Tesla CEO Elon Musk announced Thursday that he intends to move the company’s incorporation to Texas, following the decision from a progressive Delaware judge to block his $56 billion pay package. After posting a poll to X for the public to weigh in on the matter, Musk said he will be bringing the Texas proposal up for a shareholder vote.

Following the judge’s ruling, Musk told his 170 million X followers, “Never incorporate your company in the state of Delaware.”

But according to legal experts spoken to by Reuters, the move to Texas might prove difficult for the serial entrepreneur. “Shareholders need to take a hard look at how transitioning out of Delaware might impact their rights and the company’s governance,” said business adviser Keith Donovan. There may also be several more layers of Tesla administrative approval required for Musk to change incorporation. However, if Musk can come up with a modified charter that does not change anything fundamental, the new incorporation vote could be passed with a simple majority rather than two-thirds.

A shareholder vote can be expected in 40 to 60 days if the US Securities and Exchange Commission (SEC) does not decide to intervene and slow the process down.

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As Valuetainment previously reported, Delaware judge Kathaleen McCormick voided a historic $56 billion compensation package to Tesla CEO Elon Musk on the grounds that Musk provided insufficient proof that the “unfathomable sum” was fair. In 2022, Elon Musk had defended the payment package in court, saying he had no role in establishing the price tag.

In response, Musk fired off a series of X posts criticizing Delaware and its legal climate regarding corporations. Finally, he shared Wall Street Journal op-ed from November about Delaware’s corporate-allergic culture, contracted by its “flirtation with ESG.”

The piece gives an account of Delaware’s shift from a corporate-friendly tax haven to a progressive stronghold that minimizes shareholder value in favor of “stakeholders” and “broader constituents.” Delaware’s adherence to corporate law was formally changed in 2021 by former state Supreme Court Justice Tamika Montgomery-Reeves, who was subsequently nominated to the federal appellate bench by President Joe Biden.

Judge McCormick is the same person who helped Twitter sue Musk in 2022 for attempting to exit from a contract to purchase it for $44 billion. After she rejected his appeals and scheduled Musk for an expedited trial in October 2022, he went through with the deal to acquire the platform now known as X. McCormick had claimed she wanted to protect Twitter and its investors from unfair uncertainties.

Shane Devine is a writer covering politics, economics, and culture for Valuetainment. Follow Shane on X (Twitter).

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