How Do You Reduce Escheatment Risk?

For public companies, escheatment risk builds quietly. A shareholder moves and doesn't update their address. A dividend check goes uncashed. A shareholder passes away and no one notifies the transfer agent.

Individually, these look like rounding errors. Across a shareholder base of any size, they add up to real financial, compliance, and reputational exposure.

EQ's transfer agent services are built to proactively identify and remediate risks to reduce state audit exposure. Here's how unclaimed dividends and escheatment risk accumulate, what the compliance obligations look like today, and what a modern transfer agent should be doing about it before state deadlines arrive.

Why Unclaimed Property Piles Up
Most escheatment risk doesn't come from one dramatic failure. It comes from small gaps compounding over years:

• Address changes that never get updated: Shareholders move, remarry, or simply stop opening mail from a company they haven't thought about in a decade.
• Small dividend or interest checks can be misplaced and never get deposited.
• Deceased shareholder accounts with no notified estate: Without proactive outreach, these accounts can sit dormant indefinitely.
• Corporate actions that create new positions shareholders don't recognize: Spin-offs, mergers, and stock splits sometimes generate small residual positions that shareholders never realize they own.

Left unmanaged, these accumulate against a dormancy clock that varies by state, typically three to five years, after which the property must be reported and remitted to the state as unclaimed property.

What Escheatment Compliance Actually Requires
Escheatment isn't optional and it isn't uniform. Every state sets its own dormancy period, due diligence notice requirements, and reporting deadlines, and most states require issuers to send due diligence letters before property can be escheated. Missing a state's specific requirements exposes the company to audit, penalties, and interest on unreported property, sometimes going back a decade or more.

A transfer agent’s responsibilities for unclaimed property include managing requirements for every state where its clients have shareholders.  These include:

1. The applicable dormancy period for each property type (dividends, securities, uncashed checks all can have different periods).
2. Required due diligence outreach.
3. State-specific reporting formats and deadlines.
4. Holder ID registration requirements in states that mandate it.

How EQ Approaches Unclaimed Property and Shareholder Reunification
EQ transfer agent services include proactive shareholder location and asset reunification, not just reactive reporting when a state audit arrives. That distinction matters. A transfer agent that only reacts to escheatment deadlines is managing risk after the fact. A transfer agent that actively works to locate shareholders, verify current addresses, and reunite shareholders with their assets before the dormancy clock runs out reduces the amount of property that needs to be escheated, which is better for the company and better for the shareholder.

EQ supports over 20 million shareholders across more than 15,000 client organizations, which means asset reunification and escheatment compliance operate at meaningful scale, not as an afterthought bolted onto core transfer agent and registrar services.

What Good Escheatment Support Looks Like in Practice

• Proactive address verification, not just mail-forwarding reliance.
• Documented due diligence outreach that satisfies state-specific notice requirements before a report is filed.
• State-by-state compliance tracking, since dormancy periods a reporting formats are not standardized nationally.
• Lost shareholder search services that go beyond a single database check.
• Clear audit trails, since state unclaimed property audits can look back many years.

Frequently Asked Questions

How do we reduce unclaimed assets and the escheatment risk?

The most effective approach combines proactive shareholder outreach with disciplined, state-by-state due diligence and reporting. EQ transfer agent services build this into ongoing account management rather than treating it as a once-a-year compliance exercise.

What is escheatment?

Escheatment is the legal process of turning unclaimed property, including dividends, securities, and related shareholder assets, over to a state government after a defined dormancy period during which the rightful owner cannot be located or has not claimed the property.

How long can a company hold unclaimed property before escheatment applies?

Dormancy periods vary by state and by property type, generally ranging from three to five years, though some states apply different timelines to different asset classes. A transfer agent should track this on a state-by-state basis rather than applying one national assumption.

What happens if a company fails to comply with escheatment requirements?

Non-compliance exposes companies to state audits, penalties, and interest, and audits can look back well beyond the current reporting year. Proper due diligence documentation and activity tracking is often the difference between a routine filing and a costly audit finding.

Can a transfer agent help locate shareholders before escheatment is required?

Yes. EQ's asset reunification services include proactive shareholder location, which aims to reunite shareholders with dividends and holdings before the dormancy clock forces escheatment, reducing both compliance exposure and the amount of property ultimately reported to the state.