Why you should Vote NO! to Nominet's Proposed Governance Changes

[JimDavies]

Nominet recently had a consultation on proposed governance changes. It only got 20 replies. A significant number opposed the main proposals.

Despite that, they are pushing ahead with a vote at the AGM next month. Voting is due to open tomorrow.

Nominet now admit that they have been operating outside their powers since 1996. Their answer is to try to change those powers, using the system they accept is broken. That's backwards logic. They should first be fixing what's broken, then looking at change from a position of stability.

The WeightedVoting.uk team have reviewed the proposals and produced a detailed explanation of why we believe members should Vote NO!

https://weightedvoting.uk/open-letter/

There are very serious questions about possible overpayments made by members that need to be looked at, along with the legality of both weighted voting and subscription payments.

We have also produced a roadmap for what we think should happen after a No vote.

https://weightedvoting.uk/what-next-if-we-vote-no/

A No Vote is not a negative option. We have been pushing for a proper review and then change from day one. As you can see from our roadmap, a No vote is an opportunity for real change, rather than Nominet's attempt to rugsweep the problems they finally acknowledge exist.

With a 90% threshold required to pass the proposed changes, every vote counts. Please use yours to Vote NO!

​

 

[Whois-Search]

Very interesting numbers and arguments @JimDavies

Even by my own back of an envelope calculations…

On the subscription fee estimate I’m due:

Personal membership = 20 years = £2000 + £400 joining fee
Business membership = 10 years = £1000 + £400 joining fee
Total = £3800

On the domain pricing overpayments I’m due:

Personal domains = 200 x £1.33 = £266 x 6 years
Business domains = 4500 x £1.33 = £5,985 x 6 years
Total = £37,506

So that’s about 40k I could claim back if weighted voting is proven to be unlawful (depending on a court settlement)?

However as @webber said on Twitter (X) it’s not about the money. For me this is now about the utter contempt shown towards the membership recently:

https://x.com/cipnt/status/1704104904283853183

Just to get a 90% majority at the AGM (17th October) Nominet will need almost every member on board with this.

The last 90% memorandum vote (ENUM scope) in November 2006 only passed at the second attempt as some members here might remember.

Trying to push through new articles with only 20 responses without wide membership support is not only irresponsible it is doomed to failure. For those reasons I’ll be voting AGAINST the special resolution.

 

[ELIFE-MZ]

Probably a stupid question but why did they only receive 20 responses? not communicated properly? members couldn't be bothered to respond as changes to articles is hardly exciting?

 

[JimDavies]

Probably a stupid question but why did they only receive 20 responses? not communicated properly? members couldn't be bothered to respond as changes to articles is hardly exciting?

It's a bit sad when my one non-member response gets a 5% share of the pie chart! Having been to member events with less than ten people in attendance, I'd say there is a huge disconnect between Nominet and its members. As to why, I'd say it probably doesn't help having an organisation attacking the people who want to work with it.

 

[Whois-Search]

Probably a stupid question but why did they only receive 20 responses? not communicated properly? members couldn't be bothered to respond as changes to articles is hardly exciting?

I think it is a combination of things:

- The consultation form was extremely long at 25 pages even if there was a skip to end after question one.

- The consultation was online only during the summer holidays (6th June - 9th August). Which is similar to the government consultation around the same time.

- There was only one virtual event on this around 13th July which I attended - recording here.

- I’ve only seen three emails about it:

Date: 7 June 2023 at 17:01:56 BST
Subject: Consultation Opens on Nominet's Articles of Association

Date: 3 July 2023 at 13:45:05 BST
Subject: Reminder: Consultation open on proposed changes to Nominet’s Articles of Association

Date: 2 August 2023 at 09:07:06 BST
Subject: Reminder: One week left to provide your feedback on proposed changes to Nominet’s Articles of Association

- Nominet generally seems to be keeping a low profile and didn’t formally attend the London Domain Conference etc.

You will note they have moved the more ‘interesting’ topics until November:

UK Pricing Review - Eleanor Bradley (MD-Registry & Public Benefit) provided the Board with a summary of market and economic factors that are impacting the registry's cost base. The Board acknowledged the broader economic conditions had become increasingly challenging over the past 12 months and decided to discuss the matter further at the November Board meeting.

