Elon Musk-Twitter Legal Fight: What Happens if the Billionaire Doesn’t Comply

Twitter has sued Elon Musk to pressure him to undergo with the $44 billion (roughly Rs. 3,50,300 crore) acquisition of the social media firm. What occurs if Twitter succeeds and the world’s richest man, who recurrently taunts securities regulators, refuses to adjust to the courtroom order?

Can a courtroom order Musk to purchase Twitter?

Twitter is asking a Delaware courtroom to grant “specific performance” below the phrases of its contract with Musk — in different phrases, pressure him to finish the acquisition on the agreed value of $54.20 (roughly Rs. 4,300) a share.

The courtroom has issued such orders earlier than. Chicken processor Tyson Foods was ordered in 2001 to finish its $3.2 billion (almost Rs. 25,500 crore) deal for meatpacker IBP. Last yr, the courtroom ordered personal fairness agency Kohlberg & Co LLC to shut its $550 million (almost Rs. 4,400 crore) buy of DecoPac Holding, which makes cake adorning merchandise.

But the consumers in these cases had been firms reasonably than a person. Never has such particular efficiency been granted on a deal of this scale.

What if Musk resists?

The authorized battle between Musk and Twitter will play out in Delaware’s Court of Chancery, which is specified within the merger settlement for disputes.

Delaware can be a preferred incorporation vacation spot for many US public firms, together with Tesla and different Musk firms akin to tunneling enterprise The Boring Company and Space Exploration Technologies, referred to as SpaceX.

That offers the courtroom jurisdiction over an unlimited quantity of Musk property to coerce compliance if wanted. Lawyers mentioned the courtroom would start by holding Musk in contempt and issuing fines till he did as ordered.

“The court has capacious powers to enforce its orders,” mentioned Francis Pileggi, an lawyer with Lewis Brisbois in Wilmington, Delaware.

If Musk continued to disregard a judgment, the courtroom might order Tesla and different Delaware-incorporated firms during which Musk owns a stake to freeze his property or flip over shares.

“He’d be treated like a deadbeat dad not paying child support,” mentioned Minor Myers, a professor of UConn School of Law. “It would not be that hard.”

What has the courtroom completed previously?

When Delaware-incorporated ZST Digital Networks was sued in Delaware in 2012 by one in all its largest exterior shareholders for entry to its books amid accounting irregularities, the Chinese firm refused to conform. Travis Laster, a vice chancellor or choose on the Court of Chancery, appointed a receiver of the corporate to pressure it to show over the information. He additionally allowed the receiver to hunt to arrest executives in the event that they visited the United States.

The courtroom has additionally pressured firms to adjust to orders by warning administrators they are going to be held personally accountable for accumulating fines.

Ann Lipton, a professor at Tulane University Law School, mentioned there are many examples of people against the courtroom’s rulings who use appeals to tug out complying. But they finally obey courtroom orders and he or she expects Musk will as nicely.

“He’s not actually insane,” she mentioned.

© Thomson Reuters 2022