Cloud storage, cloud accounting packages and similar applications for communication and recording of information have changed the face of business forever. Before you run off to your lawyers in a panic, please read some of the following information.
While these advances have been beneficial to company directors who can discharge their duties at greater speed and from almost any location, we should pause for thought about whether or not these advances can potentially place directors in breach of their duties to the company.
Good commercial lawyers can explain and advise on Section 286 Corporations Act 2001 (Cth) (“Corporations Act”) requires the company to maintain records of financial information that accurately reflect the financial position of the company. The records can be kept electronically on the proviso that the electronic records can be converted into paper records within a reasonable time after a request is made (s288).
Pursuant to s289 the company can decide where to keep its financial records, however if they are kept outside of Australia the company is required to keep sufficient information to allow preparation of accurate financial information inside Australia; and notify ASIC of the place where the records are kept.
The cloud implications of this are clearly the location of the records. More often than not, the cloud server on which your data is stored will be located in a low-cost jurisdiction, generally not inside Australia. Financial information, pursuant as defined in s9 Corporations Act includes all source documents, statements, entries and adjustments in books of account.