Why compliance is important

Non-compliance may lead to severe fines, imprisonment, suspension or revocation of licenses, qualified audit reports, negative inferences in litigation and/or substantial risk such as perceptions of mismanagement and weak controls.

There are various reasons for keeping records, legal considerations merely being one. Inadequate record retention policies or improper implementation could lead to substantial legal risk.

Important Acts
Many Acts and Regulations require records to be kept for a minimum retention period.

The following Acts are administered by the South African Revenue Services and they all require proper record keeping:

The Customs and Excise Act No. 91 of 1964
The Estate Duty Act No. 45 of 1955
The Income Tax Act No. 58 of 1962
The Skills Development Levies Act No. 9 of 1999
The South African Revenue Services Act No. 34 of 1997
The Stamp Duties Act No. 77 of 1968
The Tax on Retirement Funds Act No. 40 of 1949
The Unemployment Insurance Contributions Act No. 4 of 2002
The Value Added Tax Act No. 89 of 1991

In each of these instances, records must be kept for a period of 5 years with the exception of the Customs and Excise Act. However, it is advised and in fact current practice that records pertaining to the last mentioned Act are kept for the full 5 years as SARS may, in certain instances, require records backdating for up to 5 years.

Litigation
There is a technical term in litigation called "discovery". This is a procedure in the litigation process whereby a litigant or defendant is required to supply all relevant or important documentation pertaining to the case to his opponent and to the Court.

The Court may draw negative inferences or impose penalties should it transpire that records where not retained or were improperly destroyed.

Audit certification
Nowadays, after scandals involving million of dollars came to light due to big corporations not adhering to accounting practices in the USA and due to international accounting and law reforms following suit, a much higher premium is placed on adhering to proper records management practices. Legislation became more strict requiring accountants and auditors to make sure that proper audit trails are in place and to report on compliance with record retention requirements.

Promotion of Access to Information Act

In terms of this Act, access to records can be requested. Any person who, with intent to deny a right of access in terms of the Act,

destroys, damages or alters a record; or
conceals a record or falsifies a record; or
makes a false record,

commits an offence and is liable on conviction to a fine or to imprisonment for a period not exceeding two years.