I read with interest this FBI Most Wanted notice concerning a certain Joshua Link, who is accused of, well:

Joshua Robert Link is wanted for his alleged involvement in a fraud scheme between January of 2021 and December of 2023. Through his company, Agridime LLC, Link and his co-conspirators solicited cattle contracts from buyers throughout the United States. They told prospective buyers that Agridime would purchase cattle, care for and feed the cattle, have it processed, and sell the meat through Agridime’s distribution channels. Agridime offered investment returns from 15% to 32% to prospective cattle contract buyers. In reality, Agridime purchased only a fraction of the cattle. The scheme resulted in an approximate loss of $115 million to over 2,000 cattle contract buyers nationwide. On January 29, 2026, a federal arrest warrant was issued for Link in the United States District Court, Northern District of Texas, Fort Worth Division, after he was charged with Conspiracy to Commit Wire Fraud.

Upon further research, I discovered that the SEC had previously brought a civil action against him and his co-conspirators. As I understand the scheme, the fraudsters sold specific cattle to individual investors, promised to hold on to the cattle, raise, feed, slaughter, and process them, and then buy the cattle back at a guaranteed higher price.  Of course, none of that actually happened – they just took the money.

So how is this a security, such that the SEC can bring an enforcement action? The SEC’s complaint makes clear that these cattle contracts were sold to investors on the promise of profit, and that the investors themselves were entirely passive which satisfies the first three elements of the Howey test for a security (investment of money, for profit, derived from the efforts of others).

But what about the common enterprise prong, if each investor thinks they’re buying individual cattle?

Certainly, broad vertical commonality is present here – in the sense that investors know the promoter will profit if they do – and that was enough for the Eleventh Circuit to find commonality met in the conceptually-similar case of Securities and Exchange Commission v. ETS Payphones, 408 F.3d 727 (11th Cir. 2005), where you bought a plot of land and telephone equipment that someone else would lease from you to run a payphone business and then buy back from you at the end of the contract.  But broad vertical commonality is fragile as a legal concept because there’s so much overlap with the “efforts of others” Howey prong.

So the SEC says something else.  According to the SEC’s complaint:

Agridime has not purchased enough cattle to fulfill its Cattle Contracts.  Agridime’s investors, therefore, do not actually invest in specific, identifiable animals. Instead, the success of the investments depends on the success of Agridime’s purported cattle operation, including its ability to attract new investors.

Get it? The investors think they’re investing in identifiable animals, but that didn’t actually happen, so any returns investors receive actually come from the (Ponzi scheme) enterprise, which is common across multiple investors.

Which sounds like an odd elision from investors’ subjective understanding to the reality of how any profits were made – but in the payphones case, and in other similar kinds of cases (like Miller v. Cent. Chinchilla Grp., Inc., 494 F.2d 414 (8th Cir. 1974), the infamous chinchilla-raising scheme, everyone loves the chinchilla-raising scheme), courts make a similar sort of move. They note that investors may be buying identifiable plots of land or chinchillas or cattle, but they can only make money when the promoter finds new investors.  ETS Payphones, 408 F.3d at 732 (“Investors were dependent upon Edwards’s ability to attract new business to realize profits.”); Central Chinchilla, 494 F.2d at 417 (“The record shows that the plaintiffs invested money in a common enterprise with the expectation that they would profit if the defendants secured additional investors.”).  And in a beaver-raising case, the Tenth Circuit found commonality in the fact that no one expected to profit from the beaver sales unless they understood the defendants to be taking part in a larger beaver industry, which was also sufficient for commonality, Continental Mktg. Corp. v. SEC, 387 F.2d 466 (10th Cir. 1967), and perhaps not unlike investors’ faith in “Agridime’s purported cattle operation.”

Anyway, leaving aside the grimness of the “raise-an-adorable-animal-for-slaughter” aspects of these schemes (“The owner may care for his own animals with each pair of beaver requiring a private swimming pool, patio, den and nesting box together with the services of a veterinarian…”) maybe the ultimate lesson here is really, courts aren’t interesting in getting into the weeds of where you find commonality when it walks like an investment scheme and talks like an investment scheme.

And another thing.  The Shareholder Primacy podcast is back! This week, Mike Levin and I talk about the securities fraud case against Elon Musk that appears to be heading for trial in March, and the latest (as of Sunday afternoon) developments in Warner/Paramount/Netflix.  Here at Apple; here at Spotify; here at Youtube.

The Weinberg Center has launched a short, anonymous survey of law professors on normative views of the shareholder proposal system under Rule 14a-8. The survey may take about 10–12 minutes. A link to the survey is available here:

https://www.surveymonkey.com/r/YWPHSC2

 If you have any questions about the survey, you can reach out to Larry Cunningham.

