The rapid rise of technologies such as artificial intelligence (AI) and blockchain is placing significant pressure on the established framework of corporate law. This pressure raises fundamental questions about whether these innovations require minor regulatory updates or warrant a re-examination of traditional doctrines.

In a new article, we explore this issue through a comparative analysis of U.S., European, and Chinese law. We suggest that technology’s impact on corporate law is broad and deep, touching on general principles of corporate formation, governance, and finance.

Digital technology has moved from merely improving corporate efficiency to fundamentally altering decision making and value creation within companies. It is challenging legal assumptions about human agency and shareholder primacy, which are foundations of traditional corporate law.

An incremental approach to legal adaptation may be insufficient given the scope of technological change. When AI is integrated into executive functions, the application of doctrines like the Business Judgment Rule may become complex with the focus on human deliberation shifting toward the governance of the underlying technological systems. This structural tension warrants comprehensive legal re-examination.

Corporate Law’s Response to Technology

Platform Governance and the Reassessment of Shareholder Primacy

Digital platforms are generally flatter and less bureaucratic than traditional firms and more consumer-centric, in the case of marketplace platforms, or creator-centric, in the case of content platforms. The scale of digital platforms and the analytical power of AI provide computational means to better manage complex interests and priorities.

AI’s ability to optimize multiple variables simultaneously suggests a practical way to account for a broader range of stakeholder interests. While shareholder primacy has long held sway in jurisdictions like Delaware, AI’s ability to process vast, multi-factor datasets could provide a mechanism for a more balanced approach. This technological capacity may support a gradual shift from maximizing shareholder value toward a stakeholder governance model.

Artificial Intelligence and the Evolution of the Business Judgment Rule

Using AI systems to assess risks and strategy requires changes to the Business Judgment Rule. In our paper, we explore whether a new fiduciary duty should require directors to demonstrate reasonable care in the selection, validation, and oversight of  AI systems. Meanwhile, directors’ failure to use AI t to help make informed decisions about complex and important matters  could constitute a breach of their duty of care. Regardless of whether a new duty arises, or a dedicated technology committee is established, directors should ensure they are familiar with AI.

From Rules-Based Regulation to Principles–Based Adaptation

We suggest that corporate law could improve by moving from a rigid, rule-based approach to technological change. Adopting a coordinated, principles-based approach may offer greater flexibility, allowing the law to maintain coherence and resilience amidst continuous and rapid technological change.

Applications Across Corporate Law

Corporate Formation: DAOs and Data as Assets

The proliferation of Decentralized Autonomous Organizations (DAOs) challenges notions of corporate form and liability. As DAOs operate on code and distributed consensus, they blur the lines between traditional corporate governance and software protocols, demanding that corporate law develop new frameworks for recognizing these entities. We also argue for the formal recognition of data as a corporate asset. Given that data is amorphous and intangible and difficult to value, including it in corporate balance sheets is challenging. Although China has formally done so, data assets are used primarily as collateral for bank lending.

Corporate Governance: Oversight, Fiduciary Duties, and Digital Accountability

The rise of digital requires better governance mechanisms in several areas. AI can help fulfill Environmental, Social, and Governance (ESG) responsibilities by improving the collection, processing, and reporting of relevant data, making it easier to verify ESG measures  and reduce greenwashing. Concurrently, the rise of digital risks, particularly in cybersecurity, has expanded director accountability. We examine how failures in establishing or overseeing robust cybersecurity-risk management may expose directors to liability. A severe cybersecurity incident, stemming from a lack of oversight, could be grounds for holding directors liable under an expanded understanding of the Caremark duty to monitor. Furthermore, the increasing reliance of corporate agents on AI tools requires clarifying the boundaries of fiduciary duties. This is particularly relevant when algorithms advise on or execute investment decisions, raising complex questions about accountability when automated systems produce errors or biases.

Corporate Finance: Digital Equity and Tokenization

Corporate finance stands to gain from digital innovation. We advocate for legally enabling corporations to issue and store equity in a digital form, known as tokenization. This transition could leverage distributed ledger technology to enhance transparency and liquidity in capital markets. By recording ownership on a secure and verifiable blockchain, tokenization could eliminate the need for costly and time-consuming intermediaries, thereby reducing settlement times, lowering transaction costs, and creating a more efficient and transparent external financing alternative for corporations.

Toward Digital Corporate Law

Our analysis points toward three substantial changes:

External and Internal Digitization

This change involves  internal and external technological modernization of the corporation. External digitization is exemplified by Estonia’s e-residency program, which extends corporate participation beyond traditional territorial boundaries. By contrast, internal digitization makes corporations more reliant on advanced digital infrastructure, automated processes, and data-management systems to support internal controls and other core management functions. Together, these developments mark a fundamental shift from firms built on paper and physical assets to enterprises structured around data and algorithms.

Rules as Code

We explore the benefits of modernizing regulation. Translating regulatory standards into a computable format, a concept we term “Rules of Corporate Law as Code,” could enhance the precision and clarity of legal rules. This approach may streamline regulatory compliance and improve the efficiency of administrative enforcement. By codifying rules, lawmakers can create standards that are readable and executable by both humans and machines, minimizing ambiguity and reducing opportunities for regulatory arbitrage. This vision seeks to make the law itself a more efficient and reliable system for governing digital corporations.

Conclusion

Technology is not merely a corporate tool; it is a structural force that requires the evolution of corporate law. Digital Corporate Law could ensure that legal frameworks remain relevant and effective in a technology-driven world. This framework would recognize new digital actors and assets, establish new standards for fiduciary duty, and leverage technology to create a more efficient and transparent legal system.

This post comes to us from Chen Wang, JSD at the University of California, Berkeley – School of Law and research fellow at the Center for Digital Economy and Legal Innovation at the University of International Business and Economics (UIBE), China, and Ke Xu, professor of law at UIBE. It is based on their recent article, “Toward Digital Corporate Law: Revisiting Corporate Law’s Responses to Technology,” forthcoming in the William & Mary Business Law Review and available here.