FAQ

What is the difference between Statutes and Best Practice?

There are 4 levels of rules that companies of all sectors follow

  • Legislation (Statute) - The act of making or forming law by the legislative process. A bill is debated and later passed by the two Houses of Parliament, becoming an Act. This is the highest form of law. e.g. The Companies Act 2006
  • Regulation - This is secondary legislation created by government authorities that has the same force of law as legislation. Regulations are designed to guide the activity of those regulated by the Authority. Regulations also function to ensure uniform application of the law. e.g. Money Laundering Regulations 2007 by HM Revenue & Customs
  • Code of Practice - a set of rules according to which people in a particular profession are expected to behave. e.g. - FSA Handbook or the Highway Code. Although a failure to abide by the codes themselves will not be actionable, as they are not regulation, the failures will serve as evidence to support a legislative action, such as the Finance Act 1998 for the FSA or the Motor Vehicles Regulations for the Highway Code.
  • Best Practice – A best practice is a technique or method that, through experience and research within a specific field, has proven to reliably lead to a desired result. Best Practice is employed in the absence of legislation, regulation or code of practice. 

Therefore, Statutes and regulations require compliance whereas Best Practice is merely guidance and advice.

Are companies under a legal obligation to have a records management policy?
In general the law states that a company must keep their records for a minimum period and make them available for inspection within that time. There are exceptions to this rule, however, e.g. Section 20 (1) (c) Money Laundering Regulations 2007 states that a company in the financial sector must have record keeping policies and procedures in place.
Is the Data Protection Act relevant in records management?

Yes it is, although the Act does not mention Records Management, the intention of the Act is to ensure that the personal data of individuals held by companies are processed and handled carefully.

The term “Data Processing” by the Act includes; obtaining, recording, holding, retrieval, erasure or destruction. All these actions are performed by record managers in their daily duties, therefore it is important for records managers to understand and apply the Act accordingly.

In the Data Protection Act what does "no longer than necessary mean?"

The fifth principle states “Personal data processed for any purpose or purposes shall not be kept for longer than is necessary for that purpose or those purposes.”

When interpreted literally this clause puts the burden on the company or individual to decide, and perhaps justify, how long to keep the relevant record. This is an example of where Best Practice advice will aid as a guide to compliance.

I have read some laws and they do not seem make any sense, how are they interpreted?

Parliament enacts laws but it is the role of the Judiciary to interpret and apply the law, due to the principle of separation of powers the Judiciary is not formally consulted when these laws are drafted. The Interpretation Act 1889 lays down the general rules of interpretation for terminology, such as “He” will also means “She” and a singular term can also mean plural.

The Judiciary also formed rules of statutory interpretation;

  • The Literal Rule, Golden Rule and the Mischief Rule. The Literal Rule – this is the first and overruling approach, the courts will interpret the terms and phrases in their ordinary meaning and context. For instance section 386 of the Companies Act 2006 states “Every company must keep adequate accounting records.” There is no confusion or ambiguity in this regulation, therefore the literal rule would be applied.
  • Golden Rule - Occasionally an Act may be badly drafted and the courts may apply a strict interpretation of the Act which would prove either absurd or grossly inequitable. In such situations the courts will adopt the Golden Rule which entails interpreting the law as they believe Parliament would have intended it to be.
  • Mischief Rule – When the law is ambiguous and applying the first two rules will not provide a remedy, the courts will look at what problem or “mischief” the law intended to address and interpret it accordingly. An example is the Street Offences Act 1959 which made it an offence for a prostitute to solicit men ‘in a street or public place’.
  • In one case a prostitute argued that she was on a balcony, not a street, and therefore she was not breaking the law. However the court applied the Mischief Rule and held that the Act intended to stop prostitutes soliciting people in a public place, whether it was done on the street or on a balcony was irrelevant. Furthermore, applying the literal rule is such a case would lead to an absurdity.
My company is being dissolved / liquidated, what do I do with the records?

The rules for a dissolved company’s records are found under the Insolvency (Amendment) Regulations 2005 which states:

Disposal of company's records and provision of information to the Secretary of State

3A. - (1) The person who was the last administrator of a company which has been dissolved may, at any time after the expiration of a period of one year from the date of dissolution, destroy or otherwise dispose of the books, papers and other records of the company.

However a company has to take other matters into account that overrules this regulation such as:

  • VAT legislation - The VAT Act 1994 requires a 6 year retention period
  • Employee records – 6 years for tax, health & safety and pension regulations
  • Historical interest – company’s own decision
  • Solicitor’s, consultants or accountant’s contract records – 6 – 12 years retention under the Limitation Act 1980

In general the age of a business record is determined by the date of the last entry or action. All the records that would ordinarily be retained, therefore, under the Companies Act e.g. board minutes, accounting records, would still need to be retained for the statutory period of 6 or 10 years (tax year+) from the date they were created, regardless of when the dissolution / liquidation date occurred.

How long should I keep Land records for?

Land Records

  • Searches
  • Leases
  • Freehold
  • Supporting documentation

The National Archives advise disposing of the records 12 years (Limitation Act) from the date when the property is transferred to another party.

Land searches are a part of the conveyancing process and the current practice appears to be retaining leasehold property records for 6 years (Limitation Act) and Freehold properties for 12 years from the transfer of ownership.

What is the difference between an ordinary contract and a contract under seal?

The Limitation Act 1980 sets the minimum retention period for contracts.

An ordinary contract is an agreement between two or more parties in which an offer is made and accepted, and each party benefits. The contract can be formally expressed (in writing) or implied (by action, such as buying goods from a store). Examples of these are the day to day contracts such as car leasing, insurance and hire purchase agreements. These contracts are kept for 6 years after termination.

Contracts Under Seal are more formal in nature and are typically embossed with a corporate seal by the Board of Directors for authentication. Historically a waxed seal from a signet ring was used to show the signatory’s intent. Examples of such contracts are deeds and bonds. Contracts Under Seal have a longer retention period ,12 years after termination.

How long should I keep Leavers' files for?

When an employee leaves a company, the company still has a legal obligation to maintain the employee’s records for a number of years:

  • Tax purposes – under the Companies Act 2006 and the Finance Act 1998, a company must keep salary records and any expenses, shares and financial benefits the employee received for a minimum of 6 years.
  • Health & Safety – Health & Safety regulations state that an employer must keep health monitoring records of the employee for 5 years, or for 40 years if the employee was exposed by any harmful substances such as biological agents, asbestos or industrial injury.
  • Pension records – if the employee was under an occupational pension scheme, those records must be kept for the life of the pension (until death) and a further 6 years.
I keep copies of invoices and purchase orders for my own reference purposes,
how long should I keep them for?

Copies of statutory records are not required to be kept by law; therefore they can be kept for as long as you feel is necessary. However the originals should be kept in the relevant department. For instance the Finance department must have the originals of all the company’s expenditure records and the HR department must have the originals of all the employees’ records.

Please note that if different departments hold copies of employees’ files or records, they must be kept as secure as in the HR department so as not to contravene the Data Protection Act.