Companies of all sizes need to maintain documentation of all sorts of things, including records of financial, corporate and legal issues, among others. In the pre-digital age, these documents were just that, hard copy documents. Whether it was Coca-Cola’s “secret formula” kept in a heavily guarded safe or less secure corporate archives, these records needed to be easily accessible in the event of a sale, audit or other legal matter, not necessarily a simple task.
However, once the digital age came along, methods of maintaining corporate documentation changed dramatically. Suddenly, companies found that digital records had numerous advantages over archiving physical copies. Having your company transition from physical to digital documentation, particularly if you’re involved in any sort of audit, corporate restructuring or an M&A, will streamline the process, saving all parties both time and money.
What Are Corporate Records?
Corporate records are documents that are vital for any company to operate. While some corporate records apply only to insiders of the company itself (mission statement, corporate succession plans, etc.), others are required by law, including income and tax records, incorporation documentation and stock transactions, if applicable. These records are typically overseen by the corporate secretary, although larger companies may have an entire department dedicated to maintaining, updating and filing these documents.
What Is a Physical Corporate Record Book?
A corporate record book (also referred to as a “corporate book”) is a collection of all the required documentation of the corporation. Of course, the term “book” is a misnomer; it’s a legacy term referring to the era when these documents were actually filed in a book (or binder) of some sort. Today, with larger companies having to comply with a greater number of laws, including governmental, corporate and industry rules and regulations, the “book” is now banks of file cabinets, holding scores of reams of physical documentation, requiring an extremely detailed organization to quickly access the records.
Limitations of Maintaining a Physical Corporate Record Book
The limitations of maintaining a corporate record book seem crystal clear. However, there are still companies that continue to support libraries of physical records. Time, expense and maintaining the security of the records top the list here. There are multiple disadvantages to this method, including:
Cost of Maintaining Physical Records
Physical records take up space (lots of space!), and space, as we all know, is expensive. Keeping these records onsite in a corporate setting will cost you so much per square foot per month. There is, of course, the option to rent less expensive space in a warehouse or an archive facility offsite, but that poses another issue, as explained in the next bullet point.
Access to Documentation
In a huge room filled with banks of filing cabinets, quickly finding the desired records can be a daunting task. It takes quite a bit of organization to arrange these documents in a way they can easily be accessed but doing that is not the endgame. If your storage facility is in the basement of your building, that’s one thing, but having to drive an hour each way to a remote site takes time and money. It also leads us to the next pitfall, security.
Obviously, your corporate records need to be stored in a secure location. And by “secure location,” that doesn’t mean that if they’re stored in a room with a lock on the door, you’re all set. There must be access control – exactly who is allowed to fish around in there? Are there some records that require more security than others? (Yes, that’s a rhetorical question.) Are users allowed to remove the records required, or do they need the ability to copy them onsite? (Which is an expense.) Or is there a dedicated “librarian” who is given a request for records and then retrieves them for the user? (Yet another large expense.) And is that “librarian” bonded or requires a security clearance? And under the umbrella of security, there is another important issue, the maintaining the security of physical records.
Risk of Losing Physical Records
Physical records are not immune from loss or damage from acts of nature or even more nefarious schemes. Just go back a few years to Hollywood’s 2008 Universal Studios fire to see how a single disaster can wipe out priceless archives. That fire destroyed well over 100,000 master recordings of some of the most iconic music in human history, an irreplaceable loss. And note that keeping a second copy in another location more than doubles the time and expense required for maintaining physical records, as the “backup” must be updated in real-time in tandem with the original to maintain consistency and the integrity of the archive.
Furthermore, in dealing with any sort of audit or M&A activity, physical records are going to be an enormous expense and take up huge amounts of time. Fortunately, there is an ideal solution for this issue: A virtual data room.
What Is a Virtual Data Room?
A Virtual Data Room (VDR) is a safe online location where companies involved in transactions, audits, M&A deals and more can store and share documentation. It has secure access, which includes enterprise-level encryption, multiple layers of security and user-friendly admin controls that allow you to seamlessly upload and download documents. Additionally, VDRs are protected by version control and allow only certain parties access to documents.
Here are three primary advantages of VDRs:
1. Saves Time
Accessing the documents in a VDR required takes a fraction of the time of finding physical records. Furthermore, users from around the globe can access the VDR in real-time, lessening the time the entire process takes.
2. Saves Money
Rather than pay for storage space, the records are maintained digitally, which saves you money. Also, all expenses for anyone to travel to the records repository are eliminated, as users need not be physically present to access the records.
3. Provides Security
Furthermore, a VDR allows the administrator to control who can see what documents. Certain parties can be configured to allow access for a select batch of documents and be kept from accessing others.
The CapLinked Solution
CapLinked is a leading provider of VDRs, is used and trusted by companies involved in an M&A or other type of audit. CapLinked VDRs contain the features required for security for document sharing. These include simple, yet secure features include high-level admin controls, document and version control, 24/7 customer service and multiple layers or security.
To see how a VDR will help your business, start a free trial of our VDR solution.
Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and consumer products industries.
Investopedia – Virtual Data Room (VDR)
The Balance Small Business – What a Corporate Records Book Is
Study.com – Physical & Electronic Records Management