CALLING ALL DELAWARE CORPORATIONS – ARE YOU COMPLYING WITH DELAWARE UNCLAIMED PROPERTY REPORTING?

7/26/2019 | Articles & Alerts, General

The Delaware Escheator’s chief enforcement tool for companies that don’t comply with Delaware’s Unclaimed Property reporting requirements are “invitation letters.” These letters invite a non-filing company to participate in the Unclaimed Property Voluntary Disclosure Program.

Despite the name, these letters are not an invitation at all. Rather, the letter is sent to a company that has been identified by the Escheator as a non-filer. Do not ignore this letter. If it’s ignored after 60 days, the company is immediately selected for an unclaimed property examination. The examination is conducted by one of Delaware’s third-party vendors (paid on commission). These examinations can last 2-3 years and can be very burdensome. And as the vendors are paid on commission, they are incentivized to find liability.

Notably, at a recent conference in Philadelphia, the Escheator stressed that the automatic examination policy will be strictly enforced if the invitation letter is ignored.

As the invitation letters are going to continue rolling out three times a year for years to come, it’s seemingly only a matter of time before a non-filing company receives one. So whether you’ve received an invitation letter or not, we can help you come forward and participate in the program to get compliant now.

Below is a bullet point outline of some general Delaware Unclaimed Property facts and a summary of the VDA/invitation program:

• Less than 1% of the $1.3M Delaware companies are complying with the State’s Unclaimed Property reporting requirements;
• Unclaimed Property is 10% of Delaware’s yearly revenue (third largest single revenue source);
• 60 days to respond to invitation letter or company is immediately referred to the Delaware Escheator for an unclaimed property “examination”;
• Last round of letters sent in late May – must respond by late July;
• Middle-market companies to Fortune 100 companies—both privately and publicly held are slated to receive this round of letters;
• Letters are sent to corporate officers and the Delaware registered agents, or others that may not be aware of what they are or the potential consequences of ignoring them; 
• Letters are sent out three times a year, but not on a specific schedule—so a company organized under Delaware law must be vigilant all year. 

The benefits of the VDA program include: 

• Waiver of penalties and interest charges;
• Extended “aging” criteria for canceled checks (90-days for voided disbursement checks vs. normal 30 days for regular audit);
• Control over the process via a “self-review” of its own records to identify and remediate areas of exposure (instead of a 3 year examination conducted by a commission-compensated third party vendor).

For further information, please feel free to contact Daniel M. Dixon, Esquire at (610) 941-2484 or ddixon@kaplaw.com.