Nominet adds handcuffs clause to proposed new Articles

Nominet wants to add a new clause to its foundational Articles of Association that would prevent it adventuring into non-domain businesses without telling its members.

The proposal follows the scandal surrounding its CyGlass security business, which the company invested about $23.5 million in before eventually selling for a dollar.

“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,” the new Article 2 reads.

While there’s nothing requiring member approval of diversification, notice would at least give members time to organize resistance if it looked like history repeating itself.

Nominet chair told members the proposed article “creates an important constitutional safeguard to ensure Nominet remains aligned with its Members in future.”

Members will vote on the proposed new Articles at the company’s AGM next month, but Nominet has set a massive 90% majority threshold for the changes to be approved.

Green said that the current board plans to live by the spirit of the proposed Article 2 even if the vote fails, but noted that there can be no guarantee future boards would also do so.

Rejected former director threatens to sue Nominet

The person Nominet barred from standing in its non-executive director election this year says he was unfairly excluded and intends to sue.

Lawyer Jim Davies, who was a Nominet director over a decade ago and stood unsuccessfully last year, said on his blog that he has asked Nominet to suspend the election, slated for September.

“If they refuse, I will apply to court for an injunction,” he wrote.

Davies was one of five people nominated for the NED seat this year. Incumbent Phil Buckingham eventually pulled out of the race, and Nominet said Davies, who the company did not initially name, was denied candidacy for not completing a mandatory security screening, carried out by third-party consultant Reed, by the deadline.

“I have asked Nominet and Reed for disclosure of specific documents as a matter of urgency, in anticipation of making an application to court to obtain a declaration that I am a valid candidate in the 2023 NED election,” Davies wrote.

Nominet’s head of comms Will Guyatt has told members that there was a June 30 deadline to submit information for the screening, which he said Davies missed. He said Davies was reminded of the deadline June 28.

In a lengthy timeline, Davies says that he completed the screening application process June 28, and carried on talking to Reed about the screening as late as July 11, when he was told the screening had not found anything “adverse” to his candidacy.

Part of the problem seems to be that Reed wanted him to submit client invoices as part of the screening, and some of Davies’ clients don’t trust Nominet enough to reveal their relationship with him.

Guyatt told Nominet members that the board had agreed unanimously to exclude Davies’ bid on July 19 to be fair to all candidates.

It’s the second time in the last year that Davies has tried to get a Nominet election called off.

Last year, when he was a candidate, he started his WeightedVoting.uk campaign, which seeks to demonstrate that Nominet’s current voting system illegally breaks the company’s own rules. That election went ahead and was won by Kieren McMcarthy.

Davies was briefly a director of Nominet until 2009 when he quit during a lawsuit filed against him over his domain industry client base.

Nominet admits membership fees mistake

Nominet has told DI it made an honest mistake when it made claims about its historical membership fees, after a pressure campaign accused the .uk registry of “misleading” its members.

The company is currently holding a public consultation on sweeping revisions to its Articles of Association, but the WeightedVoting.uk campaign, led by lawyer Jim Davies, reckons that Nominet has been violating its current Articles for years.

WeightedVoting supporters believe Nominet has been unlawfully receiving millions of pounds of membership fees for the last 25 years. This week, Davies accused the company’s leadership of either being ignorant of Nominet’s own history or “deliberately misleading” members by claiming it “has always had a flat membership fee for all Members”.

Today, about 2,500 members pay a £500 joining fee and annual renewals of £100. Their voting rights are calculated based on how many domains under management they have, using a formula so complex even Nominet sometimes gets it wrong.

The system, while it caps the amount of influence any one member may have, means that the larger registrars such as GoDaddy and Tucows have more votes when it comes to things like electing directors.

Last year, Davies, with the backing of a KC and other members, claimed that this system was not envisaged under Nominet’s Articles of Association, which date back to 1996, and that collecting a flat membership fee was therefore illegal, which Nominet has denied.

