When a business is divested, what are best practices for separating comingled records? For closure, who is responsible for storage and/or destruction?
When looking at business closure or divestiture records management, you must put a plan in place for what happens to relevant records. Laws on this vary from state to state — so consult legal counsel, tax counsel or outside expertise.
As a records professional, you’re aware of the penalties and fines related to records loss, disclosure and theft among records professionals. Recordkeeping requirements, however, extend beyond the life of your business — as do the penalties of noncompliance.
From a divestiture records management perspective, your focus must be on separating comingled records. Since records management doesn’t often gain visibility in the divestiture process, you’ll likely have to negotiate to determine who pays for transfer costs — and since seemingly every divestiture encounters delays in this process, it’s best to prepare in advance.
One of the big issues in divestiture records management is ensuring a consistent, repeatable and globally scalable process. Prior to taking any action, your organization should mutually agree upon a framework for the future transfer to take place.
For business closures, too, records must be maintained beyond the life of your organization. Generally, with closing organizations, time is a major concern — specifically, how long the organization has before it completely shutters. If you’re feeling crunched for time, it’s often prudent to simply retain all records for the maximum time any data is likely to be needed, rather than risk not keeping something for long enough.
If you have more time, sifting through records may be possible — but determine the depth of sifting in advance. Many organizations simply leverage records categories and place blanket retention periods on each category at closure, according to the longest period of time that any particular records in that category may be required to be kept. Some organizations may be able to apply more rigor to their analysis. Likely, some combination of methods will be prudent.
Determining a records custodian after closure can be challenging, and state laws vary widely on this point. By default, business owners will be considered (by most state laws) to be records custodian. Or, if any part of the business was sold, the purchaser may want to become records custodian. And don’t forget that competitors may make great custodians (think medical practices). The custodian will be responsible for ongoing management, destruction and responsiveness to records requests. For closing businesses, it’s often easiest to leverage a partner for ongoing management of both physical and electronic records.
As closures and divestitures are often time sensitive, your organization should plan ahead and develop a business continuity plan that includes the scenarios of business closure and business divestiture. In the event that either scenario happens, this advance planning will help ensure successful outcomes.