Delaware is on the brink of enhancing protections for corporate officers against shareholder lawsuits in its courts. This move comes amidst vocal critiques from influential figures, including billionaire Elon Musk, highlighting the state’s reputation as a preeminent hub for corporate matters. On Tuesday night, state legislators passed an expedited bill supported by Governor Matt Meyer and prominent Delaware business leaders. However, this move has faced backlash from lawyers representing shareholders and pension funds, who criticize it as favoring billionaires and corporate elites.
Numbers tell an intriguing story about this corporate haven:
2.2 million
Delaware is home to approximately 2.2 million business entities as reported by the governor’s office. These include around two-thirds of the Fortune 500 companies. According to state data, the number of businesses establishing their legal headquarters in Delaware is growing consistently. Although these companies may locate their primary offices elsewhere, due to Delaware’s seasoned corporate courts and extensive corporate case law, legal affairs are often handled within the state.
1,051,917
The U.S. Census Bureau estimated Delaware’s population at approximately 1,051,917 last year, indicating a two-to-one business-to-resident ratio.
81%
In 2024, Delaware registered an astonishing 81% of all U.S. initial public offerings, according to the governor’s data.
$2.2 billion
Corporate license fees and associated tax revenues contribute about $2.2 billion to Delaware’s annual budget, funding nearly a third of the state’s operational costs.
0%
Delaware boasts a zero-percent state sales tax, a benefit partly attributed to the robust revenue stream from corporate fees and taxes. This incentivizes residents from nearby states to shop in Delaware for high-cost items, taking advantage of the absence of sales tax.
$55 billion
The $55 billion compensation package awarded to Elon Musk by Tesla in 2018 was nullified last year by a Delaware judge following a lawsuit filed by shareholders. The Chancellor ruled that Tesla’s board, lacking independence from Musk, misinformed shareholders in disclosures related to the compensation plan.
Following the void, Tesla’s shareholders again approved Musk’s compensation package with a revised value of $45 billion but met renewed challenges from shareholders. The previous judgment was upheld, mandating the company to revoke the package, and Musk, along with Tesla, is appealing the decision in Delaware’s Supreme Court.
Musk’s statements—”Never incorporate your company in the state of Delaware,” shared on social media—intensified dissatisfaction regarding Delaware Supreme Court’s rulings on corporate conflict-of-interest cases. Supporters of the current legislative proposal assert that this discontent has been brewing over recent years.