Effect of backdating
Likewise, if you haven’t made the loan yet, you may set the effective date to a future date, so that the interest only starts accruing when the actual loan has been made.
To be clear, having a later effective date does not mean that the contract will not be binding until that later date.
Determining the date of an event is further complicated by ambiguous records, limited recollections and the reliance on the recollections or statements of others.
Moreover, at times fabricated backdating can be innocuous when no third party’s rights are adversely affected and no law is violated, and other times backdating that memorializes can be problematic if it misleads a court to believe the document was executed on the date the event occurred. In order to mitigate your risks, you should always disclose your use of backdating by either identifying the date of execution or by utilizing “as of” dating.
The line between these practices, however, is not always clear.
For example, the date when the event itself occurs can be uncertain.
In those cases, the courts may look at surrounding circumstances to determine approximately when the contract went into effect.
Examples of improper, fraudulent backdating: However, not all backdating involves fabrication.
Backdating can also involve the practice of dating a document on the date the event occurred even if it is not signed until later.
To a layperson, backdating sounds like a bad thing. Its legitimacy depends upon its purpose and effect. It is improper, of course, to date a document on one date, but the event occurred on a different, later date.
Typically this type of backdating occurs when the beneficiary of the backdating can reap some sort of tax or other benefit if the event had occurred on the earlier date.