Reed Smith Client Alerts

The Delaware Secretary of State has announced it will send letters inviting companies to enter the voluntary disclosure agreement (VDA) program. Invitees have 60 days from the date of the invitation to enroll in the VDA program. If a company does not enroll, it will automatically be referred to the Department of Finance for examination. Holders should consider whether the benefits of the VDA will offset the sacrifices required.

Delaware Chief Deputy Secretary of State Knight recently announced the Secretary of State’s plans to send out invitations to companies to enter the VDA program pursuant to 12 Del. § 1173(b).1 Invitees will have 60 days from the date of the invitation to enroll in the VDA program. If an invitee does not enroll in the VDA program within 60 days of the invitation mailing, the state will refer the company to the State Escheator for examination. Once a company receives a notice of an audit by the State of Delaware Department of Finance, it will not be eligible to enter into the VDA program.2

It is very important that a company not ignore the Secretary of State invitation to participate in the VDA program. Many recipients of these letters have ignored them on grounds that the company believes it is in compliance with Delaware law or believes it has had nothing to report to Delaware. Other companies have ignored the letters because only their parent holding company is incorporated in Delaware, but the operating entities are incorporated elsewhere and therefore they incorrectly believe that they can ignore the letter, only to later receive a notice of audit by Delaware’s State Escheator. Unfortunately, that letter is often followed by letters from multiple states joining into Delaware’s unclaimed property audit.