The Short Description:

The goal of the Virtual Company Project is to build online tools to help groups create and implement governance rules necessary for successful collaboration. The project is premised on the belief that the right graphical interfaces can translate the structures of the group into clear and intelligible procedures that will enable teams to make decisions, control assets and enter into contractual relationships with third parties. The Virtual Company project is creating the interfaces and designing the back-end functionality that is needed to enable group participants to see themselves in relation to the group as a whole, allocate roles, establish accountability to the group, make collective decisions, and administer group assets, expenditures and distributions.

The Big Picture:

The Virtual Company Project aims to create the legal, technical and business infrastructure necessary to enable formation and operation of companies, entirely online, and to facilitate the creation of companies (and valuable work product or services) by groups of individuals who want to share time and attention (in a collective effort) rather than investing capital.

The net has enabled the creation of markets (eBay) and altruistic community production (wikipedia and open source projects). But it hasn’t yet made it easy for a group of individuals, located around the globe, to create a persistent legal entity that has the ability to own property, open a bank account and enter into contracts with third parties (think a specialized wikipedia for profit, or a consulting service staffed by a transient group but able to contract with customers and collect fees).

State limited liability company acts can be modestly amended to provide the flexibility necessary for transient online groups (groups of individuals who come and go and provide only the level of effort they prefer) to enjoy limited liability, group-based decision-making and, collectively, legal personhood. Right now, groups that come together online to do business are at risk of being characterized as partnerships or must spend lots of money and effort to satisfy requirements of the traditional corporate form. In addition, most corporation laws require top down management by directors and are organized around ownership by those who invest capital. Those forms don’t fit the needs of online collaborators who already own the necessary capital (their computers) and want to make many decisions as a group.

Our first effort has been to work with the State of Vermont. Just recently, Professor Johnson supplied testimony to the Vermont House Commerce Committee on H.458, a bill designed to make it easier to form and operate a company online as an LLC, under Vermont law — by allowing entirely electronic filing, eliminating requirements for face to face meetings and allowing some of the rules applicable to the group to be embodied in software. The bill was introduced by Alison Clarkson and has had three hearings in the House Commerce Committee.

The changes required to adapt Vermont LLC law to allow online formation and operation of companies are quite limited. This is because Vermont law allows most default provisions of the law to be altered in an operating agreement.

Once a favorable legal underpinning is available, most of the necessary further activity will involve (1) finishing a definitive draft of one or more operating agreements designed to work for online groups, and (2) creating the software infrastructure that will allow founders to start companies, enable members to find and join them, and help the group administer its company affairs and see the state of the company (who is playing what roles, status of relationships with third paries, company assets and books, decision-making process, etc). We have have already developed preliminary designs for the agreements and infrastructure on the assumption that there will be a need for companies that involve the pooling of time and attention rather than capital. We think it is important to allow the group to “see itself” via a graphic interface and to allow individual actions by members of the group to change that picture.

Further progress will also require establishing a relationship with a financial institution that can open the accounts and provide various services (for fees) to such companies. There is the potential for the infrastructure operation (the eBay for groups, as it were) to provide a wide
range of different services and earn substantial fees (at least from groups that are successful in producing revenues). Much of the administration of group affairs can be automated and the system can be structured so as to promote trust among collaborators, online companies and their customers. Virtual companies could also be organized to serve non-profit objectives and benefit from the ability of the collaborating group to own assets and enter into agreements.

The Virtual Company Project will attempt to design and build a demonstration system that provides infrastructure for the formation and operation of organizations online, including:

Stage 1:

  • A menu-driven interface for selecting structures and rules for collaboration, enabling organization founders to create customized by-laws for the group.
  • Interfaces for the group to express its aims, work and deliverables in order to help participants find the right group and come to a common understanding of goals.
  • Information visualization interfaces to show the “state of the group” including who holds which roles in order to facilitate accountability and manage workflow.
  • Information visualization interfaces to show assets controlled by the group.
  • Time-based interfaces to track decisions made by the group over time, including graphical interfaces to show the state of the group mind.
  • Asynchronous, synchronous communications and collaborative drafting and editing functionality

Stage 2:

  • Back end systems that administer funds, pay taxes, apply appropriate permissions to group decision-making, and distribute net proceeds in accordance with founding agreements.
  • Systems and screens that facilitate the formation contractual relationships between the group and third parties.
  • External discovery system to help individuals find and join the right groups
  • Expansion of organizational types.

By helping entity founders to create more robust online organizations, and by helping participants to find and play roles that maximize their productivity and effectiveness, the Virtual Company Project hopes to enable new types of economic and social productivity.

Questions? Contact Prof. David Johnson for more emailing