Delaware enacts new unclaimed property legislation

On Jan. 29, 2015, Delaware enacted SB 11 that will act to improve fundamental fairness and transparency of the state’s unclaimed property program. SB 11 places some restrictions on the state’s use of contract auditors: a single contract auditor may not be assigned to more than 50 percent of all unclaimed property examinations going forward. Also, agreements between Delaware and a contract auditor are limited to terms of five years and current contracts should be adjusted accordingly.

Further, SB 11 makes changes with respect to independent reviewer determinations. Independent reviewers are now required to send findings of fact and conclusions to the holder within 90 days of the oral hearing. The Secretary of Finance no longer has the power to adopt or reject an independent reviewer’s determination and must send a copy of the determination to the holder. If either the holder or the Secretary of Finance disagrees with the independent reviewer’s determination, they may appeal the determination to the Delaware Court of Chancery.

The Secretary of Finance is now directed to develop a procedural manual by the end of 2015 and, going forward, ensure that contract auditors comply with the guidelines in the procedural manual. The Secretary of Finance is also charged with the duty to update the state’s administrative regulations to ensure a greater level of transparency and predictability regarding unclaimed property examinations.

This new legislation results, in part, from the negative implications from Delaware’s litigation position in the Temple Inland case. The one expected change that SB 11 did not make was to shorten the state’s look-back period; Delaware retains the ability to look back to 1981 during examinations of holders. Despite this, SB 11 is promising for holders and will lead to smoother administration of Delaware’s unclaimed property program along with a greater level of fundamental fairness.

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