Elon Musk to resign as Tesla chairman

Tesla's outspoken co-founder Elon Musk has made a deal with the US Securities and Exchange Commission (SEC) that will see him step down as chairman and pay $20 million ($A28 million) following a tweet announcing he was considering taking the US EV-maker private.

Just weeks after the controversial Tweet posted on August 7, Musk was forced to admit the go-private plan had been abandoned because he had not secured the funding required to take the company private.

In a lawsuit filed by the SEC, the US authorities claimed the Tweet by the Tesla CEO led to market chaos that caused serious harm to investors.

Following the arrangement announced yesterday, Musk has 45 days to step down as chairman. He's also not permitted to be re-elected to the board for three years.

Tesla will also be required to appoint two new independent directors to its board.

As part of a separate agreement, Musk's future Tweets will be vetted by Tesla's legal department to prevent further market disruption.

Originally, the SEC was pushing for far greater punishment for the PayPal billionaire, who will remain Tesla CEO.

It wanted Musk to be banned from running the US car-maker – a decision that some investors claimed would be disastrous for the company.

In response to claims by the SEC that the Tesla CEO failed to communicate accurate and true information and meet the required disclosure controls and procedures, Musk said the punishments were unjustified.

According to media reports, Musk was facing a two-year ban and a nominal fine until he walked out of negotiations, forcing the SEC to introduce more punitive measures.

In the future, the SEC has tasked Tesla's board to reign in the erratic Musk.

Despite stepping down from the chair, Musk will remain hugely influential with decision making at what remains one of the world's most valuable car-makers as he remains Tesla's largest shareholder with a 20 per cent stake in the company.

Unfortunately, Tesla's and Musk's legal woes do not end with the deal with the SEC.

Both are being sued by investors who suffered heavy losses after the infamous Tweet, and it's thought the SEC's judgement will only strengthen their case against the car-maker.

Despite being judged almost as valuable as established car-making giants like General Motors, in 15 years Tesla has yet to earn an annual profit -- although the company hopes its first mass-produced car, the Model 3, will turn around its fortunes.