Tesla CEO Elon Musk announced on Thursday the company’s intention to promptly initiate a shareholder vote to shift its state of incorporation from Delaware to Texas. Musk’s decision to consider re-incorporation coincides with Texas’ efforts to establish its business court network, potentially posing a challenge to Delaware’s longstanding dominance in this regard.
The significance of Musk’s move became apparent after a Delaware Chancery Court judge invalidated Musk’s $56 billion compensation package on Tuesday, asserting that the world’s wealthiest individual had not adequately demonstrated the fairness of the compensation plan.
Following this ruling, Musk used his platform, X, to advise his followers against incorporating companies in Delaware. Subsequently, he conducted a poll among his approximately 171 million followers, seeking their opinion on whether Tesla should change its state of incorporation to Texas, where the company’s physical headquarters is located in Austin.
Texas Governor Greg Abbott joined the conversation, declaring, “Elon, it’s over. The election desk is declaring a landslide victory for Texas.” In the poll results, an overwhelming 87.1% voted “yes” to Tesla re-incorporating in Texas, with the poll amassing over 1.1 million total votes.
Musk emphasized the unequivocal public support for Texas and stated that Tesla would proceed with a shareholder vote on the matter.
The Delaware Chancery Court holds a prominent position as the primary business court in the United States, attracting a majority of companies to incorporate in Delaware due to its business-friendly tax and privacy laws. Tesla’s potential shift to Texas reflects the changing dynamics and the emergence of new contenders in the business court landscape.