(Reuters) -Latin American e-commerce giant MercadoLibre’s board called on its shareholders on Monday to approve a redomestication of its U.S. operations from Delaware to Texas, in a filing ahead of a June 17 shareholders meeting.
WHY IT’S IMPORTANT
Among Latin America’s largest companies, the e-commerce giant is considered the region’s answer to Amazon and is also spear-heading a digital drive with expansions in online financial services.
Delaware was until recently the undisputed home of U.S. corporations thanks to its friendly legislation, though few companies have operations there.
However, a trickle of firms have left Delaware for Texas – notably Elon Musk’s Tesla after a local judge ruled against a proposed pay package. Musk has urged other companies to follow suit.
KEY QUOTES
“The Board considered that while more developed, Delaware law can be indeterminate because of its use of broad, flexible standards that are applied to individual cases in a highly fact specific way,” MercadoLibre said in the filing.
“This focus on precise facts and circumstances means Delaware decisions may be less predictable for an innovative company like MercadoLibre.”
It added that a recently enacted rule for codifying business judgments in Texas should “provide greater certainty to the board in its decision-making.”
CONTEXT
The vote will require the approval of a majority of shareholders. If the vote does not pass, MercadoLibre said its domicile will remain unchanged. It also noted it could face legal challenges from stockholders among others.
Analysts have said the move could benefit MercadoLibre and mark an added challenge to Asian e-commerce players such as Shein and Temu, whose are subject to a Mexican tariff on products imported through its courier services.
(Reporting by Rafael Escalera Montoto; Editing by Sarah Morland)
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