KeepUP™ Blog

As we find ourselves preparing for Spring reporting (corporations must start the Spring season by submitting reports to Delaware by March 1^st), it is worth highlighting several aspects of the due diligence and reporting processes.

Due Diligence Notices. The due diligence letter is a state mandated requirement that the holder provide notice to the owner before the property is reported and remitted to the state as unclaimed property and is also the holder’s last attempt to establish contact with the owner of dormant property before escheatment.

Method, Timing and Content of the Notice. Typically, a first-class mailing must be sent to the owner 60 to 120 days prior to filing the report, though as is common in unclaimed property, time frames vary state to state. Moreover, certified mail may be required in lieu of, or in addition to, first-class mail (e.g., New York: certified mail for property valued at $1000 or more and for all dividend reinvestment plans). Publication is also required for certain holders in New York, where requirements vary by property type). Many states also provide an exception for mailing to a known bad address, but again, this varies by state.

In states that have adopted a law based on the 2016 Revised Uniform Property Act (“RUUPA”), the time frame for mailing is generally 60-180 days before filing the report, though there are outliers here as well (e.g., Illinois requires notice to be sent 60 days to 1 year prior to the report, and by certified mail for securities valued at $1000 or more, 60 days prior to filing the report). These states have also adopted specific header and language requirements for the notice.

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  The DE Secretary of State (SOS) has indicated its intent to mail the latest round of VDA invitations on or about February 19, 2021. VDA invitations are sent several times per year to companies that are identified by the state as “likely being out of compliance” with Delaware’s unclaimed property law. 

Delaware’s Office of Unclaimed Property (OUP) has updated its payment instructions for wire and ACH payments, in advance of the upcoming March 1, 2021 Spring reporting deadline. 

MarketSphere Unclaimed Property Specialists has learned that the state of Delaware’s Department of Finance recently mailed unclaimed property audit notices to US corporations incorporated in Delaware. The audit notices target those holders who did not enroll in the Delaware Secretary of State’s Voluntary Disclosure Agreement (VDA) Program within the 60 days of receiving an invitation letter to participate. The invitation letters put the holder on notice that the state believes the holder to be out of compliance with Delaware’s unclaimed property law and invites them to participate in the VDA Program to bring them into compliance. If the holder does not enroll in the VDA Program within 60 days, they are referred for audit.

Corporations both large and small, public, or private can receive a VDA invitation. Under Delaware law, the state cannot initiate a new unclaimed property examination (audit) without first notifying the company that it may enter into the VDA Program (12 De. C. Ch. 11, section §1172). The invitations put the company on notice that if the holder does not enroll in the VDA program within 60 days of the date of the letter, the company will be referred for audit. The Secretary of State mailed approximately 200 invitations in August. Companies who did not enroll in the VDA Program within the 60-day period, may already have, or will soon receive audit notices from the Department of Finance.

MarketSphere Unclaimed Property Specialists has learned that the state of Delaware will soon be mailing unclaimed property audit notices to those companies who did not respond to the latest round of invitations sent by the state on August 21, 2020 to enroll in the Secretary of State’s Unclaimed Property Voluntary Disclosure Program (VDA program). Approximately 200 holders received these letters, which notify the holder that it is “likely out of compliance” with Delaware’s unclaimed property law and inviting them to participate in the VDA program. Any company can receive a VDA invitation, including public or private corporations, large Fortune 500 companies and smaller companies.

In accordance with Delaware law, the state cannot initiate a new unclaimed property examination (audit) without first notifying the company that it may enter into the Secretary of State’s VDA program (12 Del. C. Ch. 11, section §1172).   These letters put the company on notice that if the holder does not enroll in the VDA program, the Secretary of State’s Office will refer the company to the Delaware Department of Finance, who will issue an unclaimed property audit notice upon the expiration of the 60-day notice period.

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  Since the latter part of 2018, Delaware’s Secretary of State has been consistently mailing VDA invitations and continues this practice on an on-going basis. 

Based on correspondence that MarketSphere received from the office of Delaware’s Secretary of State, the latest round of VDA invitations were mailed on August 21, 2020 to a number of Delaware incorporated companies identified as “likely being out of compliance” with Delaware’s unclaimed property law. 

The correspondence states: 

Today, August 21, 2020, the Delaware Secretary of State’s Office will be mailing about 200 letters to various companies (individually referred to as “Holder”) that have been identified as likely being out of compliance with Delaware law, 12 Del. C. ch. 11, as it relates to reporting dormant, abandoned, or unclaimed property.  Pursuant to our state laws, Delaware cannot initiate new abandoned or unclaimed property examinations (audits) unless a company has first been notified in writing by the Secretary of State that it may enter into the SOS VDA Program.  The letter serves as such a notice to the Holder and strongly encourages participation in the SOS VDA Program, as an audit notice will be issued by the Delaware Department of Finance 60 days after the date of the mailing. 

