1. The associates of the virtual company establish a so-called "platform company" which takes the form of a joint stock company or a company with limited liability. The platform company exclusively, and not the associates, appears on the market and enters into construction contracts. However, the contracts are performed by the associates themselves. The internal relationship between the associates as well as their contributions to the virtual company are set out in a separate partnership agreement.
A model partnership agreement as well as a model of articles of association have been published.
Both the platform company and the partnership agreement between the associates constitute the virtual company. The virtual company itself has three institutions: the general assembly of associates (composed of representatives of each associate company), the committee (business management) and the auditors.
2. Since it is often impossible for all the associates of the virtual company to participate in a specific project or since they might not all be interested in it, the business management decides after discussion with all the associates who is allowed to take part in a specific project (the so-called "project associates").
The project associates prepare their offer which includes their own profit margin and submit it through the platform company to the potential principal. Once again, only the virtual company enters into the work contract (main contract) with the project master. The platform company and the project associates enter then into sub-contractors agreements which all together contain exactly the same rights and obligations as the ones included in the main contract. The compensation paid by the principal to the platform company is shared between the project associates so that the platform company itself does not make any profit.
3. The associates bear the common expenses of the virtual company proportionally to their investments. The project associates in addition bear the costs pertaining to the specific project in which they are participating.
4. Although the virtual company might appear attractive for the associates, in particular because of the provided flexibility and permanency, it must be underlined that this new cooperation has not yet been tested in the market. Furthermore, some legal issues remain unclear.
For instance, the basic idea of the virtual company is that the associates are fully liable in their internal relation to each other but are not liable externally, in particular towards the principal, since they do not have any contractual relationship with him. However, according to some legal literature, there is a (slight) risk that the entire virtual company might be deemed a partnership according to art. 530 seq. of the Code of Obligations which provides for a joint and several liability of the associates (art. 544 § 3 CO).
Furthermore, the rights of the associates toward the principal in case the latter goes bankrupt, in particular regarding their possibility to attach a lien on the property and the consequences in their internal relations, remain unclear.
In summary, the virtual company is an interesting new concept but it still has to be tested in order to determine whether it offers to the small and medium sized companies a better and viable alternative to the usual forms of cooperation in the construction business.
The content of this article is intended to provide general information on the subject matter and is not a legal advice. An individual matter requires legal advice according to the specific circumstances.