WeightedVoting claims Nominet is instead supposed to have a tiered membership system where members get more votes by paying higher membership fees. An archived page from Nominet’s web site seems to support this, but Nominet chair Andy Green allegedly told members recently that this system was never actually implememnted.

“Tiered subscriptions were clearly intended by those who established Nominet and that is reflected in the Articles,” Davies wrote yesterday. “Those Articles have not been followed since 1997. Nominet is breaking the law by doing so. It also has no power to charge subscriptions at present”

Now Davies says members have found an old Usenet* post from 1996 in which a member of the fledgling registry explains how his company, pioneering dial-up ISP Demon Internet, had just paid the maximum £5,000 for 10 votes.

Presented with this new evidence, a Nominet spokesperson told DI:

Members pointed out that we made a mistake in a document supporting the consultation to update our articles of association, as we bring them in line with current practice.

We initially believed that tiered membership fees had never been implemented by Nominet. It has been our long-standing practice to charge a flat fee for all members regardless of their size. Having been made aware that some members paid more in the very early days – from incorporation in 1996 to 1997 – we are correcting the document. Our data retention policies mean that we do not have records of invoices from so long ago. This was an error, and not an attempt to mislead anybody.

We recognise our articles of association are complex and in need of updating, hence the very process to get members involved in this consultation.

Iain Mitchell KC, who wrote a legal opinion for WeightedVoting, reckons Nominet could be on the hook for £1.5 million if it is forced to refund fees, with statutes of limitations limiting liability to the last six years.

(*For the kids… Usenet is a decentralized system of text discussion groups that was popular in the 1980s and 1990s. Think Reddit, but made of glowing green text on monochrome Unix terminals like in The Matrix or something. It still exists, but the learning curve required to use it probably isn’t worth the effort.)

One in six .au domains is a 2LD

The .au ccTLD had over 700,000 direct second-level registrations at the end of 2022, according to registry auDA.

In its annual report (pdf) published this week, auDA said it had over 716,000 2LD regs. The second level space was opened up in March last year with a six-month grandfathering period.

It had 4,160,209 domains overall at the end of December, so roughly one in six .au regs was a 2LD.

In the comparable .uk liberalization, which had a five-year grandfathering period, at its peak in 2019 roughly one in four names was a 2LD. Today, it’s more like one in 10.

Whether .au will follow the same trend remains to be seen.

Nominet blew six figures vanity-publishing ex-CEO’s book

Nominet spent £135,000 to publish an upcoming book by a CEO who has since been kicked out, to promote a business it has since divested, it has emerged.

Thoughts from the Big Chair: A Leader’s Guide to Digital Transformation, by Russell Haworth, is due to be published in April, after Nominet paid the hefty sum to publisher Forbes.

Haworth quit the company almost two years ago, just hours before he could be forced out in a member mutiny, but the publishing deal evidently pre-dates that chaotic period for the .uk registry by about a year.

Nominet chair Andy Green, who was installed months later as part of a broad institutional reform package, told members in late December that he was surprised to discover Haworth was going ahead with publication.

It was designed to help promote the company’s “Cyber business” in the US, but since that loss-making business has since been abandoned, the assets sold off for a dollar, the book currently has “no value to Nominet”, Green told members.

Judging by the Amazon blurb, it appears the focus of the book is now “digital leadership”, and one assumes it’s more about building the former CEO’s personal brand at Nominet’s expense.

On his LinkedIn page, Haworth said last month he decided to write the book during the Covid-19 pandemic and that it’s “written for senior execs and board members of meduim sized businesses who are looking to navigate their transformation journey, and what they should consider”.

Haworth is currently the UK CEO of Sweden-based Byggfakta Group, which makes software for the construction industry.

There’s no chance of getting the money back because there’s been no breach of contract, Green told members. Haworth owns all rights and liabilities to the book, so Nominet is not on the hook to buy “significant quantities” of it, he said.

Green added that he would be reluctant to approve such a deal had he been at the helm and was not aware of it until recently.

