Dell Embraces Shareholder Restrictions In Planned Texas Move (2)

Dell Technologies Inc. is asking shareholders to approve relocating its legal home from Delaware to Texas, a move that would bring new restrictions on shareholder proposals and derivative lawsuits.

If the move is approved at its June 25 meeting, Dell plans to opt into a Texas law that allows companies to set a 3% or $1 million stock ownership threshold, whichever is less, for shareholder proposal submissions, according to a preliminary proxy statement filed Monday. The company would also gain a new 3% stock ownership requirement for shareholders wishing to sue management in derivative lawsuits, a measure intended to reduce “frivolous” litigation, according to the filing.

Dell said in its proxy that the benefits of Texas incorporation “outweigh the countervailing considerations, including certain impacts on stockholder rights.”

The technology company pointed to the state’s new business court and wider shields for company leadership in breach of fiduciary duty claims as examples. However, it also warned shareholders of a lack of robust case law within that same court and the possibility of lawsuits over its potential move.

Overall, the company’s strategy to entice investors to vote for the move is quite different from that of Exxon Mobil Corp., which also proposed a Texas reincorporation this year. The oil giant in March told shareholders it “has no plans” to raise thresholds for shareholder proposals or derivative lawsuits. Tesla Inc., however, opted into more-restrictive Texas provisions after its 2024 reincorporation—though it was met with a trio of shareholder proposals seeking to scale back the decision or require a shareholder vote before any other changes.

Dell is also the latest high-profile tech firm to snub Delaware in the face of a major investor lawsuit, following in the footsteps of Tesla, Coinbase Global Inc. , and TripAdvisor Inc., which landed in Nevada last year. The computer manufacturer’s $1 billion settlement in 2022 included a $267 million payday for the shareholder attorneys who led the case, at the time the second-largest ever handed out by a Delaware Chancery Court judge.

The state’s top tribunal upheld those legal fees in a 2024 ruling delivered in the shadow of the $56 billion compensation case that ultimately drove Elon Musk and his automaker to Texas . But the justices warned in the same opinion about the potential of lawyer windfalls to stoke public outrage—an admonition that foreshadowed their decision slashing nearly $300 million off the record $345 million initially awarded to the lawyers who challenged Musk’s pay, which the high court reinstated .

eXp World Holdings Inc. is also asking shareholders to approve a reincorporation to Texas after the Delaware Chancery Court allowed litigation over the real estate firm’s alleged “rape culture” to proceed. That vote is scheduled for May 8.

—With assistance from Mike Leonard