The Delaware Secretary of State’s Office (SOS) recently made public that it will continue to send letters inviting businesses to participate in the SOS Voluntary Disclosure Agreement (VDA) Program throughout 2021. The first round of 2021 letters were sent by the SOS on Feb. 19, 2021. Additional letters are anticipated to be mailed on May 14, 2021 and Aug. 20, 2021.
Background
Letters are mailed to various businesses in which the SOS has identified as ‘likely being out of compliance’ with Delaware’s unclaimed property law. Based on previous outreach efforts, it is estimated that approximately 100 businesses receive letters in each of these mailings. Participation in the program is strongly encouraged as letter recipients who do not enroll in the program within 60 days are referred to the Delaware Department of Finance for an unclaimed property audit.
A Delaware VDA may offer a business significant advantages compared to a Delaware unclaimed property audit. The typical timeline to complete a Delaware VDA spans two years on average, whereas an audit examination can typically take five or more years to complete. Delaware audits are often conducted by third party audit firms and many adjoin additional states into the examination, thus resulting in a multi-state audit examination. With a Delaware VDA, a company ensures it is in control of its self-examination. In addition, penalties and interest are waived for the legal entities and property types brought forward during the VDA. These are among the many advantages the Delaware VDA has to offer.
COVID-19 impact
With most businesses continuing to operate remotely amid state shut-downs and health concerns, many corporate mailrooms may not be monitored daily. The SOS letters are generally addressed to senior executives (e.g., Chief Financial Officers, Chief Executive Officer, etc.). Given the narrow 60-day response window to enroll in the VDA program, C-Suite executives and related teams should be made aware of these mailings so appropriate action can be taken if and when a letter is received.
Takeaways
Delaware remains the largest enforcer of unclaimed property laws and regulations. It is very important that businesses understand the risks and the benefits of a VDA versus an audit within the response window. These letters serve as a reminder for all businesses, especially those incorporated in Delaware, to evaluate their compliance with unclaimed property laws and regulations and proactively mitigate their unclaimed property exposure.
Businesses that receive the Delaware letter or have questions about unclaimed property and various state compliance obligations should speak to an unclaimed property specialist.