McCarthy wins Nominet director election

Kieren McCarthy, the former reporter who has spent much of his career bashing .uk registry Nominet in the pages of The Register, has been elected to its board of directors following a sometimes fractious campaign.

He won despite placing second to lawyer Jim Davies in the first round of voting, which saw CentralNic lawyer Volker Greimann eliminated. The vast majority of Greimann’s votes transferred to McCarthy in the second round. The results can be found here (pdf).

Turnout was a miserable 15.1%, almost 10 percentage points lower than it was in last year’s non-executive director election.

McCarthy is executive director of the International Foundation For Online Responsibility, the non-profit set up by .xxx registry ICM to hack around ICANN’s rules and give the illusion of legitimacy in the 2003 “sponsored” gTLD application round.

As such, he’s paid indirectly by GoDaddy, ICM’s current owner, which can’t have hurt his prospects in the election but GoDaddy says it did not vote in the election. Under Nominet’s controversial voting system, larger registrars get more votes, capped at 3% of the total.

With McCarthy standing on a platform of increased transparency, some Nominet members had pointed out the irony that IFFOR hadn’t published any board minutes in several years. He also faced criticism for using Nominet’s logo, apparently without permission, in his election mailshots.

McCarthy replaces Anne Taylor, whose three-year term is up.

Nominet “gaslighting” members over fees, candidate claims

Nominet has been accused of “gaslighting” its members over the issue of whether its membership fees are lawful by one of its non-executive director candidates.

Jim Davies is one of four signatories of the latest missive from the WeightedVoting.uk campaign, which is trying to get Nominet to address both its voting system and the fees it charges members.

Following the news last week that lawyer Ian Mitchell KC, hired by the campaign, had concluded that Nominet’s Articles haven’t technically allowed it to charge membership fees for the last 25 years, the registry issued a statement saying its own legal advice disagreed.

“That advice identifies significant flaws in the [Mitchell] advice that has been published. We remain confident in the legality of Nominet’s long-standing voting and membership arrangements,” Nominet told us last week, while declining to provide that advice.

It seems the same statement was provided to Nominet members, though only WeightedVoting was provided the new opinion.

Now WeightedVoting has published Nominet’s opinion, written by Andrew Thornton KC, which concludes that the weighted voting system Nominet uses — in which bigger registrars get more votes — is “entirely lawful and enforceable”.

What Thornton’s opinion does not address is the membership fees problem, despite Nominet’s suggestion that it covers both issues.

Now Davies and his supporters have written to Nominet’s current non-executive directors, asking again for the company’s annual general meeting, still apparently due to go ahead on Thursday, to be delayed.

They call Nominet’s statement “manifestly false” and call for the NEDs to exercise their legal duties or face “personal liability”.

Davies is one of three candidates to fill a vacating NED seat at the AGM this week when the results of a recently concluded election are announced.

His rivals are former reporter Kieren McCarthy and CentralNic lawyer Volker Greimann.

Nominet may owe its members millions, top lawyer says

Nominet has been charging its thousands of members annual subscription fees unlawfully for the last quarter-century, it has been claimed.

Ian Mitchell KC, who you may recall was hired by a handful of members to opine that Nominet’s voting system may be illegal, has now delivered a follow-up opinion saying that any subscription fees it has collected since 1997 should not have been paid.

Nominet non-executive director election candidate Jim Davies, one of the members who obtained the opinions, is now calling for Nominet to postpone its Annual General Meeting and the election, scheduled to take place next week, while these legal issues are addressed.

Mitchell’s opinion states that Nominet’s Articles allowed it to set a membership fee for members prior to August 29, 1997, barely a year after the company was founded, but that subsequent fees had to be set with a bylaws change approved by 75% of the membership.

That never happened, he says, meaning:

there has been no basis within the terms of the articles for subscriptions to be set and collected from and after 31st August, 1997. It follows, therefore, that the subscriptions which were collected ought not to have been paid.

Nominet has about 2,500 members, each of whom pay a £400 application fee and a £100 per year subscription. Clearly, over 25 years, that could amount to many millions of pounds.