As the correspondence notes, if a recipient company fails to respond to the notice within 60 days, the Delaware Department of Finance will issue an unclaimed property audit notice upon the expiration of the 60-day notice period.

The Delaware Department of Finance has begun mailing letters entitled “Notice Requesting Verified Report for the Report Year 2019” to companies that have previously submitted unclaimed property reports to the state of Delaware but did not submit a report on March 1, 2020.

The letter requests that the company submit the following documentation to the Department of Finance, within 30 days of the date of the notice:

• A completed Form of Verified Report for Report Year 2019, as well as a list of legal entities included in the report; and

• A copy of the company’s unclaimed property policies and procedures.

If a company did not have unclaimed property to report in the 2019 Report Year, the state nevertheless requests that the company confirm this information by returning the a Verified Report form even though under Delaware law, negative (or “zero”) reports are not required (22 DE Reg. 851, § 2.6.2).

MarketSphere recently received correspondence from the office of Delaware’s Secretary of State (SOS), regarding the latest round of VDA invitations mailed to companies in February 2020.  As a consequence of the COVID 19 pandemic, the SOS is extending the regular 60-day response deadline. Invited companies will now have until July 18, 2020 to respond to the SOS. The correspondence also provides details regarding how best to communicate with the SOS during the current state of emergency.

 The correspondence states:  

HOLDERS: For any holder who received a February 2020 invitation from the Delaware Secretary of State to join the Voluntary Disclosure Agreement Program ("SOS VDA Program"), due to the current state of emergency declared by Governor John Carney, as well as many other declarations made across the country and the world, the Office of Unclaimed Property, Department of Finance, and the State Escheator recognize that many holders have not had full access to their mail or the proper time to route the invitation to the appropriate individual(s). As a result, holders who received an invitation to join the SOS VDA Program during February 2020 will be able to join the SOS VDA Program through July 18, 2020.

MarketSphere received correspondence on April 3, 2020 from the office of Delaware’s Secretary of State (SOS), regarding the latest round of VDA invitations mailed to companies in February 2020.  As a consequence of the COVID 19 pandemic, the SOS is extending the regular 60-day response deadline by 30 days.  Invited companies will now have until May 22, 2020 to respond to the SOS.  The correspondence also provides details regarding how best to communicate with the SOS during the current state of emergency.  

The correspondence states: 

Important update on the February 2020 invitations: The Secretary of State (“SOS”) ​is encouraging companies who know they want to enroll in the VDA Program to send in a completed VDA-1 within the prescribed 60-day timeframe.  Due to the current state of emergency declared by Governor John Carney as well as many other declarations made across the country and the world, the SOS, in consultation with the Department of Finance and the State Escheator, realizes that many companies have not had full access to their mail or the proper time to route the invitation to the appropriate individual(s).  As a result, holders who received an invitation from the SOS to join the VDA Program during February 2020 will be allowed to join the SOS VDA Program through May 22, 2020. After May 22, 2020, all companies that do not enroll in the SOS VDA will be referred to the State Escheator for examination.  Holders should be mindful that, under Delaware law, they may not join the VDA Program after a Notice of Examination has been mailed by the State Escheator.

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  Since the latter part of 2018, Delaware’s Secretary of State has been consistently mailing VDA invitations and continues this practice on an on-going basis. 

Based on correspondence that MarketSphere received from the office of Delaware’s Secretary of State, the latest round of VDA invitations will be mailed on February 20, 2020 to a number of Delaware incorporated companies.   

The correspondence states: 

On February 20, 2020, the Delaware Secretary of State’s Office will be mailing over 100 letters to various companies (individually referred to as “Holder”) that have been identified as likely being out of compliance with Delaware law, 12 Del. C. ch. 11, as it relates to reporting dormant, abandoned, or unclaimed property.  Pursuant to our state laws, Delaware cannot initiate new abandoned or unclaimed property examinations (audits) unless a company has first been notified in writing by the Secretary of State that it may enter into the SOS VDA Program.  The letter serves as such a notice to the Holder and strongly encourages participation in the SOS VDA Program, as an audit notice will be issued by the Delaware Department of Finance 60 days after the date of the mailing

As the correspondence notes, recipient companies must respond to these notices within 60 days or they will be referred to the Delaware Department of Finance, which would then have the option to commence an unclaimed property audit.