Recordkeeping provisions of international laws

In the last issue of Records Management Quarterly, we discussed provisions of international law relating to records retention--how long certain records must be retained. In this column we will discuss recordkeeping provisions of international laws other than records retention. These would include provisions of laws concerning issues such as records destruction, the integrity of records and efforts to falsify or otherwise compromise their integrity, the location where records must be maintained, the form (storage media) on which records may/ must be maintained, issues associated with protecting records against disaster, language requirements applicable to records, etc.

WHY DO INTERNATIONAL LAWS CONTAIN RECORD-KEEPING PROVISIONS?

National governments throughout the world enact certain recordkeeping provisions in their laws for many of the same reasons that our legislative bodies do here in the United States:

*Governments want businesses to preserve sufficient documentation to show that all taxes owed it have been paid.

*Governments want businesses to preserve true and accurate records proving that the businesses are being operated honestly and in compliance with the law.

*Governments want businesses to preserve their records in a form and manner such that they are readily accessible, legible, and usable should the government wish to exercise its right to audit them.

In short, national governments desire that businesses preserve records such that the rights of the government (and to a somewhat lesser extent the rights of citizens) can be enforced.

Provisions Relating to the Integrity of Records

The most numerous non-retention provisions of international recordkeeping laws relate to the accuracy and integrity of records; that is, statutory protections designed to provide for the trustworthiness of the records--to ensure that they have not been falsified. These provisions fall into two main categories: general statutory provisions against falsification, and requirements that certain records be subjected to a procedure known an "rubrication." We will discuss these two categories of laws separately.

General Provisions Against the Falsification of Records

As shown in Table 1, at least seventeen countries have enacted laws which include general provisions against the falsification of business records. (Table 1 omitted.) A sample of some of the typical provisions of these laws follows:

*Australia: Section 1307 of the Corporations Law of 1989, as amended, states that An officer, or former officer of a company who conceals, destroys, mutilates or falsifies any securities...or books affecting or relating to the affairs of the company is guilty of an offense."

*Barbados: Article 174 of the Companies Act states that "A company and its agents shall take reasonable precautions... to prevent falsification of entries in and to facilitate detection and correction of inaccuracies in the records required by this Act to be maintained..."

*China: The accounting regulations relating to joint ventures, issued in 1985, state that "no record in the books of a joint venture shall be destroyed, amended, altered or eliminated by correction fluid."

*Colombia: Article 57 of the Commercial Code states that "In the commercial books it is prohibited to alter entries... leave empty spaces that facilitate intercalations...to include notes between the lines...to erase or cross out all or parts of the entry...to tear out sheets, alter the order thereof or mutilate the books.".

*Germany: The German Commercial Code of 1897, as amended, states that an entry or recording in a merchant book "may not be altered in any manner such that the original meaning is no longer ascertainable.'

*United Kingdom: Section 682 of the Companies Act of 1985 states that "adequate precautions must be taken for guarding against falsification and facilitating its discovery."

Rubrication of Merchant Books

Table 1 also shows a total of eleven countries which are still carrying provisions in their laws requiring the "rubrication" of books of account kept by merchants and traders. Account books are "rubricated" when the blank books are presented to a judicial or administrative officer who stamps each page to "legalize" the books before it is permissible to record entries in them. Rubrication is an ancient practice designed to provide protection against the falsification of these account books, so that the government can be assured that it can audit the merchant books and collect all taxes owed. The following is a summary of these laws:

*Belgium: The Commercial Code of Belgium requires that journals and inventory books "must be legalized by a judge; i.e., the court's seal must be affixed to the books before any inscriptions are made." The books must be rebricated; that is, in bound form and with each page numbered and stamped by the Commercial Court Judge.

*Bolivia: Article 40 of Chapter 4 of the Bolivian Commercial Code states that "Merchants shall present the books they are obligated to keep, bound and numbered by a Notary Public before they use them... stamped on all the leaves must be the stamp of the notary..."

*China: Article 70 of the 1985 accounting regulations applicable to joint ventures states that "All the blank forms of important documents, such as cheque books, cash receipts, delivery orders, etc., shall be registered in a special registration book..."

*Costa Rica: Article 252, Chapter 5, of the laws of Costa Rica requires that a corporation's minute books must be "legalized by the Direct Tax Office..."

*Dominican Republic: Article 11 of Title 2 of the Commercial Laws of this country states that "The Daily Book and the Inventory Book shall be numbered, stamped with official approval, and certified once a year by the Judge of the Civil and Commercial Courts or by the Justice of the Peace..."

*Italy: Section 2215 of the Italian Civil Code states that "The journal and the inventory book, before being put into use, shall be progressively numbered on each page and stamped on each sheet by the Officer of the Register of Enterprises..."

*Libya: Part 8 of the Libyan Associations Law states that "Before use, journals and books must be certified and stamped by a Court of First Instance, which numbers the pages of each book or folio, dates them, and indicates their use."

*Spain: Section 36 of Title 3 of the laws of Spain states that "Merchants shall present the books which they are compelled to keep, stamped and page numbered to the organs of the Municipal Justice Department...before they use the first page of them...the stamp of the Judge who authorizes them shall also be stamped on all the pages of each book."

