Document retention: Overview, definition, and example
What is document retention?
Document retention refers to the policies and practices a company or organization follows to manage the storage, maintenance, and eventual disposal of documents and records. It ensures that important documents, both physical and digital, are kept for a specified period, in compliance with legal, regulatory, and business requirements. This can include financial records, contracts, employee records, and other critical documents that need to be preserved for a certain time.
For example, a business might have a document retention policy that requires tax records to be kept for seven years, while marketing materials can be archived for only three years.
Why is document retention important?
Document retention is important because it helps businesses comply with legal and regulatory requirements. Certain industries and governments impose strict rules on how long records must be kept for auditing, tax reporting, or litigation purposes. Without a proper retention policy, businesses may face penalties, fines, or legal challenges. Additionally, effective document retention ensures that important information is accessible when needed and that outdated or irrelevant documents are safely disposed of, reducing storage costs and minimizing risk.
For businesses, having a clear document retention policy reduces the risk of mishandling critical records and ensures the organization remains in compliance with industry standards.
Understanding document retention through an example
Imagine a law firm that handles confidential client information. The firm has a document retention policy that dictates client files must be kept for 10 years after the end of a case, after which they should be securely destroyed. This ensures the firm meets legal requirements for record-keeping while safeguarding sensitive client data.
In another example, a company in the financial services sector might have a retention policy requiring that tax returns and accounting records be retained for seven years to comply with IRS guidelines. After the retention period, the company can securely destroy or archive the documents to free up storage space.
An example of a document retention clause
Here’s how a document retention clause might appear in a contract:
“The parties agree to retain all records and documents related to this Agreement for a minimum of [number] years following the termination of this Agreement. After the retention period, records will be securely destroyed or archived in accordance with the applicable laws and company policies.”
Conclusion
Document retention ensures that businesses keep important documents for the required amount of time to comply with legal, regulatory, and business requirements. It protects companies from legal risks, reduces unnecessary storage costs, and ensures that critical information is available when needed. A well-defined document retention policy is essential for organizations looking to stay compliant and effectively manage their records.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.