It was reported this week that OpenAI has disbanded its mission alignment team, and fired a woman (ostensibly because she discriminated against men) who opposed adding an “Adult Mode” to ChatGPT. Meanwhile, a former OpenAI researcher published a NYT op-ed about the erosion of OpenAI’s principles.

Notably, these moves come after OpenAI’s contentious restructuring into a Delaware public benefit corporation, which required assurances to the AGs of California and Delaware that the new structure would remain true to OpenAI’s original nonprofit mission to develop AI for humanity’s benefit. The way this was supposed to occur was that OpenAI-the-nonprofit was given a golden share to control OpenAI-the-benefit-corporation’s board.

The available evidence suggests … the mission may have been redirected.

Now, maybe that’s because of the identity of the individuals appointed to OpenAI-the-nonprofit’s board, which include current and former tech execs, a private equity guy, a corporate lawyer, and Sam Altman. And certainly, there may be a broader lesson here about the general toothlessness of the benefit corporation form – we’re seeing similar issues at Anthropic, which is also organized as a benefit corporation.

But the problem likely runs deeper. For one thing, we all remember when OpenAI’s board tried to fire Altman, resulting in an employee revolt. That wasn’t surprising, because OpenAI (and Anthropic) compensate their employees with equity – incentivizing them to prioritize financial value. OpenAI and Anthropic have operated much more like VC-backed startups than social enterprises, and that may ultimately be rooted in the fact that AI requires such enormous capital investment that it simply is not practical to expect anything other than prioritization of profit.

Last week, I flew out to NYC for a quick turnaround trip and a PLI panel about Reincorporations and Redomestications. It was a part of a two-day program on Mergers & Acquisitions 2026: Advanced Trends and Developments.

Our panel featured Steve Haas from Hunton , Charlotte Newell from Sidley, and Robert Rosenberg from Houlihan Lokey. You can access the panel from PLI’s website.

Both Hunton and Sidley have put out interesting things on corporate law issues that have been on my radar. Charlotte has covered Delaware litigation and has expertise on the current state of play there as Delaware lawyer. Steve recently drafted an article for the American Bar Association: Delaware Supreme Court Establishes Test for Reviewing Reincorporation Decisions.

Although I can’t speak for the other panelists here, I think we all expect that Delaware will remain king of the hill by a substantial margin. There have been some shifts and some companies moving, but Delaware will continue to grow both in terms of overall numbers from private entity formation, public company IPOs, and public companies deciding to move to Delaware from other jurisdictions. Delaware’s overall numbers depend on both DExits and DEntries. Companies sometimes shift their incorporation from one jurisdiction to another. As long as more are moving in than moving out, Delaware will continue to grow. Delaware has a dominant product. That isn’t likely to change anytime soon. But that doesn’t mean that there isn’t any room for other states to offer alternatives.

Robert also came in with detailed slide deck with granular data. He looked at some historical moves like Costco in 1998 and Microsoft in 1993 and also pulled in recent IPO data. Most years, Delaware gets about 80% of IPOs. But 2025 looked a little different.

Nevada pulled in about 16.8% of IPOs and Delaware came in with 61.8%, picking up another 81 public companies. That’s a bigger number than the number of companies that left Delaware last year. As expected, Delaware continues to grow at a nice clip.

I haven’t yet gone an identified the 22 IPO firms and looked to see if they have any interesting or explanatory characteristics yet. Fortunately, law students are always looking for research projects and this could be an interesting one.

Ultimately, if this trend holds, it may be possible for Nevada to start accumulating more companies with IPOs. This doesn’t mean that corporate law will turn into our primary economic driver anytime soon, but it could help diversify Nevada’s economy and make it easier for me to find my students jobs in business law.

I’ve seen a few proxies now where companies identify dividend flexibility as a reason for shifting to Delaware from Nevada. But these claims about dividend differences between Delaware and Nevada law puzzle me. There isn’t any material benefit to shifting from Nevada to Delaware for the purpose of securing additional dividend flexibility because Nevada law already gives companies substantial flexibility to authorize dividends.

Why do these kinds of statements keep happening? Ultimately, it looks like some of these proxies are just scissors and paste pot jobs that replicate old proxies without confirming that the statements were or remain accurate.

Distributions Under Nevada Law

This is the relevant Nevada statute NRS 78.288. It provides:

1.  Except as otherwise provided in subsection 2 and the articles of incorporation, a board of directors may authorize and the corporation may make distributions to the holders of any class or series of the capital stock of the corporation, including distributions on shares that are partially paid.

