New rules aim to provide additional clarity regarding enforcement
While all eyes have been on the massive Dodd-Frank Act, the state of Delaware has snuck through some changes to the unclaimed property legislation. In August, lawmakers from the small but influential state adopted Senate Bill 272, which aims to provide ‘holders with additional clarity and certainly regarding the enforcement of Delaware’s unclaimed property statute.’
In a new report, law firm Sidley Austin describes the intention behind the legislation: ‘ameliorating the increasingly adversarial and even litigious interactions between the State and holders of unclaimed property...is laudable and timely. As in any legislation, there is room for improvement, and certain provisions of the Act could be fruitfully modified.’
The amendments are important for Delaware listed companies because they go some way to clarifying the rules by which the state and its auditors can determine a holders’ liability, and establish limits and exemption for ‘uninvoiced’ property or transactions between businesses. Delaware is by far the most aggressive state in pursuing escheatment claims against companies – in 2008, unclaimed property was the number two source of revenue for the state.
The Sidley paper states: ‘To quote the statute, [E]mployment of estimation techniques is an accepted and routine practice used by holders of abandoned and unclaimed property and by the State Escheator in determining holders’ liability to report and pay such property to the State with respect to periods for which inadequate holder records exist. There is no corresponding provision that authorizes a holder to employ estimation techniques, but such a right is implicit in the provision. Worth noting, however, is that the authorization of estimation techniques extends only to a determination of the amount a holder must pay to Delaware.’
