Major Deadline Approaching To Minimize Exposure For Unclaimed Property Liability

Delaware corporations and other business entities have a limited opportunity to minimize and liquidate exposure to Delaware unclaimed property liability by enrolling in Delaware's Voluntary Disclosure Agreement Program. The VDA program permits companies not under audit to voluntarily disclose and pay the amount of unclaimed property without interest or penalties. To obtain the maximum benefit of the VDA program—a waiver of all interest and penalties on reported property from transactions in 1996 and later, and an exclusion of property arising from transactions that took place prior to 1996—a company must enroll by June 30, 2013. An audit could otherwise subject a company to liability for transactions that took place as far back as 1981, plus interest and penalties which could double the amount due.

All that need be done by June 30 is to make the decision to enroll, and to fill out a simple form. Completing the enrollment form is not an acknowledgement of liability, but is a commitment to conduct an internal review to determine whether or not there is liability, and to make payment if liability is found. There is then a two-year period, until June 30, 2015, to file the report and pay any unclaimed funds due to Delaware from transactions in 1996 and later.

Most companies have some exposure under unclaimed property laws, which require that property such as uncashed payroll checks, uncashed vendor checks, uncashed dividend checks, unredeemed gift certificates (in some states), unredeemed cash rebates (in some instances) and other intangible property be paid to a state. The state of the owner's address has the first priority right to take the property. If that state is not known, or if the owner's address is in a foreign country, the state of incorporation (or formation) of the "holder" of the property has the right to take the property.

Companies likely to have the greatest unclaimed property exposure to Delaware include:

Delaware companies whose business is likely to produce a significant volume of unclaimed property owed to persons or companies whose address is not known, or whose address is in a foreign country. Businesses which have significant dealings with employees, vendors, and customers in Delawareespecially if the nature of the transactions, such as seasonal employment, vendors used for a short time, and a liberal policy on accepting returns resulting in credit balances, is likely to result in unclaimed property. The Delaware...