A document retention policy is critical for any business. Also known as a record-keeping policy, a document retention policy provides minimum retention periods for important business documents and establishes a routine for the final disposition of a company’s records. These policies are put into practice to ensure records are kept for as long as they might be needed for legal, administrative, financial, and research purposes. A good document retention policy should identify the document retention policy manager, the specific documents that must be retained, and determine how long and where they should be stored. Talk with a New York business law attorney to review your document retention policies.
What Documents Are Most Important for a Business?
There are various types of documents that every business must keep. Certain business documents can help a company operate smoothly. Other records are necessary to carry out legal and financial goals. Some of the most important documents businesses should have in place include:
- Corporate documents — Corporate documents can include bylaws, operating agreements, shareholder agreements, partnership agreements, business meeting minutes, employee stock option agreements, and board resolutions. The period for retention of these documents is seven years after the business closes.
- Financial documents — Financial documents important for a business can include business plans, tax returns, business reports, business insurance, business pitch deck, and business licenses. Businesses must keep these documents for seven years.
- Internal documents — Crucial internal documents for a business can include a business plan, compliance and regulatory documents, company policies, trademark documents, and business reports. The period that these documents must be kept is seven years after the company closes, unless a document retention policy is adopted that specifies otherwise.
The ordinary retention time for contracts, non-disclosure agreements, and employment agreements is one year following the statute of limitations after the contract has been completed. In addition, under New York law, transactional documents and records should be kept for six years.
Why is a Document Retention Policy Necessary?
Document retention policies are imperative for several reasons. Not only can they help to reduce the time that employees would have to spend searching for records, but they can also provide vital protection in the event of litigation. Sometimes, an adequate document retention policy can make all the difference in winning or losing a lawsuit.
While there is no provision in the Federal Rules of Civil Procedure or the New York Civil Practice Law and Rules that specifically defines when a pre-litigation duty to preserve is triggered, it can usually arise when a litigation hold letter or notice of pending litigation is received. A litigation hold letter suspends a company’s standard document retention policies and prohibits the destruction of any information that could be relevant evidence in a lawsuit until litigation has concluded.
If one side suspects the other has intentionally, recklessly, or negligently destroyed evidence in a case, they may be accused of “spoliation.” Courts have broad discretion as to whether to impose sanctions for destruction of evidence. However, evidence of a clear document retention policy can show a court that the destruction of a document was reasonable.
It’s also essential to be aware of several federal and state laws that might apply to the retention of various types of documents when starting a retention policy. For example, the IRS has the authority to audit tax records for up to six years in cases involving suspected fraud. In employment law matters, the Fair Labor Standards Act and the Family Medical Leave Act require companies to keep payroll and wage records for either two or three years. Also, companies offering retirement plans are subject to ERISA record retention regulations.
Contact an Experienced New York Business Law Attorney
Creating a document retention policy can be complex. A knowledgeable business law attorney can help you with creating a policy that helps to protect your business and financial interests. Brinen & Associates is dedicated to providing skillful counsel to business owners for a wide variety of business matters, including drafting effective document retention policies and other corporate documents. Call (212) 330-8151 or send us a message to learn more about how we can help.