 

[ELIFE-MZ]

Well I do hope the NED candidate who promised price reduction/freeze says his piece during the board meeting. Total names have dropped by 230K compared to end of Aug 2022. A price rise won't go down well.

 

[Kieren]

Probably a stupid question but why did they only receive 20 responses? not communicated properly? members couldn't be bothered to respond as changes to articles is hardly exciting?

It's a good question.

There were three emails about it plus a video that included three Board members and the chair. There was announcement on the Nominet website (https://www.nominet.uk/have-your-say-on-our-proposed-articles-of-association/) and several posts on LinkedIn and Twitter. Then there were four events within the two-month consultation window with Board members and staff; one specifically on this consulation. Plus I called a random list of 30 members, spoke to 24 of them and I believe four of them responded as a result.

So there was a significant amount of effort and outreach put into the consultation. But, you're right, it still only resulted in 20 responses from members.

As to why, it's hard to know for sure, but it's likely a combination of a number of things:

FROM THE GENERAL MEMBER PERSPECTIVE

* It's a pretty dry topic - changes to the Articles of Association - and about the half the members I spoke to said that the truth was that they weren't all the bothered about it. So long as they can continue to get their .uk domains, they're happy

* Another group (with some crossover) said that they weren't lawyers and the topic seemed a little specialist. I pointed out that the consultation has been purposefully written in plain English in order to get past this barrier of legalese and so some said they would look, but I suspect their sense that this was something that don't want to involve themselves remains

* A huge percentage of members are simply too busy. While a majority of members said they had seen at least one email about the consultation, most said that they hadn't had time to really read it because they were too caught up running their business.

FROM THE NOMINET ENGAGEMENT PERSPECTIVE

* I don't know about you, but the majority of emails I get from Nominet concern upcoming maintenance. There are occasional - monthly? - emails that seek to engage more, but the truth is that there isn't much of an ongoing back-and-forth on Nominet issues. I think this is a shame and should change but that's where we are right now

* The main form of communication with members is via email. And the reality as anyone that runs a business will know is that if you get a 20 per cent open rate you're doing well. Get above a 2 per cent click rate and you're off to the races.


OTHER POTENTIAL FACTORS

* Whois-search suggested above that the consultation was too long and that put people off. Unfortunately that's not borne out by the numbers - there was no influx of members coming to the consultation front page and then dropping off. The reality was that not that members bothered to click the link(s).

* The fact that the consultation was run over the summer is definitely not ideal - but then that's why the consultation ran for two months. That's plenty of time to response. So I don't think that was much of a factor either.

* Phrasing: the consultation was not communicated as being something urgent or highly important that required members' attention - in large part because the organisation was concerned that that approach would be viewed negatively. And so there wasn't a sense of urgency to it.



Anyway, regardless of all that, and despite the arguments outlined above, I would urge Nominet members to consider voting in favour.

The changes will modernise the org's articles and build a better foundation for the future, while retaining the status quo. And of course there is a proposed new article that would commit Nominet to informing members of any plans that are a significant departure from established business activities.

If this commitment had been in place in the past, then the purchase of CyGlass would have shared and discussed with members in advance. So this addition - which would need to be approved by members - provides an additional safeguard and commitment designed to tackles issues from the past going into the future.

Cheers

Kieren

 

[JimDavies]

It's a good question.



Anyway, regardless of all that, and despite the arguments outlined above, I would urge Nominet members to consider voting in favour.

The changes will modernise the org's articles and build a better foundation for the future, while retaining the status quo. And of course there is a proposed new article that would commit Nominet to informing members of any plans that are a significant departure from established business activities.

If this commitment had been in place in the past, then the purchase of CyGlass would have shared and discussed with members in advance. So this addition - which would need to be approved by members - provides an additional safeguard and commitment designed to tackles issues from the past going into the future.

