ELECTRONIC STORAGE OF COMPANY “BOOKS”

As we have seen the development of technology take over in all forms of life, it seems that one area that many companies still lag behind in the electronic storage of its own corporate records. Records such as registers, recorded information, financial reports, financial records and documents can all be kept electronically (including in the cloud), albeit with some compliance requirements.

These types of records are defined as “books” under section 9 of the Corporations Act 2001 (Cth) (the Act). According to section 1306 of the Act, “books” can be kept electronically so long as they can be reproduced in a written form and are appropriately guarded against.

Compliance Requirements

Whilst section 1306 of the Act allows “books” to be stored electronically, there is a requirement for a corporation to take all reasonable precautions for guarding against damage, destruction or falsification of any “book” or part of a “book”. Electronic copies must be a true and clear reproduction of the original paper records. To satisfy the legislative requirements, the electronic records must not be altered or manipulated (or have the ability to be altered or manipulated) and they must be capable of retrieval so they can be read at any time.

Inspection

The Act provides where a corporation records its data electronically and it is required to make the “books” available for inspection or to provide copies or parts of the documentation, the corporation must provide their data in written form or provide a document containing a clear reproduction in writing. This means that if a corporation chooses to store data electronically, they need to be able to provide such data in written form or by reproduction, which in simple terms, means printing a document.

Financial Records

Whilst financial records fall within the scope of “books” under the Act, they have their own set of requirements for electronic storage. Pursuant to section 288 of the Act, financial records must be convertible into hard copy if they are kept in electronic form. If a person is entitled to inspect a company’s financial records, this hard copy must be made available to them within a reasonable time.

Retaining Records

Under the Act, financial records are recommended to be kept for at least seven years. There is no indication of how long other “books” should be kept, however we would recommend that the seven year timeframe is adhered to.

Cloud Storage

There are several benefits of having company “books” stored electronically, including ability to locate and access the information in the future, physical records can fade over time and storage costs. An easy, efficient and cost effective method of storing data electronically is online storage or the “cloud”. Not only does cloud storage save space (no external hard drives and servers required) but the data can be accessed anywhere and from other devices. Depending on what company data you are storing electronically, consideration must also be given to privacy requirements. If personal information is being stored on the cloud, you will need to have appropriate privacy policies in place.

If you would like further information on electronic storage of company data, please contact Jarrod Ryan (jarrod@ryandurey.com) or Alyce Cassettai (alyce@ryandurey.com).