After Elon Musk’s Delaware exit, state lawmakers weigh bill to overhaul corporate law
Tesla CEO Elon Musk looks on as US President Donald Trump speaks to the press as they stand next to a Tesla vehicle on the South Portico of the White House on March 11, 2025 in Washington, DC.
Mandel Ngan | AFP | Getty Images
Tesla CEO Elon Musk turned Delaware’s corporate law into a hot-button topic last year after a judge there ruled that his $56 billion pay package from 2018 was illegally granted and should be rescinded.
In social media posts, Musk smeared the judge and became an outspoken critic of Delaware’s judiciary, moving the site of incorporation for Tesla and his other companies out of the state while encouraging others to follow suit. Dropbox moved its site of incorporation to Nevada, and Bill Ackman said his Pershing Square Capital Management would exit Delaware. Meta and Walmart are reportedly considering leaving.
After a flurry of such announcements, Delaware’s Senate Majority Leader Bryan Townsend, a corporate attorney by trade and former clerk for Delaware’s Court of Chancery, began looking into the matter with fellow elected leaders. He then moved to sponsor a bill, known as SB 21, aimed at making Delaware a more attractive state for businesses.
On Thursday, the state Senate voted to pass an amended version of SB 21. If it passes Delaware’s House of Representatives, in a vote expected next week, and gets signed by the governor, the bill would change the state’s corporate law. Notably, it would alter how companies can use independent directors and other officials to ensure deals they’ve made will pass muster in court, and limit the records that shareholders can obtain from companies when investigating possible wrongdoing.
Townsend told CNBC that the aim of the bill is to ensure Delaware corporate law is clearer and more predictable, and that the state remains attractive to both investors and corporate leaders.
Many institutional investors, legal scholars and shareholders’ attorneys have opposed the bill, arguing that it would harm minority shareholders and allow boards and executives to make decisions based on their own interests rather than for the broader investor base.
The International Corporate Governance Network (ICGN), consisting of investors with more than $90 trillion in combined assets under management, spoke out against the bill on Tuesday. According to its website, ICGN members include Alliance Bernstein, the Swedish AP funds, BlackRock, CalPERS, CalSTRS, Franklin Templeton, Norges and Vanguard.
ICGN CEO Jen Sisson cautioned in a letter sent to Delaware state senators and representatives that SB 21 “will be detrimental to shareholder rights, with potentially significant negative implications for long-term returns for investors, including people saving for their retirements, current retirees and other individuals investing their savings.”
Sisson also said the bill would “reduce judicial oversight” and diminish shareholders’ trust that they can “seek remedies through litigation, when necessary.”
The anti-Delaware sentiment has at least some political motivations. While aligning themselves with President Donald Trump, executives like Musk and Ackman are trying to publicly undermine what they describe as “activist judges” who have issued rulings they found disagreeable.
Musk also has a lot of money potentially at stake. If adopted, legal scholars have argued, the new law could help the world’s richest person in his effort to reverse the court’s order in January 2024 that rescinded his mammoth pay package.
Unusual rollout
In her ruling, Delaware Chancery Court Judge Kathaleen McCormick said Musk’s compensation plan had been inappropriately set by Tesla’s board, which was controlled by Musk, and approved by shareholders who were misled by Tesla’s proxy materials before being asked to vote on the matter. Musk filed for an appeal, and the case is now in the hands of the Delaware Supreme Court.
As CNBC previously reported, Richards, Layton & Finger, a corporate defense firm whose clients include Musk and Tesla, helped draft the bill. The firm told CNBC that it wasn’t working on behalf of any specific client and that it was “part of a group, including highly respected lawyers, professors, and former jurists.”
Other shareholders’ attorneys have opposed SB21, or called for significant revisions, in part because of the bill’s unusual rollout.
Changes to Delaware corporate law historically have been drafted by a broad coalition of attorneys representing companies, executives and minority shareholders, and who are part of the Delaware State Bar Association’s Corporation Law Council (CLC).
SB 21 was introduced to Delaware’s legislature on Feb. 17, without any initial review or participation by the CLC.
Matt Meyer, candidate in the 2024 Delaware gubernatorial election to replace term-limited incumbent governor John Carney.
