and USD 1,350 above that (Schedule 1 Order 2022, from 1 January 2023); later fee orders were not read, so verify.
The founders’ ODI leg: where FEMA attaches, and where it does not
Under the Overseas Investment Rules 2022 (G.S.R. 646(E), 22 August 2022) both entities are foreign entities, formed outside India with limited liability, and ODI is the acquisition of unlisted equity capital of a foreign entity or subscription as part of its memorandum (rule 2(1)). The RBI Master Direction of the same date defines equity capital as equity shares, perpetual capital, irredeemable instruments or fully and compulsorily convertible contributions (para 1(vii)). So a founder who takes a council, director or supervisor seat in a memberless foundation and receives no shares makes no ODI into it, and a token allocation is not equity capital either. We located no RBI text on a resident founder’s cash contribution to a memberless foundation: confirm it with the AD bank before any remittance, or fund the foundation from the TokenCo or from non-resident contributors.
Subscribing for TokenCo shares is ODI (rule 2(1)). The exception is sweat equity, qualification shares or ESOP shares up to 10 percent of paid-up capital without control, which are OPI and still count against LRS (Master Direction para 22(2), (7)). Schedule III para 1 governs a resident individual: ODI and OPI count against the Liberalised Remittance Scheme ceiling of USD 250,000 a financial year, and ODI is allowed only in an operating foreign entity that is not in financial services activity and has no subsidiary or step-down subsidiary where the individual has control. A founder-controlled TokenCo that owns an operating or Indian development company fails that test. Hence the ownership line: the foundation owns the TokenCo, the founders hold no equity capital in either entity, and the FEMA points left are what they are paid and any contribution they make, both to confirm with the AD bank.
Three definitions police the fix. Control (para 1(iii)) includes the right to appoint a majority of directors or agreements giving 10 percent or more of voting rights; council seats and multisig keys are the facts an AD bank reads against it. Rule 19(3), the two-layer limit where money comes back into India, counts subsidiaries by control (para 20(2)); test a foundation over a TokenCo over an Indian development company against it before the Indian company exists. Financial services activity (para 21(7)(d)) is an activity that, carried out in India, would need registration with or regulation by an Indian financial sector regulator. We located no RBI position on whether a TokenCo that needs FIU-IND registration is caught, and so barred to a resident individual, so it goes to the AD bank in writing.
Where a founder does hold TokenCo shares, the standard ODI file applies: no borrowed funds for start-up ODI, with a chartered accountant’s certificate (rule 19(2); para 9), Form FC and a Unique Identification Number through the AD bank before remitting (OI Regulations 2022, reg 10(2)), and an Annual Performance Report by 31 December (reg 10(4)). The FEMA, ODI and LRS compliance service runs that file, and missed filings go to the ODI regularisation checklist.
The build order for an India-founded wrapper
| Step | What happens | The rule |
|---|---|---|
| 1 | Write down what the wrapper does for whom: own-account issuance, or swap, bridge, custody or launchpad services for users | S.O. 1072(E), 7 March 2023; Cayman and BVI VASP Acts, s.2 |
| 2 | Form the foundation: memorandum, articles, qualified-person secretary, a supervisor, bylaws for the token vote; file beneficial ownership | Foundation Companies Act ss.4(1), 8, 12; Beneficial Ownership Transparency Act 2023 s.4 |
| 3 | Incorporate the TokenCo through a registered agent with the foundation as sole shareholder; file beneficial owners within 30 days | Business Companies Act ss.5, 6(1), 41(1); Beneficial Ownership Regulations 2024 reg 17(1) |
| 4 | Only if a resident founder holds TokenCo shares: Schedule III check, no-borrowed-funds certificate, Form FC and UIN before the wire | OI Rules Schedule III; Master Direction paras 9, 16; OI Regulations reg 10(2) |
| 5 | Fix where decisions are made: council and board meetings held and minuted outside India | Income-tax Act 2025 s.6(10) |
| 6 | Run the filing calendar set out in the sections above | Foundation Companies Act s.14; Financial Return Order 2023; Beneficial Ownership Regulations reg 22(1); OI Regulations reg 10(4); FIU-IND guidelines para 5.1 |
POEM: the tax question the FEMA answer creates
Taking the founders off the share registers solves Schedule III and raises a residence question: under section 6(10) of the Income-tax Act 2025, a company is resident in India if its place of effective management, where key management and commercial decisions are in substance made, is in India. A council of three Indian residents voting from India puts a Cayman company at risk of being treated as resident in India, because that is where its key decisions are made in substance. The board hygiene is on the POEM page, and Indian-resident founders’ own token sales, taxed in India wherever the TokenCo sits, are on the 2026 crypto tax page.
The FIU-IND perimeter: for or on behalf of another
No Indian statute read for this page deals with DAOs as such. RBI and the tax department reach the wrapper through its founders; FIU-IND reaches it directly, by activity. Ministry of Finance notification S.O. 1072(E) of 7 March 2023 brought five VDA activities under section 2(1)(sa)(vi) of the Prevention of Money Laundering Act when carried out for or on behalf of another person in the course of business, including financial services related to an issuer’s offer and sale of a VDA. A service provider registers with FIU-IND as a reporting entity under its guidelines of 10 March 2023 (para 5.1).
Para 11.1 is the DAO sentence: persons offering services relating to the issuance, offer, underwriting, market making, placement, sale, distribution, circulation and trading of a VDA are service providers, and automating those functions through a smart contract does not relieve the controlling parties. That is the 2023 text; check its wording and numbering against the 8 January 2026 update.
