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By Scott Regan, Unclaimed Property | May 26, 2020

Upon receiving an invitation from the Delaware Secretary of State (DE SOS) to enroll in Delaware’s unclaimed property voluntary disclosure agreement program (VDA), corporations have sixty days to decide whether to enroll.  If a corporation fails to enroll, it will immediately be referred to the Delaware Secretary of Finance (DE SOF) to be forcibly enrolled in the state’s unclaimed property audit program.

Here are 5 reasons to enroll in the DE VDA program;

  • Waiver of interest and penalty: DE’s audit program enforces interest of up to 50%, which is waived in the VDA program
  • Shortened duration: the VDA program must be completed in 18-24 months, while the audit program has no time limit and often lasts 5 years or longer
  • Preferable voided check aging criteria: the VDA programs allows 90-day aging criteria for researching voided checks while the audit program requires 30-day criteria for researching and including voided checks in potential unclaimed property populations. This VDA benefit provides for a vast reduction in potential extrapolated liability versus the audit program.
  • Ability to deal with Delaware only: the DE SOF employs third party contingently paid audit firms that represent all states and who immediately shop the assignment to their multiple state clients. Thus, a DE audit becomes a multi-state audit every time.
  • The VDA is a Corporate friendly: the DE SOS exists to serve as a corporate connection to Delaware’s business friendly government while the DE SOF’s purpose is to collect revenue.  Thus, in every way the VDA program is designed to be more friendly to corporations.   While the VDA program has significant requirements and is a serious undertaking, it is vastly more advantageous to corporations.  The audit program is run by contingent fee firms who are incentivized to maximize collections.  Since corporations who receive an invitation to the VDA program will, by statute, be in either the VDA or audit program, choosing the VDA program is a no-brainer.

 

And 5 best practices in preparation to accept the invitation.

  • Determine if your company has previously enrolled in the VDA or audit program: Delaware’s VDA and audit programs have existed in various formats for many years. If your company has completed a DE VDA or audit, and the scope has expired or the terms were not met, it may be advantageous to enroll in the new DE SOS VDA program to avoid the risk of audit.
  • Review merger & acquisition activity: For merged or acquired entities incorporated in Delaware that are non-compliant, the DE SOS VDA program is a great option to comply with your unclaimed property obligations and eliminate interest and penalties due to DE. Watch our M&A webinar for a practical guide for leveraging policies and procedures developed specifically for acquisition activities.
  • Record retention: Determine your company’s sources of unclaimed property, and the availability of researchable records.
  • Response team: The VDA program is a verified self-audit with specific rules that require input and data from many departments. Consider assembling a multi-discipline response team to include participants from accounting, finance, treasury, human resources/benefits and legal.  It is advisable (and recommended by the DE SOS) to retain external advisors/advocates who are familiar with navigating the requirements of the VDA program.
  • Policies and procedures: Gather and review your company’s existing policies and procedures (if any) for the treatment of aged liabilities and obligations.
  • Historical filings: If possible, gather all of your company’s prior escheat filings for the last 10 years or as far back as available.
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