Regulatory compliance is a crucial requirement of certain businesses. As regulations can vary significantly by state or industry, following the rules can be important to a business’s long term success. In such instances, document management and retention of contractual agreements must be conducted in compliance with the appropriate regulations. Any violation of those rules — such as failing to protect sensitive information or illegally destroying documentation, can result in stiff penalties and other undesirable consequences.
Contracts and Regulatory Compliance.
Regulatory compliance is even more important when contracts are involved. Contract Lifecycle Management (CLM) solutions, which provide a disciplined methodology and structure for easily managing contractual agreements, must similarly adhere to any laws pertaining to the retention of controlled documents. In the event of a legal or regulatory dispute, a business can easily recover the appropriate document to help resolve or prove an issue. If documentation has been unlawfully destroyed, the organization can be held accountable.
Retention Not Just the Domain of Final Agreements
The importance of contract retention is not the exclusive domain of final agreement versions. Because the development of a contract is typically a process that can require many iterations involving back-and-forth negotiations between parties, a particular contract could go through many versions before a final copy is completed. In some cases, these documents fall under the same rules regarding retention and destruction. If legality is not a factor, retaining older versions of an agreement can also be valuable in other ways.
Knowing the history of a particular contract can help during the creation process. If language was previously removed, but it was later added into an agreement before the contract was finalized and signed, having the initial documentation at your disposal can be helpful. This can also assist with managing future contracts. In addition, having the ability to easily review old documentation can help in the negotiation process, providing a window to help understand the thinking that resulted in why particular language was used. This won't always be applicable, but the ability to have the information at your disposal can be useful.
CLM Makes Document Managment Easy
Contract Lifecycle Management software which stores multiple versions of contractual documents, associating one to another, can play a significant role in helping to more effectively manage current agreements and to provide a knowledge base useful in future agreements. Such tools provide access to all current and historical documentation pertaining to each contract and, by storing it in a central repository, information access is quick and easy.
When Legal Disputes are Unavoidable
This and other aspects of Contract Lifecycle Management solutions is particularly valuable should a legal dispute arise. The requirement to retain documentation for as long as required — whether that requirement stems from a legal obligation or a component of internal policy — can be important. This includes an awareness of when contractual records can be deleted. CLM systems can automatically provide contract managers with notifications when documents can and cannot be deleted, assuring they are not removed while they remain under a regulatory requirement or if they are a part of ongoing litigation.
In real estate transactions, it is not uncommon to require that all historical information pertaining to a sale be retained for seven years. Once that time has elapsed, the agency is allowed to destroy the documentation. Deleting documents after the expiration of a regulatory requirement makes sense both by decreasing the number of documents that must continue to be managed and by reducing storage requirements. It can also remove the burden of responsibility to provide information, should a legal claim occur at a later date. Very simply, CLM solutions help make the entire contract management process more manageable.
Tags: Knowledge Base