Delaware has established itself as a prominent hub for corporations owing to its favorable business laws. However, Elon Musk’s choice to move both Tesla and SpaceX out of Delaware has garnered significant attention. In response, state lawmakers are actively working to preserve Delaware’s status as a premier location for business incorporation.
For many years, Delaware has been a key destination for business formation, offering the First State an influence that belies its modest population of just over one million. Nonetheless, the state is now making concerted efforts to uphold its pro-business reputation after Musk relocated both Tesla and SpaceX to Texas last year. This decision came after a Delaware judge invalidated a $55 billion compensation deal for Musk, prompting several other well-known companies to consider similar moves.
Currently, Delaware lawmakers are deliberating on a bill aimed at ensuring the state remains a top choice for corporate incorporation by modifying its corporate law framework. This legislation, which recently received unanimous approval from the state Senate, proposes changes to the handling of agreements between corporate executives and substantial shareholders in Delaware.
The bill is set to be examined by the Delaware House of Representatives next. If it secures approval in that chamber, it will be presented to Democratic Governor Matt Meyer, who has expressed support for the initiative. Meyer spoke with Business Insider in February regarding the challenges facing the state’s corporate reputation. “The fact is, Delaware is the best location in the world for a company to incorporate, and that’s thanks to our legal expertise dating back to 1792. But let’s be clear: If any entity leaves Delaware, we’re going to work to win them back,” the governor, who assumed office in January, remarked.
Democratic State Senate Majority Leader Bryan Townsend, the principal sponsor of the bill, told Delaware Public Media that the proposed changes are not aimed at enticing Musk back but rather at preventing companies from leaving the state. “We don’t want there to be no guardrails — that’s what other states might be offering,” Townsend stated. “We want important guardrails, but they’ve got to be predictable and consistent and workable in terms of all the kinds of transactions that companies enter into.”
Although the bill wouldn’t apply retroactively, and therefore wouldn’t affect the ongoing issues involving Musk, the situation surrounding the Tesla CEO could significantly influence Delaware’s business environment in the future. In January 2024, Musk publicly criticized Delaware via X after Chancery Court Judge Kathaleen McCormick blocked his compensation package, suggesting, “Never incorporate your company in the state of Delaware.” In December 2024, Judge McCormick rejected the package once more, with Musk currently appealing that decision.
Additionally, Pershing Square Capital Management founder Bill Ackman announced in February that he would be relocating his management firm from Delaware to Nevada. Dropbox also made headlines by reincorporating from Delaware to Nevada, effective this month. Furthermore, Meta is reportedly considering a move away from Delaware to either Texas or another state, as indicated by the Wall Street Journal.
