Last month I was invited to Washington DC to present One Click Orgs at the Summit on Next-Generation Governance Models organised by Harvard University’s Berkman Center for Internet and Society. This one-day summit brought together fifty senior academics, figures from the Obama administration and technologists.

There was a huge amount of interest in the project. It was a particular pleasure to meet Oliver Goodenough (Co-Director of the Berkman Center’s Law Lab) and David Johnson (Senior Resident Fellow at the Center for Democracy and Technology). They were jointly responsible for the reforms passed in the Vermont state legislature in 2008 opening the way for virtual corporations. Both Oliver and David have graciously agreed to join One Click Orgs’ Advisory Board.

One of the most interesting topics discussed at the Berkman summit was the way that virtual corporations could undermine key planks of the corporate regulation regime. Currently the vast majority of corporations are registered in the jurisdiction in which they’re located. The notable exception is the United States where the state of Delaware has a long-standing reputation for business-friendly company law which has led a lot of ventures to incorporate there.

The emergence of virtual corporations threatens to cut the tie between the location of a business and the jurisdiction where it registers. Just as shipping businesses register their fleets under “flags of convenience” such as the Bahamas where regulations are looser and multi-national firms organise their tax affairs around the laxest regimes, businesses will increasingly be free to incorporate in whichever jurisdiction in the world has the most favourable company law. This raises a host of questions about how governments will be able to fulfill their responsibilities to protect consumers and shareholders from abuses and fraud.

The invention of artificial personality and limited liability by the UK Parliament in the nineteenth century reflected a quid pro quo where joint-stock corporations gained significant privileges and protections in return for which they submitted to state regulation and agreed to place key information in the public domain. That bargain is now in danger of unraveling.

Virtual corporations pose many other questions for society. The internet has given rise to millions of online communities which will soon have an easy route to acquire legal personality. Are we ready for a world where “guilds” in the online game World of Warcraft can become corporations, own assets, have their own governance systems and enter into contracts with the rest of the world?

Important advantages are offered by virtual corporations. They will permit entrepreneurs to set up a venture in a matter of hours in response to a new opportunity and greatly reduce the bureaucratic friction involved in running a company. But we need to be sure that the regulatory regime keeps up with the challenges presented by this new world.