BENNINGTON -- Minor changes to Vermont law may pay high dividends as the state looks to gain ground in the Internet economy. The new legislation, signed into law by Gov. James Douglas on June 6, allows for the creation of "virtual corporations" by doing away with corporate requirements such as face-to-face board meetings and even the need for a physical headquarters.
"The idea is to give Vermont the opportunity to become the Delaware of the net by creating a favorable environment for these companies," said Professor David Johnson of the New York Law School. Johnson helped create the law. "What the legislation does is eliminate some barriers to the creation of companies," he said.
Delaware is home to many major corporations principally because of its favorable business laws.
"The basic idea is that there are a lot of people coming together over the net to create open-source content," Johnson said. "The theory is, if these people could jointly own what they create, there may be more of it."
David Mace, a spokesman for the Vermont Agency of Commerce and Community Development, said he was excited about the possibilities the new legislation presents. "It's a huge step forward," said Mace. "It makes us the first state to adopt this."
Mace said that the Internet changed the way group work is done, and the changes made in the legislation reflect those changes.
"A software developer doesn't necessarily require a building to make their product," Mace said. "They can create their product collaboratively over the Internet."
Apart from removing the barriers to the creation of these companies, though, Mace said little else had changed. "They would be treated the same as any corporation," Mace said. "They'd basically be just a Vermont-registered limited liability corporation."
Mace said the companies would not exist in any one area of the state. "Their headquarters, for all intents and purposes, would be in Vermont," Mace said. "They would not necessarily be based in a town."
According to Mace, the companies would still provide revenue to Vermont. "The company still has to pay fees to incorporate, and is subject to Vermont business taxes," Mace said.
Mace said that the legislation has already made a splash. "Obviously, the program's pretty new, but it's generated interest from trade publications," Mace said. "It's certainly an attractive drawing card for technology companies."
Johnson, too, said he had seen an increase in attention. "Since the story was first covered, I've been getting e-mails about it every day," Johnson said.
Mace said that the comparison with Delaware may be a bit premature.
"If we're remotely as successful as Delaware, it would be very good," Mace said. "Hopefully, being first in line on this will help us."
Johnson said that the types of companies the legislation could draw may not be what instantly springs to mind when the word "corporation" is mentioned. "If you think along the lines of Wikipedia-for-profit, you're on the right track," Johnson said.
Johnson said the work toward making Vermont more Internet friendly is far from over. He said the state needed to move its system for registering corporations online.
"The legislation was necessary, but not sufficient," Johnson said.
"There still need to be more online hosting services, as well as the ability to fill out these forms online."