DOVER, Delaware (Reuters) -Delaware lawmakers approved on Tuesday an overhaul of the state's corporate law in a bid to keep powerful business leaders like Mark Zuckerberg from moving their companies' legal home to another state, although opponents call it a giveaway to billionaires.

The law, known as SB 21, was approved by a vote by Delaware's House and now goes to Governor Matt Meyer, who has said he will sign it.

The bill mostly impacts companies with a controlling shareholder, like Meta Platforms , which is controlled by Zuckerberg. The proposal provides steps that allow for a company and its controlling shareholder to arrange deals, such as selling corporate assets to the controller, that cannot be challenged in court by the company's other investors. 

Supporters and opponents of the bill both agreed during Tuesday's debate that the state must prevent "DExit" -- or a stampede of companies moving their legal home out of one of the country's smallest and least populated states -- although they disagreed on the strategy. While other states are trying to attract corporations, Delaware remains home to most large public companies in part because its corporate law protects board directors from being sued if they are independent and act in the company's best interest.

The state's corporate legal system, which locals refer to as "the franchise," generates more than 20% of Delaware's budget revenue.

"We have a million Delawareans who rely on the $2.2 billion that the corporation franchise brings in to the state," Representative Krista Griffith, a Democrat, told lawmakers on Tuesday. "What seems permanent can easily vanish."

Several companies, mostly with controlling shareholders, have said they might or will leave Delaware, including Dropbox, Meta, Tripadvisor and President Donald Trump's media company. On Friday, Simon Property Group, which is not a controlled company, asked its shareholders to approve moving the real estate investment trust's legal home to Indiana, where it has its headquarters, from Delaware. REITs like Simon tend to be chartered outside of Delaware.

The proposed legislation has been labeled "the billionaire's bill" by critics, which include attorneys for shareholders and managers of pension funds. High-profile opposition ads included a billboard truck featuring an image of Elon Musk waving a chainsaw that circled Legislative Hall in Dover before lawmakers voted.

Witnesses who testified for opponents said the bill might prompt shareholders to encourage companies to leave Delaware for states with corporate law that better protected their investments. "I've got to tell you, investors' reactions to SB 21 have been surprisingly negative," Robert Jackson, a law professor and former commissioner on the Securities and Exchange Commission, told lawmakers.

The bill prevents shareholders from challenging deals that are approved by a board committee that has a majority of independent directors or by a vote by public shareholders. The bill also limits records available to shareholders who want to investigate a deal for conflicts.

Numerous amendments were rejected, including one that would have eliminated the law's retroactive effective date. The law will be effective back to February 17, which one lawmaker said would eliminate potential legal liability for unspecified claims that he said shareholders were investigating against the board of Meta Platforms. 

Corporate leaders have expressed frustration in recent years over court rulings that upset certain expectations about the state's law. Musk fueled the debate last year by urging companies to follow Tesla and leave the state after a Delaware judge rescinded his $56 billion pay package as CEO of the electric car maker.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Alexandra Hudson and Leslie Adler)