With the hit of the global pandemic due to Covid-19 in March 2020, many (if not all) businesses needed to re-think their structural organization. Most importantly, while different countries were entering complete lockdown, companies needed to face the reality – remote work was and still is the only answer for many companies’ existence. While it was difficult at first, especially for entities that had never even dealt with one remote worker, it seems that employers and employees have noted the benefits that remote working provides. One of the issues around remote work will be discussed in this article, of specifically: what are some compliance issue a company should consider if it continues operating as a virtual company without a physical office?
If we take as an example the United States, many companies have gone from partially remote to 50/50, or even fully remote. What did those companies need to do? For those becoming fully remote, the first question occurring is which would be the primary place of business. The primary place of business was defined most recently in the Thompson v. Intel Corp., 2012 judgment, and it is supposed to be the ‘nerve center’ of the company – i.e., the main place from which the company’s business is coordinated and controlled by the executive officers. It is also necessary for a company to have established headquarters no matter the type of business, size of company, or State presence. On that note, we should think about virtual companies. Such companies are governed entirely online for the most part, they do not have an office anywhere, and their employees could work from all over the world. How does this work? For smaller companies, the executive (usually owner) could choose their home address, however, this brings about privacy issues. Most companies go down the ‘virtual office’ road. A virtual office is in fact not virtual in the regular sense of the word – it is actually a physical address which companies could use for a business address (or even a registered address), and in some cases it could serve as established Headquarters of the company. In this circumstance, however, it could be difficult for companies to prove that their Headquarters (or principal place of business) is actually the virtual office’s address.
In any case, if a company goes fully remote and changes Headquarters as even the last physical location is abandoned, companies must make sure to file this information with their State of incorporation, or any State within the US or abroad where they are somehow registered as entities. While there are currently different leniency programs offered to companies temporarily working in a remote manner, once the pandemic slows down and things start reversing to normal, companies should be ready to comply with all regular legal requirements in any country they have engaged in business activities. It is unclear how the legal system might change until then and whether some of these leniencies will stay in place to support businesses in their new endeavors.