But Mitchell also suspects Nominet could be protected by the UK’s statute of limitations, reducing its exposure to just the last six years and around £1.5 million.

Mitchell’s opinion was paid for by member Dulwich Storage, owned by former director Angus Hanton, as part of the Davies-led WeightedVoting.uk campaign, which is calling for Nominet to scrap its system that gives its members more votes depending on how many .uk domains they have registered.

Davies says he informed Nominet’s board about Mitchell’s latest opinion last week but has not received a response. So he’s now also written to Civica, the election services company that oversees Nominet ballots, to “to step in and adjourn the AGM”.

Postponing the AGM would also postpone the NED election in which Davies, former reporter Kieren McCarthy and CentralNic lawyer Volker Greimann are vying for an opening seat on the board. Voting closes in a couple of days.

While Mitchell called the subscriptions situation a “recipe for litigation”, Davies says he has no intention of suing Nominet. He says he wants, in Mitchell’s words, for “members [to] come together to see if it is possible to find a consensual way out of the mess which has undoubtedly been created”.

It’s not entirely clear what a solution would look like.

Scrapping the voting system in favor of one-member-one-vote would likely disadvantage candidates relying on winning with the backing of a small number of large registrars, which Davies believes is Greimann’s strategy.

Davies’ headline policy has been to slash .uk registration fees back to £2.50, while McCarthy and Greimann have platforms focused on transparency and member engagement.

Nominet has said that it believes its weighted voting system is lawful. The company has been contacted for comment on the latest legal drama.

Nominet gets new CFO

Nominet has recruited Vodafone’s head of finance to be its new CFO.

The company announced today that Carolyn Bedford will join on December 1, and will also take an executive director seat on the board.

She replaces Ben Hill, who was one of several directors removed from the board in a member coup in March 2021.

Last-minute bombshell in Nominet election — it may be ILLEGAL

Nominet’s current non-executive director election may be illegal, according to a legal opinion commissioned by one of the candidates.

Candidate Jim Davies, along with fellow former director Angus Hanton, say barrister Iain Mitchell KC has said that elements of Nominet’s voting practices are “clearly unlawful”, and they’ve asked Nominet to scrap them.

If Nominet accepts the opinion, it could mean the election — which is going on right now — could become a one-member-one-vote affair rather than the current system where you get more votes based on how many .uk domains you manage.

Davies and the other signatories to a letter sent to Nominet believe the company’s extremely complex “weighted voting” system is illegal under the UK’s Companies Act. They write:

This is a very serious issue for Nominet, particularly as there is an AGM and Board Election happening soon. Based on counsel’s opinion, we believe the only lawful way to conduct that meeting (and future meetings) would be one member, one vote.

Should Nominet agree and change the system, it would mean that big registrars such as GoDaddy and Tucows would get the same number of votes — one — as individual Nominet members.

This would most likely advantage IP lawyer Davies and fellow candidate Kieren McCarthy, who is a reporter rather than a registrar, at the expense of third candidate Volker Greimann, who works for Key-Systems, the large registrar owned by CentralNic.

Davies, in echoes of the PublicBenefit.uk campaign that led to a boardroom bloodbath last year, has set up a web site at WeightedVoting.uk to encourage fellow members to read the opinion and sign the letter.

While confidence in the company has arguably improved under its new leadership, member hackles were raised recently with the admission that Nominet had spunked millions of dollars on a failed attempt to enter the security market.

Voting in the NED elections began on Monday and runs until the end of the month. The results will be announced October 5, the day before Nominet’s AGM.

UPDATE: A Nominet spokesperson reached out with the following statement:

We acknowledge the receipt of a legal opinion commissioned by one of our members. We believe that our long-standing election process and voting rights are lawful and are being applied in accordance with our founding documents. We believe they have served and continue to serve both Nominet and its members well. Therefore, the election and voting will continue as planned. We will consult with our legal advisers prior to responding to our member.