This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
Download: Board Consent for a Token Generation Event — Template (.docx) — a companion resource for this post. Adapt with counsel before use.
Here is the 2026 crypto governance story that plays out the same way more often than boards want to admit. TGE is six weeks out. The tokenomics deck has been through eleven versions. The market maker has drafted a memorandum of understanding that references a token amount and a lockup that nobody on the board has actually approved by resolution. The foundation has been “in formation” for four months. The general counsel is preparing a memo on the securities-law posture, but the memo has not yet been circulated to the directors. And on the calendar, someone has penciled in a thirty-minute board meeting the week before TGE — “TGE approvals” — with no accompanying package. That thirty-minute meeting is where fiduciary duty breaks down, if the board is not prepared.
A token generation event is not an operational milestone that management can execute on its own authority. It is a fundamental corporate act — the issuance of a new class of economic instrument with securities-law implications, potential material effects on the equity capital structure, and downstream obligations that will bind the company for years. It belongs squarely at the board level. Here is what a board should actually approve before the TGE, in what form, and why.
Why the TGE is a board-level decision
Three separate legal frameworks converge to make the TGE a board matter. First, corporate authority. Section 141(a) of the Delaware General Corporation Law vests the management of the corporation’s business and affairs in the board. The issuance of a novel economic instrument, the entry into multi-year market-making and custody arrangements, and the funding of a non-U.S. foundation are all decisions the board cannot delegate to the CEO by operation of law.
Second, fiduciary duty. Directors owe the corporation the duties of care and loyalty under settled Delaware precedent. A TGE without an informed board record — without a documented review of the securities-law posture, without minutes that reflect deliberation, without independent-director involvement where insiders hold pre-TGE instruments — is the sort of record that generates Marchand v. Barnhill, 212 A.3d 805 (Del. 2019), and In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959 (Del. Ch. 1996), exposure if things go sideways after launch.
Third, securities-law posture. In SEC v. LBRY, Inc., No. 21-cv-260 (D.N.H. 2022), the court held that the token itself was a security under SEC v. W.J. Howey Co., 328 U.S. 293 (1946). In SEC v. Ripple Labs, Inc., No. 20-cv-10832 (S.D.N.Y. 2023), and SEC v. Terraform Labs Pte. Ltd., No. 23-cv-1346 (S.D.N.Y. 2023), the courts drew lines that continue to be litigated. Even with the SEC’s softened 2025–2026 posture, a board that approves a TGE without acknowledging receipt of a regulatory memo has left itself without the reliance defense that a well-papered record provides.
The seven-item board consent checklist
A well-drafted TGE consent walks the board through seven substantive approvals. The companion template linked above is a fillable version of the same seven-item structure. In prose form, here is what each item does.
First — token supply approval. The board fixes the maximum initial supply of the token by resolution. This is analogous to the board’s authority to issue authorized capital stock — the number matters, and later increases to supply should require a new board resolution. Language like “such number as the officers deem appropriate” is not authority; it is a delegation, and it will be redlined by the first serious diligence team that reads it.
Second — allocation approval. The board approves, by exhibit, the initial allocation among the six standard buckets — community and airdrop, ecosystem and grants, treasury (company or foundation), team (including founders and employees), holders of pre-TGE instruments (SAFTs, T-SAFEs, standalone token warrants), and initial liquidity. See our companion post on SAFT vs T-SAFE vs token warrant for the pre-TGE instrument taxonomy. Allocation percentages should tie to the tokenomics deck that was shared with pre-TGE investors and, where applicable, with the community — misalignment between the whitepaper and the actual allocation is one of the fastest ways to draw both securities and consumer-protection scrutiny.
Third — settlement mechanics for pre-TGE instruments. Every SAFT, every T-SAFE, every token warrant has a token-conversion or delivery mechanic. Some are pro rata to fully-diluted equity; some are fixed token counts; some depend on a valuation methodology at TGE. The board consent should reference a specific exhibit that captures the settlement mechanic for each instrument category, and should authorize the officers to deliver tokens accordingly. A board that approves the TGE without approving the settlement mechanic is approving half the transaction.
Fourth — foundation or DAO structure. If the company has formed or intends to form a non-U.S. foundation (Cayman, Swiss, Panama, and Zug are common) or is stewarding a DAO that will govern the protocol post-TGE, the board should approve the structure by exhibit, along with the contribution, license, services, and grant agreements between the company and the foundation. The board should also acknowledge the transfer-pricing and IP-transfer implications, which typically require a separate tax memo.
Fifth — key contract approvals. The market-making agreement, exchange listing agreements, and qualified-custody agreements are the three contracts that materially bind the company post-TGE. Market-making agreements in particular can commit the company to loans of tokens at specific volumes, options on the loaned tokens, and revenue-sharing arrangements that can materially affect the treasury for years. Board approval, with counsel review of the specific forms, is not optional.