Cheers

Kieren

Doesn't the new Article 2 just promise to "inform...a significant change in scope"? Not share and discuss. Do you realise why it has been worded like that? Did you take independent legal advice on how ineffective it is?

Something like CyGlass was not a change of scope at that time. I would also have been considered too commercially sensitive to discuss before the purchase. You don't flag that sort of thing to the market. So it seems very, very unlikely that it would have been put to members before it happened. I'd say that is an obvious red herring.

As for engagement, when the company and even its NEDs treat members with overt hostility and have to have posts redacted by the community moderator, lack of engagement is not really very surprising.

For the reasons set out here, I would urge members to Vote Against the proposed changes. Not least until we know whether Nominet has received up to £90 million pounds in overpayments from members.

 

[Systreg]

What about the vote for AGM and Non-Executive Director Election 2023, who do people suggest voting for?

I have zero interest in this, so I'll go with whatever domainers suggest, as I have no intention of reading about any of the candidates.

(Edit)

As suggested above, I voted against the articles of association thing.

 

[webber]

What about the vote for AGM and Non-Executive Director Election 2023, who do people suggest voting for?

I got you covered

 

[Whois-Search]

On the new Article 2 or handcuff clause as @KevDI has coined it now…

I thought the wording provided in the original articles consultation was at least a realistic prospect:

2. The Board shall provide the Members at each annual general meeting with an overview of the company' activities and objectives for the previous and current financial years, together an explanation of any change in scope and how these relate to the Company's objects for the public benefit.

Even when Cyglass was bought back in February 2020 we were told about it in the CEOs statement for that financial year on page 6:

In February 2020, Nominet made two acquisitions that expanded the reach and depth of the Nominet group's cyber portfolio - CyGlass and XQ Cyber.

Cyglass was also purchased under the current memorandum the scope of which changed in 2006. The objects of the company are not changing here.

So how did the legal eagles or board go from that wording to doing it “in advance” with this wording:

Proposed article 2: "The Board will inform the Membership in advance of any proposed significant change in scope, together with an explanation as to how this relates to the Company's objects for the public benefit.

How can the board enter in to any kind of commercial discussion without notifying the membership first?

 

[Kieren]

On the new Article 2 or handcuff clause as @KevDI has coined it now…

I thought the wording provided in the original articles consultation was at least a realistic prospect:

Even when Cyglass was bought back in February 2020 we were told about it in the CEOs statement for that financial year on page 6:

Cyglass was also purchased under the current memorandum the scope of which changed in 2006. The objects of the company are not changing here.

So how did the legal eagles or board go from that wording to doing it “in advance” with this wording:

How can the board enter in to any kind of commercial discussion without notifying the membership first?

The wording in the original articles consultation was strengthened in response to member feedback.

Some members expressed concern over exactly what you outline: that the former CEO only informed members after the fact about the investment in CyGlass. The current Board's intent was to ensure that members would be informed *before* any such steps were taken, and so the wording was strengthened to include "in advance."

The Board feedback gives two examples to help explain the impact of this proposed change:

"Examples:
• Under this article, a plan for a significant investment in a business or line of business unrelated to the company s current activities would be considered a change of scope. For instance, had this commitment been in place in the past, the plans to purchase an enterprise cyber services business such as CyGlass - would have been shared and discussed with Members in advance.
• An example of an activity which the Board would consider within the existing scope would be operating new registries and we would update Members of activity such as this in the usual way at the AGM or through Board reports. "

You can read the full Board response here: https://www.nominet.uk/wp-content/uploads/2023/09/Articles-consultation-Board-response-final-1.pdf


Kieren

 

[Whois-Search]

The wording in the original articles consultation was strengthened in response to member feedback.

You mean this feedback on pages 13-16

I can only find a few comments submitted there that remotely fits the outcome. As those comments wanted an AGM resolution etc.

Either way I can’t see this Article 2 being used on core registry decisions like bidding for this here or this here in Australia. We will still be last to know after the contract is signed?

If Nominet started selling cars or pizzas I’m sure we would hear about it…. However cars or pizzas are not allowed under the entrenched memorandum objects anyway?

Unless it’s a database and comes under other registry services.

