Delaware Announces Voluntary Disclosure Agreement Program

On July 11, 2012, Governor Markell signed into law Senate Bill 258 (“SB 258”), authorizing the Delaware Secretary of State (“Secretary”) to offer and enter into a Voluntary Disclosure Agreement (VDA) for unreported abandoned and unclaimed property (AUP). In so doing, SB 258 allows the Secretary to shorten the “look-back” period for Delaware VDAs by as much as five years.

Under the previous Delaware VDA policy, the State required holders of unreported AUP to calculate their exposure for transactions beginning on or after January 1, 1991. With the passage of SB 258, the “look-back” period would be shortened to 1996 for holders who notify the Secretary, in writing, of their intention to enter into the VDA Program (“Program”). The holder must deliver a properly executed Notice of Intent to participate in the State’s Program to the Secretary by June 30, 2013, and make full payment of the property to the Secretary by June 30, 2014. After June 30, 2012, but before June 30, 2014, holders who notify the State in writing of their intent to enter the Program will be afforded a reduced “look-back” period and be required to calculate exposure for transactions beginning on or after January 1, 1993. To be eligible, the holder must deliver to the Secretary, after June 30, 2013, and on or before June 30, 2014, a proper Notice of Intent to participate in the State’s Program and make full payment of the property to the Secretary by June 30, 2015. The Program will “sunset” after July 30, 2014, and the Secretary will have no such authority to accept a Notice of Intent by a holder to enter into a VDA through the Secretary’s office.

It is important to note that SB 258 does not apply to any holder who entered into a VDA with the State Escheator prior to June 30, 2012. Further, any holder who had previously received a Notification of Examination from the State Escheator or receives an examination notification after June 30, 2012, will be ineligible to participate in the Secretary’s Program.

However, any holder who delivered a properly executed Notice of Intent, or entered into a VDA with the State Escheator by June 30, 2012, will be granted the benefit of the shortened “look-back” period, depending on the dates of payment of AUP to the State Escheator. The State Escheator, not the Secretary, will retain all authority on actions by a holder in conjunction with either a Notification of Intent to enter into the Program or execution of a VDA on or before June 30, 2012.

As a final note, SB 258 requires both the State Escheator and Secretary to waive any right to seek payment under 12 Del. C. §§ 1156 and 1158, following a holder’s remittance of such property by way of the Secretary’s Program except in the case of fraud. Moreover, the State Escheator is barred from performing any examination of a holder who participates in the Secretary’s Program prior to July 1, 2015, except for which the holder is referred to the State Escheator by the Secretary. This is a marked departure from current practices. Prior to the passage of this law, a State Escheator had the right to audit VDA results up to three years following submission. Additionally under the new law, the Secretary will have no authority to perform examinations or conduct investigative analysis of holders but will maintain authority to respond to and resolve claims or contentions brought by holders under the Secretary’s Program.