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Delaware Adopts Unclaimed Property Voluntary Disclosure Program

Publisher: Day Pitney Alert
January 25, 2013
Day Pitney Author(s) Michael James Guerriero

In an effort to encourage companies to disclose and report their possession of unclaimed property, Delaware has provided such entities with a limited opportunity to enter into a voluntary disclosure agreement ("VDA"), which would significantly reduce the potential liability associated with failure to adhere to the state's unclaimed property laws. All Delaware business entities are eligible to participate in the VDA program so long as they have not previously received a Notice of Audit, are not currently under audit, and have not entered into a prior voluntary disclosure program with the Delaware Department of Finance as of June 30, 2012.

Most notably, the VDA program reduces the time period during which companies are subject to assessment from 31 years to 16 years for companies that enter into VDAs prior to June 30, 2013, and make full payment or enter into payment plans by June 30, 2014. The program would also limit the authority of the Secretary of State and the State Escheator to audit the voluntary disclosures.

Typically, companies are required to escheat to the proper state any monies or other property owed by the companies to the owners of the property once the item or amount remains unpaid or otherwise unclaimed for a certain period of time. The state would then hold the unclaimed property until such property is actually claimed by the owner.

Under most states' unclaimed property laws, if the company has a last known address for the owner of the property, it is required to escheat the property to that state. However, as is most often the case, the property escheats to the company's state of incorporation in the event the company cannot locate the name and/or address of the owner of the property. With Delaware being home to so many companies, it has historically taken an aggressive stance toward auditing such companies for violations of its unclaimed property laws. In fact, Delaware has forecast it will take in almost $500 million in unclaimed property in 2013 alone, which would make such unclaimed property, as well as the fines and penalties levied against companies for violations of the state's unclaimed property laws, its third largest source of annual revenue.

All companies incorporated in Delaware should carefully evaluate their compliance with unclaimed property laws and assess their exposure against the potential benefits of the VDA program with respect to the various types of reportable property.

For more information regarding the VDA program, including a copy of the relevant forms, please visit www.delawarevda.com.

The Day Pitney attorneys listed to the right are available to discuss any issues or questions you may have regarding Delaware's VDA program.

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