The digital age has made it very convenient for the companies to retain an enormous volume of documents. This was not possible before the advent of electronic record keeping. Hence the companies have upgraded their IT systems so that the paper records can be digitalised. This is of course not adequate without the adoption of the comprehensive formal policy.
Need of a document retention policy
- Legal compliance – The document retention policy enables the company to at first fulfil the legal obligation in order to preserve the documents. This may be related to pending or potential litigation. There are also certain legislative requirements that are needed to retain the documents.
- Litigation and M & A preparedness – if the company has the document retention policy, then it will stay on the top of the all the documents that it has stored. This policy is renewed as well as audited. The supervisors of the policy have a good understanding about the storage of the documents. This is handy when the company becomes engaged in the litigation or has a potential M& A target. The company can with the help of retention policy be able to hit the ground in both the scenarios.
- Costs – The retention policy of the document prescribes a particular time period to be followed. If the time taken is more than what is prescribed, then it will be discarded. This will ensure that the digital space is not wasted and also limits the everyday costs. This policy also enables the company to save costs in the event when it gets engaged in litigation.
The good retention policy lists the type of documents that it has to be retained. The standard for the target of the transaction is to provide a representation and the warranty in respect to the condition of the books and the records.