      2.  No distribution may be made if, after giving it effect:

      (a) The corporation would not be able to pay its debts as they become due in the usual course of business; or

      (b) Except as otherwise specifically allowed by the articles of incorporation, the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved immediately after the time of the distribution, to satisfy the preferential rights upon such dissolution of holders of shares of any class or series of the capital stock of the corporation having preferential rights superior to those receiving the distribution.

Here, Nevada mostly tracks the Model Business Corporation Act’s Section 6.40(c) with a critical difference. Nevada allows its corporations to opt out of the balance sheet test so long as the articles of incorporation so provide. If a corporation opts to include this sort of articles provision, it still leaves the equity or cash-flow insolvency test in place.

Distributions under Delaware Law

What tests apply for dividend declarations under Delaware law may be a more complex topic and you have to go to Delaware’s case law to actually understand it. The Delaware statute provides for dividends out of “surplus.”

But the statute is not the only limitation. For example, this 2011 law review article explains that:

Delaware law on the cash flow test, like the balance sheet test,
developed from common law jurisprudence. The test is not entirely clear:
the unanswered question is whether the test is present or forward-looking. In
other words, does a company become cash flow insolvent only at the point
when it actually defaults on a debt? Or is it insolvent at an earlier point,
when it becomes clear that the company will not be able to pay its debt in the
future?

Other guidance explains that “[t]he Court of Chancery, in ThoughtWorks, also identified a common law limitation from ‘redeeming…shares when the corporation is insolvent or would be rendered insolvent by the redemption.'”

Delaware has restrictions on dividend declarations and fully understanding them requires understanding Delaware case law.

What Some Proxies Say About Dividends

At this point, I’ve seen a few proxies claiming that Nevada does not offer as much flexibility as Delaware for declaring dividends. For example, LQR House has announced a planned move from Nevada to Delaware and stated that part of the rationale for the move is that “a Delaware corporation has greater flexibility in declaring dividends.” The same phrase appeared in proxies from Upexi (6/2/25), Iveda Solutions (10/7/24), and Nanoviricides (12/17/22).

This is what LQR House said:

For example, a Delaware corporation has greater flexibility in declaring dividends, which can aid a corporation in marketing various classes or series of dividend paying securities. Under Delaware law, dividends may be paid out of surplus, or if there is no surplus, out of net profits from the corporation’s previous fiscal year or the fiscal year in which the dividend is declared, or both, so long as there remains in the stated capital account an amount equal to the par value represented by all shares of the corporation’s stock, if any, having a preference upon the distribution of assets. Under Nevada law, dividends may be paid by the corporation unless after giving effect to the distribution, the corporation would not be able to pay its debts as they come due in the usual course of business, or (unless the corporation’s articles of incorporation permit otherwise) the corporation’s total assets would be less than the sum of its total liabilities, plus amounts payable in dissolution to holders of shares carrying a liquidation preference over the class of shares to which a dividend is declared. These and other differences between Nevada’s and Delaware’s corporate laws are more fully explained below.

Reincorporating For Dividend Flexibility Makes Little Sense

If you’re looking to reincorporate from Nevada to Delaware on the theory that it will allow a corporation to secure more dividend flexibility, I don’t think that’s a real benefit. If you have the votes to reincorporate, you should also have the votes to simply amend your articles of incorporation to waive the balance sheet test–if that’s what you want to do.

LQR House Has A Lot Going On

Notably, the most recent 10-Q reveals that LQR House recently settled legal proceedings. This is how its most recent 10-Q describes the settlement:

As previously disclosed in the Company’s Current Reports on Form 8-K filed on July 15, 2025 and September 26, 2025, the Company, together with certain current and former officers and directors, was named as a defendant in an action filed by Kingbird Ventures, LLC in the Eighth Judicial District Court, Clark County, Nevada. The complaint alleged, among other things, breach of fiduciary duty and related claims arising from corporate governance matters. On September 22, 2025, the Company and other defendants entered into settlement agreements with Kingbird Ventures and related parties to resolve all matters in the litigation. The settlements provide for mutual releases and a total cash payment obligation of approximately $13 million from the Nevada Defendants (as defined in the agreements), including an initial payment of $7.5 million made in September 2025 and a remaining balance of approximately $5.5 million due by December 18, 2025. No admission of liability was made by any party.

Although I haven’t yet pulled the court files, the $13 million settlement illustrates that some claims that Nevada will let companies get away with just about anything appear overstated. LQR House has a market cap now of about $20 million. It paid out well over half that amount when it settled “breach of fiduciary duty and related claims arising from corporate governance matters.” The settlement comes in at 65% of LQR House’s current market cap. Nevada isn’t known for calling foot faults, but don’t think the state can’t drop the hammer.