Given the recent headlines involving fraud allegations against various corporations and their accounting firms, e.g., Enron and Arthur Andersen, the issue of document retention has become a major concern for many companies. Companies that may not have had a document retention policy in the past are quickly implementing a policy so the companies’ employees have a clear procedure regarding which documents are to be maintained, how long the documents should be maintained, and when the documents should be destroyed.
A good document retention policy should include the following elements:
• Identifies documents which must be retained.
• Sets forth how and where the documents are stored.
• Sets forth the length of time documents are to be retained.
• Conforms to all statutory requirements for the retention of documents, including relevant statutes of limitation for actions which may be filed against the company.
• Identifies the person responsible for overseeing the retention policy.
• Sets forth separate procedures for the retention of documents once a government investigation or litigation has begun to ensure relevant documents are not destroyed prior to the resolution of the same.
• Provides regular employee training regarding the policy, including refresher courses.
• Provides for audits to ensure that employees are complying with the policy.
A uniform and consistently applied retention policy can provide many benefits to a company. Litigation costs can be reduced because documents relevant to issues raised in litigation will be easier to locate, thus saving both time and expense related to the production of the documents. A company can also avoid court-ordered sanctions related to delays in the destruction or delays in producing documents relevant to litigation or government investigation because such documents have either been properly maintained and stored, or properly destroyed pursuant to the policy prior to the initiation of the litigation or investigation. Criminal penalties under the Sarbanes-Oxley Act, which makes it a crime punishable by up to 20 years in prison to destroy documents relevant to a federal investigation, can also be avoided. Finally, an effective policy will help reduce a company’s cost for the storage and retention of documents.
If you do not have a document retention policy or desire to have your present policy reviewed, please telephone the member of the Firm with whom you regularly work.