The law eliminates the requirement for the directors of Vermont companies to meet face to face, allowing them to instead conduct business through virtual conferencing.
VCs will also be able to file the financial and investor statements which are required by law entirely electronically.
Under US state law, a corporation's Board is legally required to regularly meet in person. Corporations must also file a paper copy of financial records and important company announcements.
Changes to the law were a result of lobbying by the Institute for Information Law and Policy from the New York Law School, as part of the Institute's Virtual Company Project.
The project is an attempt to draft the framework for a company which uses the collaborative power of the internet to provide for-profit services, and to ensure such a company has the ability to own property, open a bank account and collaborate with third-party businesses.
According to the project's mission statement, the best way to visualise the goal is to “think a specialized wikipedia for profit, or a consulting service staffed by a transient group but able to contract with customers and collect fees”.
The project's proponents say that within such an entity, financial rewards and voting power would be granted according to an individual's level of contribution made to the business, not the number of shares owned.
That said, they also argue that major decisions would likely be made in a group in the same spirit of collaboration that would exemplify the company's activities.
The institute hopes to eventually craft a software package which will allow people to found and manage VCs, and allow others to find and join them.
Tom Worthington, Adjunct Senior Lecturer in the Department of Computer Science at the Australian National University, says Australia is ahead of the US in this regard.
“In Australia there are few legal impediments to having a virtual company,” he says.
“Some years ago, when I was president of the Australian Computer Society [ACS] we looked at the issue of what we could do online. I chaired a meeting of out national council by video conference and there didn't seem to be any doubt this was a legal meeting.”
Worthington says there were uncertainties over how interactive a meeting has to be, with contention over whether an e-mail list would qualify. “To give certainty, we used the existing provisions for postal ballots to conduct ballots by email,” he says.
The Australian Government has been supportive of the prospect of companies operating electronically, with changes to both federal and state law occurring in the past 10 years to accommodate it, Worthington says.
“Australia has lead the way in some areas, such as providing an international standard for record keeping, which allows for elelctronic records.”
Virtual Companies a reality for Vermont
By Staff Writers on Jul 1, 2008 6:00AM