Elon Musk calls for shareholder vote to move Tesla’s incorporation to Texas

Elon Musk has announced plans to hold a shareholder vote to move Tesla’s state of incorporation to Texas. The decision follows a Delaware judge’s rejection of Musk’s $55 billion compensation package.

Earlier this week Musk saw his compensation package voided by a judge in Delaware, with the judge calling it “an unfathomable sum” and unfair to Tesla shareholders. The judge cited numerous deficiencies in how the compensation package was approved, specifically calling out the close relationships Musk has with the board members.

This does not mean that Musk will never see the $55 billion he earned, but rather that shareholders would have to vote again on a pay package that was created without the issues noted by the judge in her 201 page decision.

Within hours of the decision, Musk took to his social media platform X to hold a public poll asking whether Tesla should change its state of incorporation from Delaware to Texas.

Twenty-hours and over a million votes, the poll, in which anyone could vote, showed 87% in favor of the move. Musk confirmed the public’s choice on his social media platform, announcing the company will “move immediately to hold a shareholder vote to transfer state of incorporation to Texas.”

Despite having no business ties with Delaware, Tesla and many major companies in the US like Walmart, Google, Amazon, and others, are incorporated in the state, mostly due to its favourable taxation. The state is also widely recognized for its corporation-friendly legal framework.

The decision to move Tesla’s state of incorporation to Texas, however, is not as easy as holding a poll on X. A Boston College law professor, Brian Quinn, told The Guardian that the move would require board initiation and is not solely dependent on the results of a public poll. Quinn also mentioned that shifting to Texas wouldn’t alter the fundamental law that underpinned the Delaware ruling. Texas, having launched a new business court, aims to establish itself as a fair forum for business disputes. However, Musk’s expectations and his approach to the move might put Texas in a difficult position.

As we pointed out on X, there are going to be numerous advantages and disadvantages in moving Tesla’s state of incorporation from Delaware to Texas. Hopefully Tesla will clearly convey all of these, both good and bad, before holding the vote so that shareholders can make a fully informed decision, rather than agreeing to it in a knee jerk reaction.

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