WILMINGTON, Del., July 8, 2025 — Having been tagged as corporate hub for American companies over decades, Delaware recently witnessed pivotal changes to its governance laws.

The move is widely seen, as an effort to keep a check on the exodus of companies from Delaware.

Last year, Tesla CEO Elon Musk, led migration of the incorporation of his companies from Delaware to Texas and Nevada, citing regulatory red tape as the reason.

Musk also made a clarion call to corporate America for abandoning Delaware and move base to Texas.

Dubbed as “DExit”, the potential mass migration saw many companies, threatening to shift out of the state, which as per industry data, boasts to have two-thirds or 60 percent of Fortune 500 companies incorporated.

Preventing Corporate Advantage

Notably, a Delaware judge invalidated Musk’s compensation package from Tesla that was potentially worth over $55 billion after shareholders’ lawyers had sued over the package that Tesla’s board of directors awarded Musk in 2018.

Lately, corporation statutes in Delaware, Nevada, and Texas were amended in significant ways this year.

Delaware offers several advantages for companies to be incorporated there.

Its legal regime, is known to offer balance and reliability for firms to register in Delaware. Delaware has adopted major changes to its governance laws, making it more hospitable to billionaire-led companies such as Tesla and Facebook.

This comes amidst growing competition from other states for corporate domiciles.

Delaware bill creates “safe harbors” from litigation for transactions involving controlling shareholders, such as buying a controlling shareholder's business or restructuring a class of stock. However, it will not impact a takeover of the company by the controlling shareholder.

Industry data reveals that more than 20 percent of Delware’s budget revenue comes from corporate fees. The billions in franchise fee allow the state to avoid implementing a sales tax.

Regulatory Bottlenecks and Impact 

In March this year, Financial Times reported that board of Facebook, which faced a trial in Delaware over its board’s oversight of customer data policies, was mulling to shift its incorporation out of Delaware.

The newspaper had also reported that Simon Property Group, was considering to seek its shareholder approval, to move its domicile to Indiana, where it is headquartered.

On March 26, the Delaware legislature passed Senate Bill 21 (SB21), limiting shareholder access to corporate records and moving the goalpost for director disinterestedness to avoid court scrutiny of what were long considered conflicted transactions.

However, Financial Times reported that a group of top law professors have raised questions against the bill.

The critics of the bill, were quoted as saying that it upends dozens of corporate law precedents and would take away power from Delaware judges with expertise in corporate issues.

Corporate advocacy groups, as per the report, have supported the changes brought in by Delaware. Some large investors have criticised the legislation as “too deferential” to corporate leadership.

 

Inputs from Saqib Malik

Editing by David Ryder