Reed Smith In-depth

The Delaware Secretary of State continues to send letters inviting companies to enter the voluntary disclosure agreement (VDA) program pursuant to the state’s unclaimed property law. Invitees have 60 days from the date of the invitation to enroll in the VDA program. If a company does not enroll, the Secretary of State will refer the company to the Department of Finance for examination. While audits can be costly, so too can the VDA. Holders should consider whether the benefits of the VDA will offset the sacrifices required. Here, we set out some of those considerations.

Auteurs: Diane Green-Kelly Sara A. Lima Freda Pepper Autumn D. Homza

The Secretary of State (“SOS”) plans to send out “invitations” to companies to enter the VDA program pursuant to 12 Del. § 1173(b).1 All companies should watch for the invitations. The SOS does invite companies who already file unclaimed property to participate. The following are the approximate dates in the current calendar year that the SOS has announced it is sending invitations for the Delaware SOS VDA Program.

  • February 19, 2021
  • May 14, 2021
  • August 20, 2021

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 SOS 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 Delaware’s unclaimed property audit.

Before enrolling in the VDA program, companies should take into account the considerations below to determine whether the benefits of the VDA program will offset the costs: