Best Practices of a Document Retention Policy

Tax Professionals Resource
October 3, 2012 — 1,388 views  
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A good document retention policy can help organizations avoid hefty penalties that may arise from litigations. The function of a document retention policy is to determine the storage of documents, where they should be stored and how long they should stay in the designated areas. The policy ensures that documents are safely kept as long as they are required by the organization, as a government statute requirement or for pending litigation and investigations. There are certain essential elements to be considered when drawing up a document retention policy.
A good policy should consider the laws and regulations governing the company or industry on which the policy is focused. A number of industries have regulations on document retention and there are no universal laws that apply to all industries. Common law requires that documents required for a litigation or investigation be preserved. Companies are required to implement litigation holds on documents relevant to pending litigations. 

An effective document retention policy must be actively enforced as well as audited. A properly enforced policy helps organizations avoid certain problems such as the loss of documents that may be helpful in litigation. A good document retention policy also prevents the accumulation of documents which reduces the amount of information to be reviewed when a document request is issued. 

A good document retention policy is one that is effective in enhancing preparedness for litigation. The policy should provide a clear guideline on where and how information is stored. Effective policies require attorneys to have knowledge of their clients’ IT systems. This knowledge could prove useful when the courts ask for an explanation of the IT systems. 

A document retention policy is only effective if it can be properly implemented. This requires company management to support the establishment of the policy and require employees to be educated on it. There must be clear implications for not following the guidelines of the policy. Good document retention policies are easily implemented and should be periodically updated. The policy should also fit the needs of employees and how they store information. 

Though clarity and enforcement are essential elements of an effective document retention policy, the policy should also be flexible to be suspended in case of litigation. It should also state what happens in case of a litigation hold. 
Many organizations are required by various laws to retain their records for a certain period. The drafting and implementation of an effective document retention policy is significant in protecting a corporation against various charges in court. 

Tax Professionals Resource