Document dilemma
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What legal obligations need to be built in to corporate records management policies? Neil Trueman and Matthew Warren of law firm Bristows advise.
Most major businesses generate millions of emails and other electronic files, plus mountains of paper documents. Obviously, companies are tempted to overwrite and delete electronic documents or to shred paper files, rather than pay to store and catalogue them all.
However, the wholesale shredding of corporate documents has been associated with recent scandals. It is also clear that the deliberate and systematic destruction of documents and files can seriously compromise any defensive legal case that might arise.
Organisations need to avoid being overwhelmed by old files, but also need to keep important documents. To do this they must devise and implement objective document management and retention policies.
Retention periods
Companies need to retain documentary evidence to enable them to take action and defend legal claims against them. But after a certain time has elapsed, claims are barred under UK limitation legislation.
These time limits mean that once the relevant period has elapsed, it is usually safe to dispose of files and records. Generally, the limitation periods to bring legal proceedings in the UK are:
There are exceptions to these general limitation periods. For example, for claims involving personal injury or damage to property resulting from a defective product, the time limit may be extended to ten years.
Furthermore, the general limitation period for actions in tort may be extended to 15 years if the damage is latent. That is to say, if the injury only shows up some years later.
When companies decide how long to keep files and documents, they must weigh the risk of destroying them against the cost of storing them. Because limitation periods vary according to types of claim, it is hard to say definitively when companies can delete documents with no risk that they may be needed in legal proceedings.
A sensible compromise would be to keep files and documents that may be relevant to potential litigation for at least six years. Documents that relate to dealings with third parties, or to complaints or problems, are more likely to be needed in future litigation than documents that relate to internal management issues.
Files and documents that may be relevant to potential product liability litigation, such as instruction manuals or product information brochures, should be kept longer because the limitation periods are longer.
Personnel and related records The retention of personal data about individuals in the UK is governed by the Data Protection Act. Personal data includes any information about an identifiable individual, such as contact details and employment history, and would include most of the information in files on individual employees.
Under the Data Protection Act, all records of personal data about individuals should be accurate and kept up to date, and should not be kept longer than necessary. The number of demands by individuals requesting access to personal data seems to be increasing, so the timely deletion of old files should reduce the burden of responding to such requests. However, some personnel-related documents, such as insurance records including lists of insured people, should be retained permanently.
Hazardous substances Under UK regulations, retention periods of up to 40 years apply to medical records relating to hazardous substances such as lead and asbestos. Companies should therefore check whether the medical records of employees are covered by these regulations. If not, a sensible retention period for most employee files would be six years from when employment ceases.
Tax In general, records required for tax purposes should be kept for six years from the end of the relevant accounting period. Because it may be inconvenient to determine the dates of particular accounting periods, companies should keep documents required for tax purposes for seven years.
Litigation exception Files and documents relating to current or pending litigation should be kept at least until any dispute is resolved and no longer open to appeal. If documents relevant to litigation are deliberately destroyed, the court may draw adverse inferences, and the destruction could be viewed as obstructing the course of justice.
Company documents The UK Companies Act requires private companies to keep accounting records for three years, and public companies six years. The Companies Act also requires companies to keep documents relating to their incorporation and corporate activities, such as certificates of incorporation, minutes of meetings, statutory returns, statutory registers and share registration forms. A number of these documents will be on paper and should be kept permanently.
Staff training The success of a well thought out document retention policy in reducing costs and increasing efficiency will ultimately be determined by the way that policy is implemented. Like the introduction of any new software system throughout a business, successful implementation of a document retention policy requires that staff are effectively trained to identify and catalogue a given electronic file or paper document for storage in the correct manner for the correct period of time. And inevitably with any training of an electronic nature, the bulk of this task is almost certain to fall to the IT department.
