Thursday, November 20, 2008

Is Vermont the new Delaware?


It's all explained in the article Vermont wants to be the "Delaware of the Net".

If you've dealt with the incorporation of a company (or you've already heard about this in the past few months), you probably know what this is about. Delaware has structured its laws in such a way as to be particularly friendly for companies seeking to incorporate. I've worked for at least one Delaware corporation (it was based in Silicon Valley). Sort of the Liberian ship registry of the US corporate world.

Vermont is trying to do the same for "virtual corporations" -- those without physical offices, paper filings and other physical artifacts one might expect of a company. In doing so it's trying to duplicate its success in captive insurance [*]. It's an interesting idea, but I'm curious just how much of a competitive advantage Vermont would really have. There are more factors to consider than whether papers have to be filed on paper. For example, credit card companies love Delaware for its lax usury laws. One could conceivably start a virtual credit card company, but would one want to charter it in Vermont or in Delaware?

On the other hand, it's hard to see what Vermont stands to lose. So why not give it a shot?

[*]I had to look that one up. Wikipedia informs us that a captive insurance company is a subsidiary that exists primarily to insure its parent company. Seems somewhat circular, but the captive always has the option of purchasing re-insurance from independent insurers.

1 comment:

David Hull said...

Note to self: what ever came of this? Guessing not too much.p0