Courtesy: New Castle County
Townsend said Delaware’s elected leaders had fielded complaints from a number of public companies, or attorneys representing them, which he declined to name. Their frustrations had reached a “boiling point” he said, while other states like Texas and Nevada were making a concerted effort to provide an alternative.
“We wanted to address what we can legislatively,” Townsend said.
If Delaware’s House passes the bill, it would hit the desk of Democratic Gov. Matt Meyer.
Even though Delaware is a heavily Democratic state — Trump lost by almost 15% in the 2024 election — the legislation has support from some prominent party leaders, including the governor, as well as corporate defense attorneys, legal scholars and former Delaware litigants unhappy with prior rulings in the state.
Meyer said in an interview on Tuesday with CNBC’s Andrew Ross Sorkin that attorneys and corporate executives have told him that “there is some loss of clarity, predictability and fairness” in Delaware’s corporate law that he believes should be remedied.
A group of 21 law firms, including Cravath, Swaine & Moore, Gibson Dunn and Latham Watkins, sent a letter of encouragement to the state’s general assembly dated March 11.
The group wrote that the bill “provides statutory definitions and safe harbors that enhance clarity and will facilitate proactive evaluation of director appointments, conflicts cleansing and transactional planning.” SB 21 could also help companies incorporated in Delaware to “streamline corporate decision-making and transactional execution,” the lawyers wrote.
In his CNBC interview, Meyer downplayed fears that a so-called DExit was underway, a reference to a mass exodus of companies out of Delaware to incorporate in other states.
Delaware boasts 2.2 million corporate entities from around the world that are registered in the state, including 81% of U.S. companies that went public last year, Meyer said, adding, “The idea that we’re losing something is not totally accurate.”
When he was running for governor, Meyer’s campaign was heavily supported by entrepreneur Phil Shawe, a former Delaware litigant who became an outspoken critic of the state’s Court of Chancery after he was sanctioned in a case concerning who should maintain ownership of a business he started with his ex-fiancee. In 2018, he moved incorporation of the company, TransPerfect, to Nevada.
Last year, Shawe spent $2 million on an ad campaign slamming Delaware, and supporting Musk, all while encouraging other companies to flee the state. Shawe also contributed over $1 million to fund a political action committee supporting Meyer.
Shawe told CNBC, in an emailed statement, that he was not involved in drafting SB21 but “had lots of concerns and ideas” about Delaware’s Court of Chancery, and was “proud to have been at the forefront of this important discussion.”
Gov. Meyer’s office didn’t respond to a request for comment.
U.S. President Donald Trump (right) and C.C. Wei, chief executive officer of Taiwan Semiconductor Manufacturing Co. (left), shake hands during an announcement of an additional $100 billion into TSMC’s U.S. manufacturing at the White House in Washington, DC, U.S., on March 3, 2025.
Bloomberg | Bloomberg | Getty Images
The latest version of U.S. President Donald Trump’s “big beautiful bill” could make it cheaper for semiconductor manufacturers to build plants in the U.S. as Washington continues its efforts to strengthen its domestic chip supply chain.
Under the bill, passed by the Senate Tuesday, tax credits for those semiconductor firms would rise to 35% from 25%. That’s more than the 30% increase that had made it into a draft version of the bill.
Companies eligible for the credits could include chipmakers such as Intel, Taiwan Semiconductor Manufacturing Company and Micron Technology, provided that they expand their advanced manufacturing in the U.S. ahead of a 2026 deadline.
The new provisions expand on tax incentives under the 2022 CHIPS and Science Act, which provided grants of $39 billion and loans of $75 billion for U.S.-based semiconductor manufacturing projects.
But before the expanded credits come into play, Trump’s sweeping domestic policy package will have to be passed again in the House, which narrowly passed its own version last month. The president has urged lawmakers to get the bill passed by July 4.
Trump versus Biden
Since Trump’s first term, Washington has been trying to onshore more of the advanced semiconductor supply chain from Asia, support its domestic players and limit China’s capabilities.
Although tax provisions in Trump’s sweeping policy bill expand on those in the Biden administration’s CHIPS Act, his overall approach to the semiconductor industry has been different.
