Mr Musk cannot become the owner of more than 14.9% of Twitter's common stock either as an individual shareholder or as a member of a group as long as he is the director of Twitter, the company said in a filing.
Twitter Inc has welcomed world's richest man, Elon Musk to the company.
This comes after Musk bought 9.2% stake in the company.
He has also become a director in the company.
Twitter made the announcement on Tuesday, saying it would name top shareholder and Tesla boss Elon Musk to its board, a day after the billionaire disclosed a 9.2% stake in the social media company.
Mr Musk cannot become the owner of more than 14.9% of Twitter's common stock either as an individual shareholder or as a member of a group as long as he is the director of Twitter, the company said in a filing.
"I'm excited to share that we're appointing @elonmusk to our board," Twitter Chief Executive Officer Parag Agrawal said in a tweet. "He's both a passionate believer and intense critic of the service which is exactly what we need on @Twitter, and in the boardroom, to make us stronger in the long-term."
Twitter CEO and board member Parag Agrawal said Tuesday that the company's board had conversations with Musk "in recent weeks."
"He’s both a passionate believer and intense critic of the service which is exactly what we need on @Twitter, and in the boardroom, to make us stronger in the long-term. Welcome Elon!" Agrawal added.
Musk will serve as a Class II director until 2024, something that technically prevents him from taking over complete control of Twitter's board.
Still, Musk's stake now makes him Twitter's largest individual shareholder. Given his frequent use of the platform, some analysts are expecting Musk, who has 80.5 million followers — nearly four times more than President Joe Biden — to command a significant presence within the company.
"Musk joining the Twitter board a key signal that Twitter is embracing Musk rather than a more hostile situation," Dan Ives, a managing director at Wedbush Securities who covers Twitter, Tweeted Tuesday.
"We would expect Musk to have an immediate impact upon joining the Board and the Street will look for a range of strategic paths ahead for Twitter with Musk on board."
Musk joins a board that includes Agrawal and Twitter co-founder Jack Dorsey, who stepped down as CEO in November.
Musk's board seat will give him a say about the company's broader direction, something that he has routinely discussed on his Twitter account, which has decried the company's moderation efforts. Musk tweeted last month that Twitter was a threat to democracy.
"Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy," he tweeted in March.
It's unclear exactly what changes Musk might push for, but on Monday night he tweeted a poll asking if users wanted an edit button, an idea that has previously been knocked down by Twitter leadership.
Musk's addition to the board was met with quick support from some conservatives who have argued that Twitter unfairly censors them and have called for former President Donald Trump to be unbanned from the platform.
Twitter's stock price jumped about 6 percent in premarket trading and is up almost 30 percent since Musk's disclosure of his Twitter holdings.