On the notification’s for-or-on-behalf-of-another test, a TokenCo selling its own token for its own account is, on our reading, outside; confirm against the 8 January 2026 guidelines. A wrapper running a swap, bridge, custody product or launchpad for users is inside, smart contract or not. See FIU-IND enforcement and the DeFi, DAO and NFT perimeter, and the FIU-IND registration service.
Who signs what on this file
Cayman counsel and the qualified-person secretary form the foundation; the BVI registered agent incorporates the TokenCo. Infinilex scopes and coordinates both and holds the India leg: the Schedule III and rule 19(3) analysis, Form FC where a founder holds shares, certificates from Infinilex’s in-house chartered accountant, section 6(10) board hygiene and the FIU-IND perimeter memo. Infinilex counsel qualified in India, the UAE and the US sign opinions for those jurisdictions; for the EU and any other jurisdiction Infinilex scopes and coordinates the local counsel who sign. The US securities question sits with the token legal opinion; the launch-day list with the Web3 legal readiness checklist. Email is answered within one working day.
Frequently asked questions
Can founders living in India set up a Cayman foundation company for a DAO?
Yes. The section 4(1) requirements of the Foundation Companies Act (2025 Revision) do not turn on where the founders live: a memorandum with objects, surplus-asset and no-distribution clauses, adopted articles and a qualified-person secretary. The India questions are whether any founder acquires equity capital (FEMA), where key decisions are in substance made (tax residence), and whether the wrapper does anything for other people (FIU-IND).
Does an Indian founder make an overseas direct investment by sitting on a DAO foundation's council?
Not by the seat alone. Under the Overseas Investment Rules 2022, ODI means acquiring unlisted equity capital of a foreign entity, and a council or supervisor seat in a memberless foundation gives none. Once the foundation owns a TokenCo or anything else, an AD bank reads council seats and multisig keys against the definition of control: a majority of directors, or 10 percent or more of voting rights by agreement. We located no RBI text on a founder's cash contribution to the foundation, so confirm it with the AD bank before the wire.
Why should the Cayman foundation own the BVI TokenCo instead of the founders?
Because Schedule III of the Overseas Investment Rules 2022 lets a resident individual make ODI only in an operating foreign entity that is not in financial services activity and has no subsidiary where the individual has control. A founder-controlled TokenCo that holds an operating or Indian development company fails that condition, and rule 19(3) adds the two-layer limit where money comes back into India. With the foundation holding the shares, no resident individual holds equity capital anywhere in the wrapper.
Does a DAO wrapper with Indian founders need FIU-IND registration?
It depends on what the wrapper does for other people. The Ministry of Finance notification of 7 March 2023 brings five virtual digital asset activities under the Prevention of Money Laundering Act when carried out for or on behalf of another person, including financial services related to an issuer's offer and sale of a VDA. On the notification's for-or-on-behalf-of-another test, a TokenCo selling its own token for its own account is, on our reading, outside; confirm against the 8 January 2026 guidelines. A wrapper running a swap, bridge, custody product or launchpad for users is inside, smart contract or not.
Can a Cayman foundation or BVI TokenCo become an Indian tax resident?
It can, if its place of effective management is in India. Section 6(10) of the Income-tax Act 2025 puts that where key management and commercial decisions are in substance made, so a council that meets from India and a TokenCo whose directors all live in India are both at risk.
Wrapping a protocol whose founders sit in India?
Send the short version: where each founder lives, who holds which seats and keys, whether an Indian development company exists, and what the protocol does for users beyond issuing its own token. We will tell you which entity should own what, and whether any founder is making ODI at all, before anyone instructs Cayman or BVI.
Thirty minutes with Prashant Sharma, the founder, who does the work himself. You leave with next steps either way. Email is read by the founder and answered within one working day.
Sources, read 6 October 2026: Cayman Islands Foundation Companies Act (2025 Revision) (published 30 January 2025), Foundation Companies (Fees) Regulations, 2017 (made 17 October 2017), General Registry fee schedule (effective 1 January 2025), Beneficial Ownership Transparency Act, 2023 (gazetted 15 December 2023) and its Commencement Order, 2024 (made 30 July 2024), Virtual Asset (Service Providers) Act (2024 Revision) (gazetted 15 February 2024); BVI Business Companies Act (Revised Edition 2020) (law as at 1 January 2020), Amendment of Schedule 1 (No. 2) Order, 2022 (gazetted 6 October 2022), Financial Return Order, 2023 (gazetted 2 March 2023), Beneficial Ownership Regulations, 2024 (gazetted 4 December 2024) with the June 2025 access policy, Virtual Assets Service Providers Act, 2022 (gazetted 29 December 2022) and the FSC FAQ (undated, read 6 October 2026); RBI, Overseas Investment Rules, 2022, Overseas Investment Regulations, 2022, Master Direction on Overseas Investment (all 22 August 2022) and Master Direction on the Liberalised Remittance Scheme (updated 6 September 2024); Income-tax Act, 2025 (Act 30 of 2025, dated 21 August 2025), section 6 and section 2; Ministry of Finance notification S.O. 1072(E) (7 March 2023); FIU-IND AML and CFT guidelines for VDA service providers (10 March 2023) and downloads index listing the 8 January 2026 update.
General information for founders, not legal or tax advice on your facts. Government fees are the registries’ figures, not Infinilex’s. Points marked verify or to confirm above remain open. Have the structure reviewed on your facts before anyone is instructed.