Tesla (TSLA) CEO Elon Musk has called for a shareholder vote to move Tesla's incorporation to Texas. What does he want Tesla to do with the “lone star nation”?
Tulane Law Associate Professor Ann Lipton joins Yahoo Finance Live to discuss what this move means for the EV giant and why Delaware is a popular state for incorporating. Lipton explained that Delaware became a popular choice in the early 1900s and remains so because it offers courts and “very up-to-date corporate law that is responsive to the latest trends.” Delaware is unique in that it has a specialized court that hears only business disputes and is presided only by the chancellor, who is an expert.
Lipton says the system allows for “trusted decisions” to be made in less time. Delaware has been able to create a “network effect,” Lipton said, noting that priorities are generally set to the extent that outcomes are clear and easy to achieve.
Lipton acknowledged that Nevada is comparable to Delaware in some ways, and sees Nevada as “attractive” to some, but offers limited flexibility and freedom for investors. ing. “Nevada has carved out its own little niche,” Lipton said.
Although Lipton expects there will be “some delays” in the process of incorporating in Texas, Lipton said it will increase the likelihood of “friendly judges” in Texas. He doesn't think Musk will be given any leeway outside of that, saying, “That's definitely a problem.” It's a risky move,” Musk said.
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Editor's note: This article was written by Ike Ntekim
