I've been attending (and speaking as a panelist at) the National Association of Stock Plan Professionals (NASPP).  One of the panels discussed the important, but arcane topic of state unclaimed property (aka escheat) laws.  Coincidentally, Volume 5, Issue #3 of the California Controller's Unclaimed Property Newsletter arrived in my inbox this same week.

California's unclaimed property law has the effect of transferring the use and benefit of unclaimed assets from the private holders of those assets to the state.  Because the states receive so much unclaimed property and return so little to the actual owners, escheat laws have become an important liquidity resource.

While it's not surprising, it is disappointing to hear how aggressively states have become in pursuing issuers.  For example, some states are retaining contingent fee examiners to review company escheat procedures.  The NASPP panel also highlighted the aggressive positions taken by states with respect to whether contact has actually been lost with a shareholder.  Employee stock purchase plans, nominee holders and acquisitions may result in "lost" shareholders according to the states even when those shareholders are still working for the issuer.

Companies that deliver unclaimed shares to the state must be careful.  In Azure Ltd. v. I-Flow Corp., 46 Cal.4th 1323 (2009), the California Supreme Court found that immunity attaches only when the issuer complies with the other provisions of the unclaimed property law.