The practice of presenting blank books of account to a governmental official, who must "legalize" them by stamping each page to certify their authenticity must seem very strange and primitive to records managers here in the U.S., a country in which account books have existed primarily in electronic form for the past several decades. But rubrication is not really very different in purpose from IRS Procedure 91-59, which requires that taxpayers maintaining tax-related records on computer systems retain these electronic records and the software, documentation and other capability to process them for the duration of their tax liability. Regardless of whether the media is ledger books or digital data, the government is simply trying to ensure that it can audit the books and that all taxes owed have been paid.

Provisions Specifying the Location Where Records Must Be Maintained

The laws of a number of countries contain provisions specifying the location where records of regulated businesses must be retained. Most of these countries are former British colonies in which the businesses operate registry-type filing systems.

For example, the laws of Botswana, Ghana, Malaysia and Singapore (all former British colonies) all require regulated companies to maintain books of account at the "registered office of the company."

Provisions Relating to the Form (Media) of Records

Space in this article does not permit a full treatment of the subject of international recordkeeping laws relating to the form or media of business records; this would consume a separate article or an entire book. We can, however, summarize the laws relating to the use of electronic and microfilm media.

Where alternative storage media are concerned, most international laws are designed to ensure that, if business records are recorded on microfilm or electronic media, the information will be legible, accurate and accessible. Some examples follow:

*Barbados: The Companies Act of Barbados states that "all records required by this Act... may be recorded [by means of mechanical or electronic data processing...that is capable of reproducing any required information in intelligible written form within a reasonable time."

*China: Article 72 of the Accounting Regulations applicable to joint ventures states that "A joint venture keeping its accounts by electronic computer shall maintain properly its accounting records stored in or printed out by the computer...the tapes, discs, etc. shall be kept and no deletion shall be allowed unless the records in them are printed out in visible form."

*Germany: Section 44 of the Commercial Code of 1897, as amended, states that documents specified in the section can be "stored on film or on other data storage records...if it is assured that the reproduction or data...can be made legible within a reasonable period of time."

*Guatemala: Article 368 of the Commercial Code of Guatemala states that merchants may keep their accounts 'by means of mechanized procedures...microfiche or by any other system, provided that it permits analysis and control."

*Iraq: Chapter 3 of the Commercial Code of Iraq states that merchants may "replace the [account] books...by using modern machines..."

*United Kingdom: Section 683 of the Companies Act of 1985 authorizes the use of computers for company records "otherwise than in legible form, so long as the recording is capable of being reproduced in legible form."

Provisions Specifying the Language in Which Records Must Be Written

Table 2 shows a summary of language requirements of international laws applicable to business records. (Table 2 omitted.) Generally, these provisions require that the business records of companies subject to the country's laws be written in the official language of the country. An interesting exception is Germany, which requires merchants subject to the German Commercial Code to employ a "living language," or a "language in modern use" in the keeping of business books.

Protection of Records Against Disasters

A few countries have enacted recordkeeping laws containing provisions requiring regulated businesses to safeguard certain records against loss due to disaster or other causes. The Companies Act of Barbados requires companies to "take reasonable precautions to prevent loss or destruction" of records.

The laws of Turkey are quite explicit concerning this matter:

"When the books and records which a merchant is obliged to keep are lost through a disaster such as fire, flood or earthquake, and within the legal term the merchant may ask the responsible court of the locality where his undertaking is situate to give him a certificate, within fifteen days after he has come to know his loss...The merchant who has not obtained such a certificate shall be deemed to have refrained from producing his books."

Provisions Concerning the Destruction of Records

Surprisingly, only one country among those surveyed promulgated any statute concerning the destruction of records--the Peoples Republic of China. Article 79 of the 1985 accounting regulations applicable to joint venture businesses states that:

"If the accounting files need to be destroyed after the expiration of the retention period, an itemized list of the files to be destroyed shall be prepared and reported to the board of directors, businesses regulatory department and tax authority for approval. No files can be destroyed unless such a list is approved. The list of destroyed accounting files must be kept permanently."

Provisions Relating to Status of Records Upon Closure of Business

A number of countries (mostly in Latin America) have included provisions in their recordkeeping laws relating to the status and disposition of the records of a business upon its closure. These appear to be old laws--most of them specify the responsibility of heirs of the merchant for the merchant books--and would thus appear to be more relevant to small family-owned businesses than to large corporations. A sample follows:

*Argentina: Article 67 of the Commercial Companies Act of 1972 states that "the heirs of a merchant are presumed to have the books of their ancestor and are bound to produce them as and when the person from whom they have inherited would have been so bound."

*Bolivia: Chapter 4 of the Accounting Laws of Bolivia state that "the cession of commercial activities does not exempt the merchant from the obligation referred to in the preceding article [to retain books and records for 5 years] and if he should die the obligation falls upon his heirs."

*Costa Rica: Article 270 of the Commercial Laws states that "When an individual...closes his business, liquidating it, he is obligated to retain the books and correspondence for at least four years from the date the liquidation is accomplished."

In conclusion, governments throughout the world want businesses in their countries to maintain good records that are accessible and legible, in order to provide evidence that the businesses are being operated in accordance with the law, particularly where the payment of taxes is concerned.

Copyright Association of Records Managers and Administrators Inc. Jul 1995
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