Digital Company Managers in Delaware

Delaware is considering a legislative proposal to create a novel business entity to be called the Artificial Intelligence Company ("AIC").

Under the proposal, an AIC may have only one shareholder (an individual or another Delaware entity). It has no human management, board of directors, or traditional employees and its operations are managed entirely by a designated AI agent serving as the Manager.

The operating agreement of the AIC must summarize the AI agent's structure, abilities, and training. The AI agent must also document every action it takes in a signed record. If the AI agent fails, the shareholder must step in and pick a new one within 30 days.

The AIC possesses limited liability and a separate legal personality, meaning the shareholder is generally shielded from the company's debts. To keep this protection, the shareholder must keep the AIC adequately capitalized and solvent based on rules set by the Secretary of State.

The one shareholder still owes duties of loyalty and care to the AIC. The shareholder can be held liable for fraud, willful breach of law, or if they knew or should have known the AI acted outside the company's stated scope. Before doing business with anyone, the AIC must disclose its liability limits, its sandbox status, and that Delaware does not endorse the AI technology.

Why the proposal wins

1. The proposal is simple and market efficient. Today, single-person, AI-driven entities are becoming a real commercial phenomenon, with solo founders building ultra-lean businesses projecting nine- or ten-figure revenues. 

2. A legal entity powered solely by a digital agent and carrying no employee overhead can now generate immense economic value.

3. If a founder can run a high-output business this way while complying with all relevant statutory standards, there is little reason to establish a traditional entity burdened by human employees, complex management tiers, and heavy corporate overhead.

4. Product liability enures under the relevant consumer protection and product liability laws.

Balogun Harold provides strategic legal counsel to tech companies, venture capital funds, founders, and investors on shareholder rights, equity structuring, share transfers, and M&A transactions.