 

[Kieren]

You mean this feedback on pages 13-16

I can only find a few comments submitted there that remotely fits the outcome. As those comments wanted an AGM resolution etc.

Either way I can’t see this Article 2 being used on core registry decisions like bidding for this here or this here in Australia. We will still be last to know after the contract is signed?

If Nominet started selling cars or pizzas I’m sure we would hear about it…. However cars or pizzas are not allowed under the company objects anyway unless it comes under other registry services.

Yes, those are them.

I found it very easy to locate the comments I referenced - there were directly above and below the comment you mentioned.

They were: "Tying this to the AGM, which might be 11 months in the future could potentially be problematic."

And: "Whilst the reason above refers to "contemplating" things (ie in the future tense), the drafting seems largely to be in the past tense. In my view, this should be redrafted to reflect the need to advise of FUTRE changes of direction."

Re: bidding decisions you referenced. They are explicitly given as examples in the Board feedback, which I also pasted above.

Here it is again for reference: "An example of an activity which the Board would consider within the existing scope would be operating new registries and we would update Members of activity such as this in the usual way at the AGM or through Board reports."

As for what would be covered, I would again reference my earlier message in this thread taken from the Board response.

I'll place it here again for reference: "Under this article, a plan for a significant investment in a business or line of business unrelated to the company s current activities would be considered a change of scope. For instance, had this commitment been in place in the past, the plans to purchase an enterprise cyber services business such as CyGlass - would have been shared and discussed with Members in advance."


Kieren

 

[JimDavies]

Yes, those are them.



I'll place it here again for reference: "Under this article, a plan for a significant investment in a business or line of business unrelated to the company s current activities would be considered a change of scope. For instance, had this commitment been in place in the past, the plans to purchase an enterprise cyber services business such as CyGlass - would have been shared and discussed with Members in advance."


Kieren

Unfortunately that is not what the draft Article 2 says. It says :

Proposed article 2: “The Board will inform the Membership in advance of any proposed significant change in scope, together with an explanation as to how this relates to the Company’s objects for the public benefit.”​

So was CyGlass a "significant change is scope" at the time it was bought? It was part of an existing expansion plan. It was also a commercially sensitive deal. So it would be easy (and probably right) for a board to say an article like this did not apply. And what could anyone do if they disagreed? Bring a claim against Nominet?

One would have to be either a knave or a fool to believe this draft article means anything at all of substance.

 

[Whois-Search]

The ‘scope’ of Nominet was set way back in 2006. You will even find that out on this very forum and on archive here. That resulted in this EGM here.

After that EGM which was voted through on the second attempt at 90.97% …. the memorandum was expanded from just 7 objects to the current 15 objects you see in the memorandum today (ends 3.15).

Due to the Companies Act enactment on 1st October 2009 that memorandum or objects have now become entrenched in the articles of Nominet:

From 1 October 2009, the provisions of an existing company's memorandum, if they are not provisions which would form part of a new style memorandum, will automatically be treated as part of that company's articles (section 28). Existing companies will be able to alter these provisions by amending their articles.

So, for example, an existing company will, if it wishes, be able to remove its objects clause by amending its articles by special resolution.

Where an existing company has entrenched provisions in its memorandum, those provisions will become entrenched provisions in the articles. Where the entrenchment is expressed to be incapable of change, that will remain valid. In contrast, a company formed on or after 1 October 2009 will always be able to change any provision for entrenchment in its articles by agreement of all the members.

Nominet has one of those restrictive clauses in the memorandum (clause 4) which requires a 90% vote on changing clauses 3, 5, 6 or 9.

Some 17 years later and you can see from the red line that the objects (clauses 3.1 - 3.15) are not changing apart from the term “articles” to make it one document.

Note: if Nominet hadn’t changed those words it would have only needed a 75% vote to change the articles around it. Equally the board could have changed the objects while having a 90% vote.

So how does the new Article 2 actually prevent companies like Cyglass being acquired in 2020 using the scope set way back in 2006 ?

In my opinion it does not and it’s a red herring designed to distract from the status quo ie. We have new articles but nothings actually changed.