Business
Will Elon Musk Get What He Wants If Tesla Moves To Texas? Analysts State
By - 02 Feb 2024 10:43 AM
Due to the absence of precedent and distinct regulations in Texas' business courts, Elon Musk's proposal to relocate Tesla from Delaware may not grant the CEO of the electric carmaker the extra flexibility he seeks, according to legal experts.
Following a crushing defeat this week in Delaware's Chancery Court, which nullified his $56 billion compensation package, Musk declared on social media on Thursday that Tesla would "move immediately to hold a shareholder vote to transfer state of incorporation to Texas."Later on Thursday, Musk said, "Change your state of incorporation out of Delaware before they lock the doors."
If Musk's corporate relocation plan is approved by the board of directors at Tesla and the shareholders approve it as well, the electric vehicle manufacturer would move its incorporation from Delaware, the state in the United States with the largest number of registered companies because of its two-century-old corporate legal system. Due to this certainty, Delaware has long been favored by businesses; however, Musk may upend this by moving Tesla and enticing others to follow.It takes time and volume to build up a body of case law that makes the courts a trustworthy venue for business disputes, which is why Delaware has a clear advantage, according to Edwards.
A number of states, including Texas, have passed "constituency statutes," which guarantee business executives' ability to take into account interests other than maximizing profits for stockholders. He said that Delaware is not one of them.
