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Implementing an effective record and document retention policy (“Document Retention Policy”) requires more than just an organized system of files. A good Document Retention Policy requires development of a comprehensive strategy that maximizes efficiency and effectiveness while minimizing risk. A Document Retention Policy identifies, establishes, and describes how a business and its employees are expected to treat and manage the business’s physical, paper, and electronic documents and data from start to finish (creation, modifications, through destruction). It is recommended that businesses should implement a Document Retention Policy. According to Thomson Reuters Practical Law, a Document Retention Policy can assist a business in being more efficient in determining whether documents from a certain time period are still held within the business and in finding the applicable records and documents in the event that litigation hold obligations are imposed on the business by a potential litigation or government investigation. Also, a Document Retention Policy could help demonstrate to a judge or government authority that the business had a “legitimate and neutral purpose” for the destruction of documents or records if the documents which were relevant to the suit or investigation were destroyed in accordance with the business’s Document Retention Policy and before the business “reasonably anticipated the investigation or lawsuit”. Intentional destruction of documents relevant to a pending litigation (“known as the spoliation doctrine”) can have a harsh negative impact on your business’s position in the litigation. The National Association of Independent Businesses (NAIB) simply states that “If a litigant requests a document that you cannot provide because it has been destroyed, then a judge or jury may in some circumstances be permitted to conclude that the document contained information detrimental to your position.” They further explain that the primary exception to this rule is if the destruction of the document was reasonable. “Evidence of a clear and consistently enforced Document Retention Policy, enacted for valid purposes, will go a long way to convince the court that the destruction of a document was reasonable.” Top 10 Tips for Building a Document Retention PolicyMay 01, 2016 by Thomson Reuters Legal Managed Services.
The law recognizes that businesses cannot keep documents forever, so businesses are not expected to provide documents in the course of litigation or investigation if they were destroyed in accordance with routine document destruction procedures. However, every business needs a well-planned Document Retention Policy in order to be adequately protected. Here are a few recommended tips for your business to consider with its Document Retention Policy to assist in the success of your policy:
- Conduct your Due Diligence
Different industries and the laws that govern each industry have drastically different requirements with respect to the length of time that records must be kept, as well as how those documents must be stored. It is imperative that companies conduct necessary due diligence to ensure compliance with the specific legal and business regulatory retention requirements for different types of documents. Typically, the range for document retention appears to be in the three to seven year range. It is also important to keep in mind that some documents are required to be permanently retained (i.e. annual financial statements, auditor reports, patents, agreements with perpetual protections and/or survival terms, etc.).
HAS YOUR BUSINESS CONDUCTED ITS DUE DILIGENCE REGARDING DOCUMENT RETENTION? IF IN DOUBT, BE CAUTIOUS!
- When in Doubt, Err on the Side of Caution
Sometimes it is unclear which documents fall under a particular category. And, in some cases, documents may actually fall under multiple categories. If a document could be considered more than one type of item and there are different rules governing the retention procedures, it is always a good decision to preserve the document based on both rules.
For example, if a particular accounting firm also constitutes a tax record, then a copy of that form should be saved in the files that relate to accounting items and the separate files that pertain to tax matters. Similarly, if the pertinent accounting rules mandate a three-year retention timeframe and the tax rules dictate a four-year timeframe, it is best to err on the side of caution and keep the document for the longer period of time.
HOW IS YOUR BUSINESS STORING ITS DOCUMENTS AND RECORDS PURSUANT TO YOUR DOCUMENT RETENTION POLICY AND SECURITY PRACTICES?
- Cloud Storage Is The Way to Go
The best course of action is to set up a corporate repository where there are folders and subfolders that can be created, added, and copied as appropriate. There are obviously different ways to establish a corporate repository, but utilizing cloud storage is definitely the best way to go. In addition to offering a large amount of space for huge sums of data, cloud computing allows for efficiency and reliability. If a company changes its office spaces, there is no hardware to transport or files to move.
In addition, with cloud storage, there are no networks to deal with, so if a company’s networks or internal systems are subjected to attack, documents stored in the cloud will remain safe from harm.
- Security Matters
These days, there is just too much important information contained within company documents, and much of this tends to reside in cyberspace. Because of this, it is absolutely crucial for some company resources to be allocated to the safekeeping of records. It may be tempting to choose one of the many free data storage solutions currently available. But, it just isn’t wise to pinch pennies when it very well may result in compromising document security. Fortunately, there are services that recognize the importance of document privacy and employ stringent security measures to protect it.
REVIEW, LOOK AGAIN, BEFORE DESTROYING YOUR BUSINESS’ DOCUMENTS AND RECORDS. STICK WITH YOUR PRACTICES AND POLICIES TO COMPLY AND BE SAFE.
- Take another look before you toss.
At the end of a document’s retention period, take one last look before destroying the record to make sure there isn’t any particular reason to keep it. Perhaps the document is relevant to anticipated litigation, or perhaps a document was mis-categorized and is not due for destruction yet. Someone should be in charge of taking a final look before a document is destroyed.
- Stick to your Document Retention Policy.
If you do deviate from your Document Retention Policy routine destruction schedule for any reason, that reason should be documented. It may not seem like a big deal if you routinely keep documents longer than your Document Retention Policy requires or if you are not always consistent in that area, but by failing to adhere to your Document Retention Policy, you may be giving up valuable protections your Document Retention Policy could provide if litigation arises.
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