Introduction
For foreign multinational groups operating in Japan, obtaining accurate and timely financial information from Japanese subsidiaries is essential for governance, tax compliance, transfer pricing, consolidation reporting, and overall risk management.
However, under Japanese law, a parent company does not automatically have unrestricted access to its subsidiary’s books and records, even when it holds 100% of the shares.
Access to financial information must be grounded in specific legal rights or governance structures.
This article explains the main legal bases and practical routes by which a parent company can obtain a Japanese subsidiary’s financial data in a lawful and effective manner.
1. Shareholder's right to inspect under the Companies Act (Article 433 of the Companies Act)
Under Article 433 of the Companies Act of Japan, shareholders have a statutory right to request inspection or copying of accounting books and related documents, provided certain conditions are met.
To exercise this right, the parent company (as shareholder) must generally:
- Hold 3% or more of the total issued shares (the threshold may be lowered by the articles of incorporation).
- Have continuously held the shares for at least six months (also waivable by articles).
- Have a legitimate purpose, such as oversight of management, preparation of shareholder proposals, or collection of evidence for litigation.
A written request must be submitted to the subsidiary’s head office, specifying the shareholder’s name, address, shareholding, holding period, purpose of inspection, scope of requested documents, and preferred date and place of inspection.
The company must respond—usually within two weeks—by granting access or providing a written explanation if it denies the request.
If the purpose is deemed improper (e.g., competitive intent or harassment), access can be lawfully refused.
It is important to note that this right belongs only to the shareholder itself.
If the parent company’s employees, auditors, or external advisors wish to inspect on its behalf, a power of attorney must be submitted, and the legitimacy of the request may still be scrutinized.
2. Access through Directors or Statutory Auditors
If executives from the parent company serve as directors or statutory auditors of the Japanese subsidiary, they can lawfully obtain financial information in the course of their duties.
Directors have broad authority to access all accounting and operational information necessary for business execution and board oversight. Under Article 362 of the Companies Act, directors may freely review books and records within the scope of their role.
Statutory auditors (kansayaku) possess even stronger powers.
Article 381 expressly allows auditors to investigate the status of the company’s operations and assets at any time, including reviewing contracts, meeting minutes, and accounting books.
Accordingly, when a parent company appoints one of its officers as an auditor of the subsidiary, that person can obtain comprehensive financial information on behalf of the group—provided the information is used solely for proper oversight and not in breach of confidentiality.
However, directors and auditors are bound by fiduciary duties and confidentiality obligations.
Transmitting information from the subsidiary to the parent company beyond the scope of legitimate business purposes may constitute a breach of duty under Japanese corporate law. Thus, internal protocols and clear documentation of purpose are essential.
3. Contractual and Governance-Based Information Rights
Beyond statutory inspection rights, most foreign groups rely on contractual arrangements to ensure regular access to financial data.
This is the most practical and stable method, especially for wholly owned subsidiaries.
Typical agreements include:
- Information-sharing clauses in the articles of incorporation or shareholders’ agreement.
- Parent-subsidiary management agreements or intra-group service agreements, under which the subsidiary must periodically report financial results, budgets, cash-flow forecasts, and related-party transactions.
Such agreements formalize the reporting flow, often requiring submission of:
- Monthly, quarterly, and annual financial statements.
- Variance analyses between budget and actual results.
- Transfer-pricing documentation and intercompany transaction summaries.
- Tax return copies, audit reports, and key contracts.
By codifying these obligations, the parent company can receive data routinely without resorting to legal inspection requests.
This also supports compliance with international tax documentation (e.g., transfer pricing master file, local file, and CbC reporting).
4. Limitations for Regulated or Listed Subsidiaries
If the Japanese subsidiary is a listed company or operates in a regulated financial industry (such as banking, insurance, or securities), statutory and regulatory restrictions apply.
Confidential client information and regulatory reporting data are protected under the Financial Instruments and Exchange Act and relevant sectoral laws. Even a parent company cannot access such data freely.
In such cases, the parent company typically receives only the audited financial statements and summary management reports.
To access detailed data, it is necessary to follow procedures in accordance with the regulations of the supervisory authority and internal compliance.
5. Summary of Legal Channels and Roles
| Position of the parent company | Legal basis | Accessible information | Main Restrictions and Considerations |
| Shareholders (3% or more, for more than 6 months) | Article 433 of the Companies Act | Accounting books and related materials | A legitimate purpose is required; competitive purposes are not allowed. |
| Director | Companies Act Article 362, etc. | All information related to finance and operations | Limited to the scope necessary for duties - confidentiality obligation exists |
| Statutory Aauditor | Article 381 of the Companies Act | Accounting books, contracts, minutes, etc. | Always investigable - Leakage prohibited |
| Contractual Rights | Management Contract / Information Provision Contract | Reports, financial statements, etc. | Within the scope defined by the contract |
| Listed/Regulated Subsidiary | Financial Instruments and Exchange Act / Industry laws | Overview of Audit Reports | Restricted access to customer information and confidential data |
6. Practical Recommendations for Foreign Parent Companies
For foreign parent companies managing Japanese subsidiaries, the following approaches provide a legally sound framework:
-
Establishment of Information Provision Clauses
When establishing or acquiring a subsidiary, it is important to clearly specify the information provision clauses to the parent company in the articles of incorporation, shareholder agreements, and management contracts. -
Utilization of Executive Positions
Appoint representatives from the parent company as directors or auditors of the subsidiary, and establish a system that allows for the acquisition of financial information based on legal grounds. -
Establishment of a Regular Reporting Process
To create a flow of information that does not rely on ad-hoc requests for viewing by establishing monthly and quarterly reporting protocols. -
Confidentiality and Data Protection Measures
When transferring acquired information abroad, comply with the Act on the Protection of Personal Information (APPI) and data transfer regulations, and take appropriate management measures. -
Alignment with accounting and tax compliance
Confirming whether the financial data used for consolidated financial statements and transfer pricing documentation is supported by audit evidence and external verification.
Conclusion
Under Japanese law, there is no automatic “parental right” to a subsidiary’s internal financial information.
Access must derive from the parent’s shareholding rights, board or audit positions, or contractual reporting frameworks.
By understanding these mechanisms and establishing clear governance structures, foreign parent companies can secure transparency, ensure tax and accounting compliance, and maintain effective control over their Japanese operations—without breaching Japanese corporate or privacy law.