Document management may not seem like the most exciting of subjects, yet it’s vital that owners develop a strong document management policy. Here, Grid Law founder and Business Advice expert, David Walker, explains why.
Many (if not most) business owners completely dismiss the importance of a document management policy. That is, until I phone them while we’re in the middle of a legal battle and ask for a copy of specific contract that could make or break their case, and at this point I have their attention.
Document management still isn’t exciting, but all of a sudden it becomes the most important of tasks that day. After a frantic search, there’s either elation when it’s found or despair if it’s lost.
It’s not until after the event, when the dust has settled, that clients take document management seriously. The trouble is, many people don’t know where to start. They have no idea what their legal obligations are, or what they should be doing. So, we start by creating a document management policy.
This document management policy has to be clear so that all staff know what documents need to be kept, for how long and what to do when it comes to their destruction. Also, it’s vitally important that there’s a standard filing system so that documents can be quickly and easily found if they’re needed.
Now, clearly there isn’t a one-size-fits-all policy that every business can adopt because every business is different. They all have different regulatory requirements, they’re different sizes and the individual nature of the business means that they generate more or less documents than another.
The document management policy will also vary depending on how risk averse the business owner is. The more risk averse someone is, the more documents they will want to keep and the longer they will keep them for.
When creating your document management policy, you need to think about all the different types of documents you have in your business and their different categories. For example, you will have contracts, correspondence, company records, certificates, and financial information to name but a few. These can then be divided into sub-categories. For example, your contracts could be divided into customer, supplier and employment contracts.
Once you have your documents categorised, you need to decide how long to keep them. Unfortunately, in many cases there are no clear legal guidelines, so you need to look at each one and decide how much risk it exposes the business to.
Take employment contracts as an example. There is no specific law that says how long you should keep a contract. However, an employment contract contains personal data and the Data Protection Act says that you should keep personal data for no longer than is necessary.
Therefore, you may decide that there’s no need to keep the information after the employee has left, especially if they’ve parted the company on good terms. However, guarding against legal risk may be a legitimate reason to keep a copy of the contract long after the employee has left.
If you parted company on less than ideal terms there may be a risk of the ex-employee suing the business. They don’t have to do this straight away, as the limitation period (the legal time limit) for starting a claim in the courts is three years for a personal injury claim and six years for a breach of contract claim.
It would be extremely time consuming to assess the risk that each ex-employee posed to the business, so your policy may say that all employment contracts and records should be kept for six years after the employee has left. To be on the safe side, keep them for seven years, as sometimes there are arguments about when the time limit starts running. This would give you the best chance of defending any potential employment claims the business faced.
Then, you need to go through the same exercise for each category and sub-category of document until you have a clear policy on how long they should each be kept.
Once you have your policy, make sure the documents are stored securely. If you’re storing paper copies, it goes without saying that the facilities should be appropriate for storing potentially sensitive and confidential information.
You need to ensure that unauthorised people don’t gain access to them and you need to ensure that it is more than just a room full of boxes. Also, don’t underestimate the fire risk that a paper mountain can be. Therefore, electronic storage is becoming ever more popular. Original documents are scanned and then destroyed.
Scans of original documents can be used as evidence in any legal action, but before the court will accept them, the court needs to be assured of their integrity. The British Standards Institute has a code of practice which explains in more detail what you should be doing when it comes to scanning and storing documents. Either read this code of practice or take advice on it before scanning and destroying important documents.
Another important point to remember when scanning and saving documents electronically is that they must be future-proofed. Will the file format and the storage medium still be accessible in ten years’ time?
When it comes to document destruction, make sure they are destroyed properly. Hard copies should be security shredded. If you’re deleting electronic copies, simply hitting the delete key may not be enough to properly erase them. You may need special software to permanently erase them from your systems.
If you don’t have any sort of document management policy in place now, I strongly recommend that you implement one as soon as possible, because there will come a time when you need to put your hand on a specific document.
If it’s too onerous a task to go through past records then at least make the commitment to apply the policy to all documents going forward. This may not be ideal, but the risk to the business will decrease over time so long as you are careful.
If you need any further advice on implementing a document management policy, please feel free to email me at email@example.com.
Catch up with more of David’s pieces for Business Advice, here:
- Essential legal considerations when developing a new app
- How to overcome common problems with non-disclosure agreements
- The benefits of a shareholders’ agreement for small business owners
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