Earlier this year, the president even called for a repeal of the CHIPS Act, though Republican lawmakers have been reluctant to act on that front. Still, U.S. Commerce Secretary Howard Lutnick said last month that the administration was renegotiating some of the Biden administration’s grants.
Trump has previously stated that tariffs, as opposed to the CHIPS Act grants, would be the best method of onshoring semiconductor production. The Trump administration is currently conducting an investigation into imports of semiconductor technology, which could result in new duties on the industry.
In recent months, a number of chipmakers with projects in the U.S. have ramped up planned investments there. That includes the world’s largest contract chipmaker, TSMC, as well as American chip companies such as Nvidia, Micron and GlobalFoundries.
According to Daniel Newman, CEO at tech advisory firm Futurum Group, the threat of Trump’s tariffs has created more urgency for semiconductor companies to expand U.S. capacity. If the increased investment tax credits come into law, those onshoring efforts are only expected to accelerate, he told CNBC.
“Given the risk of tariffs, increasing manufacturing in the U.S. remains a key consideration for these large semiconductor companies,” Newman said, adding that the tax credits could be seen as an opportunity to offset certain costs related to U.S.-based projects.
Elon Musk, chief executive officer of Tesla Inc., during a meeting between US President Donald Trump and Cyril Ramaphosa, South Africa’s president, not pictured, in the Oval Office of the White House in Washington, DC, US, on Wednesday, May 21, 2025.
Jim Lo Scalzo | Bloomberg | Getty Images
Tesla shares have dropped 7% from Friday’s closing price of $323.63 to the $300.71 close on Tuesday ahead of the company’s second-quarter deliveries report.
Wall Street analysts are expecting Tesla to report deliveries of around 387,000 — a 13% decline compared to deliveries of nearly 444,000 a year ago, according to a consensus compiled by FactSet. Prediction market Kalshi told CNBC on Tuesday that its traders forecast deliveries of around 364,000.
Shares in the electric vehicle maker had been rising after Tesla started a limited robotaxi service in Austin, Texas, in late June and CEO Elon Musk boasted of its first “driverless delivery” of a car to a customer there.
The stock price took a turn after Musk on Saturday reignited a feud with President Donald Trump over the One Big Beautiful Bill Act, the massive spending bill that the commander-in-chief endorsed. The bill is now heading for a final vote in the House.
That legislation would benefit higher-income households in the U.S. while slashing spending on programs such as Medicaid and food assistance.
Musk did not object to cuts to those specific programs. However, Musk on X said the bill would worsen the U.S. deficit and raise the debt ceiling. The bill includes tax cuts that would add around $3 trillion to the national debt over the next decade, according to an analysis by the Congressional Budget Office.
The Tesla CEO has also criticized aspects of the bill that would cut hundreds of billions of dollars in support for renewable energy development in the U.S. and phase out tax credits for electric vehicles.
Such changes could hurt Tesla as they are expected to lower EV sales by roughly 100,000 vehicles per year by 2035, according to think tank Energy Innovation.
The bill is also expected to reduce renewable energy development by more than 350 cumulative gigawatts in that same time period, according to Energy Innovation. That could pressure Tesla’s Energy division, which sells solar and battery energy storage systems to utilities and other clean energy project developers.
Trump told reporters at the White House on Tuesday that Musk was, “upset that he’s losing his EV mandate,” but that the tech CEO could “lose a lot more than that.” Trump was alluding to the subsidies, incentives and contracts that Musk’s many businesses have relied on.
SpaceX has received over $22 billion from work with the federal government since 2008, according to FedScout, which does federal spending and government contract research. That includes contracts from NASA, the U.S. Air Force and Space Force, among others.
Tesla has reported $11.8 billion in sales of “automotive regulatory credits,” or environmental credits, since 2015, according to an evaluation of the EV maker’s financial filings by Geoff Orazem, CEO of FedScout.
These incentives are largely derived from federal and state regulations in the U.S. that require automakers to sell some number of low-emission vehicles or buy credits from companies like Tesla, which often have an excess.
Regulatory credit sales go straight to Tesla’s bottom line. Credit revenue amounted to approximately 60% of Tesla’s net income in the second quarter of 2024.
WATCH: Threats to SpaceX & Tesla as Musk, Trump feud heats up
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