Sixth — regulatory posture memo acknowledgment. The board should formally acknowledge receipt and review of the regulatory memo prepared by outside counsel, and confirm that the TGE will be structured consistently with the memo’s recommendations, including any geo-fencing, KYC, and transfer-restriction measures. This creates the reliance-on-counsel record that supports a business-judgment-rule defense if the SEC or state regulators later challenge the launch.
Seventh — officer and director indemnification. The board should confirm that the company’s existing indemnification, both under the certificate and bylaws and under any individual indemnification agreements, applies with full force to TGE-related actions. If the company has not yet procured directors’ and officers’ insurance covering crypto activities, the board should authorize its procurement or renewal on terms that specifically cover token-related risks — many standard D&O policies exclude digital assets by default.
Special committee formation
Where directors or their affiliates hold pre-TGE instruments (SAFTs, T-SAFEs, standalone warrants) — which is the norm rather than the exception at seed and Series A — approving the settlement mechanics is a related-party transaction. Similarly, a market-making agreement with a firm affiliated with an investor is a related-party transaction. Under Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014), the well-known “MFW” framework, business-judgment review of a controller conflict transaction requires both special committee approval and majority-of-the-minority stockholder approval, subject to specific procedural conditions. Most crypto TGEs will not implicate MFW because there is no controller demanding the transaction, but the underlying logic — that a committee of independent directors, with independent counsel and financial advisors, review the related-party pieces — is the right posture.
The special committee should be formed and charged before, not after, the settlement mechanics are approved. A special committee formed on the day of the TGE consent, with no time to negotiate, is not doing the work that Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d 1110 (Del. 1994), and its progeny expect.
Documenting the record
Minutes matter. The board’s TGE consent is likely to be requested by the SEC or state regulators in any post-TGE examination, by acquirers in an M&A diligence, by later-stage investors in a Series B or Series C, and by plaintiffs’ counsel if the token underperforms and stockholders bring suit. The consent, the exhibits, the regulatory memo, the tax memo, the market-maker term sheet, and any special committee minutes and materials should all be assembled in a single board book and retained on the corporate record.
Two documentation traps. First, an under-documented consent — resolutions without exhibits, or exhibits marked “to be attached” that never get attached — is worse than no consent at all, because it suggests the board approved something without knowing what it was approving. Second, a consent that ratifies action already taken — “the officers’ entry into the market-making agreement on [DATE] is hereby ratified” — is legally effective but creates a record that the transaction happened before board approval, which is a fiduciary-duty vulnerability. Approve first, execute second.
Interaction with existing stockholders agreements
The TGE can trigger provisions in the company’s existing stockholder documents that founders and boards routinely miss. Protective provisions in the certificate or the stockholders agreement often require preferred consent for the issuance of any new equity or equity-linked security — depending on how the token is structured, this can be triggered. Rights of first refusal on issuances of “securities” can be triggered if the token is a security. Preemptive rights can require an offer to existing stockholders before token distribution to pre-TGE holders. Drag-along and voting agreements may or may not reach a foundation contribution depending on drafting.
The board consent should direct the secretary to confirm whether any protective, ROFR, preemptive, drag, or voting provision is implicated, and to obtain the necessary waivers or consents. Better to identify the issue and paper the waiver before TGE than to discover the missed waiver during Series B diligence.
Post-TGE reporting cadence
The board’s work does not end at TGE. A well-drafted consent obligates the officers to report to the board no less frequently than quarterly on token distribution and vesting, treasury holdings and disbursements, material market-making activity, regulatory correspondence and litigation, and any proposed material change to supply, allocation, or protocol governance. This is the crypto-industry analog to the audit-committee cadence expected of a public company.
The reporting cadence should be memorialized in the consent itself, not left to informal practice. When the audit committee or the full board decides to review the treasury policy or the market-maker relationship two years post-TGE, the consent-level obligation is what forces the calendar item.
Drafting posture
The companion template linked above is a full-form unanimous written consent under DGCL § 141(f), with recitals that walk through the fiduciary and regulatory posture, eleven substantive resolutions that cover the seven checklist items plus stockholder consents and general authorization, a signature block, and a list of the five exhibits (token allocation, settlement mechanics, foundation structure, market-making form, and regulatory compliance summary) that a properly-papered TGE consent should attach. External statutory reference for DGCL § 141 is available at the Delaware Code online.
Download: Board Consent for a Token Generation Event — Template (.docx) — a companion resource for this post. Adapt with counsel before use.
If you are a director, general counsel, or outside counsel preparing a board for a token generation event, feel free to reach out to our firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
