In the light of the recently signed Electronics Communications and Transactions Bill, (ECT) and the King II report on corporate governance, companies must ensure that they adequately protect themselves in terms of preserving and storing electronic documents and communications. This is according to Frederick Castleman, sales director at data back-up and archiving specialist, Source Consulting.

Castleman says that while companies in many international markets are already obliged to record and store all communications and electronic documents as records that could be used in audits and as evidence to protect them against potential corruption charges, there is currently no law in South Africa that makes this an imperative. He stresses that while this is not presently a legal requirement, it is strongly advisable for SA companies to maintain a complete track record of their transactions, communications and intentions.

"Allegations of corporate corruption are all too common, particularly in the wake of the numerous scandals that followed the Enron and Andersen debacle in the US," he says.

"It would be naïve to assume that these incidents are confined to companies in the US. If the question as to whether or not corruption has occurred is ever raised, it is in the scrupulous business' best interests to be in a position to reveal its dealings from easily accessible electronic evidence," he states.

Castleman feels that South African companies should take steps to proactively protect themselves from damaging allegations and implement policies and procedures to track and keep records, as it is easy to do today.

"The authorities do not check up on many corporates as yet as they are hesitant to challenge companies as corporate governance laws have not yet been implemented," he says.

"The authorities' concerns are that companies find loopholes before the law is implemented; they clearly want to make sure that they have covered everything. For this reason, companies should endeavour to ensure that they comply with the implications of the laws as recommended by King II and the ECT Bill," says Castleman.

Protecting valuable data

Listed companies may need to protect themselves in data disputes. "Court cases are governed by complex rules, including provision for search, disclosure and discovery of evidence. While companies do not have to preserve documents, the failure to do so in most cases infers the worst - a cover up. Good practice in terms of a policy of storage and protection of e-mail and other electronic documentation ensures that the integrity of a company is preserved," he adds.

Castleman says areas of concern include accounting documents, company records, employment records, agreements and the like. "There is no argument that there are greater volumes of information than ever before, that are being generated and distributed faster and wider. The Companies Act was written before the Internet existed, but the spirit of that document should be embodied in electronic communication and documentation even before its reach is legally extended," he says.

With the United States' war on terror, its authorities such as the FBI and CIA have been afforded wider ranging powers, so if information audit trails are not kept, the worst is often assumed.

"Over the last few years computer generated documents have become admissible evidence. Essentially data protection is about protecting your business in a capricious and volatile world. "The value of electronic data and communications records cannot be over-emphasised, and there is growing support for legislation to uphold the requirements of companies to record and store their data," concludes Castleman.

For more information contact Frederick Castleman, Source Consulting, 011 235 7700.