Legal and Finance: Documents Dynamite after Enron
Byline: John Duckers
Birmingham law firm Hammond Suddards Edge is warning businesses to review their document management policies in the wake of the Enron collapse. Companies, it cautions, must ensure they are keeping pace with changes in the law.
Charlotte Colman, a solicitor in HSE's commercial group, said: 'The mass shredding of documents by Enron's auditors has brought the issue of document destruction, management and retention into the public eye and graphically demonstrated that the issue of document management is not simply an internal matter for a company.
'UK regulators have far reaching powers to deal with companies who have not managed their documents correctly and can arrest, seize documents, impose fines on companies and, in severe cases, prison sentences on their directors. Some regulators, such as the Information Commissioner and Health and Safety Executive, can also 'name and shame', which can have a devastating effect on a company's reputation.'
There are a myriad of rules, which often conflict, concerning how document management should be approached. The major issue is the various different retention periods set out in legislation and in many cases it can be an offence to destroy a document before that time has elapsed.
'Some records are required by Finance Act legislation to be kept for four years; other legislation may require documents to be kept for longer, others for less,' said Ms Colman.
Other legislation which impacts upon document management policy includes the Anti Terrorism, Crime and Security Act which recommends that emails are retained for possible later access by law enforcement agencies.
The Companies Act prescribes punishment of fines and imprisonment for destroying documents in cases where the destroyer cannot prove that he had no intention to defeat the law.
Limitation periods or statutory periods within which legal claims can be brought should also be kept in mind. Competition law authorities can carry out on-site investigations and impose criminal sanctions if documents are destroyed that impede an investigation. …