Shareholders’ right to Inspect Companies’ Materials

Shareholders’ right to inspect materials kept in the company

　A Kabushiki-Kaisha is obligated to hold an annual shareholders’ meeting every year and to provide its shareholders with a business report and financial statements. Despite of the fact, especially the small and medium-sized Japanese companies that do not hire legal advisors or have legal divisions often neglect these obligations (or sometime they do not even know that they exist).
　In particular, shareholders residing overseas are often forgotten by the companies in which they invest, and I sometime hear stories that “they have never received a report from the company after investing in the company.”

　When encountering such a situation, it is very vital to know that shareholders have statutory right to inspect the minutes and other documents kept by the company. Following chart is the list of such inspecting rights of shareholders with legal basis; which you can use to confidently insist your rights to the company.

Shareholders’ statutory right to request inspection

*1 If a request for a written transcript or extract is made, a fee set by a company may be incurred.
*2 Requests may be rejected if it is determined that there is a risk that the information may be used for purposes other than research related to securing or exercising shareholder rights (e.g., obstruction of business, leakage of information to a third party, etc.).
*3 Financial Statements, etc.: Financial statements, business reports and their notes (including audit reports or accounting audit reports)

Inspection of annexed documents of application forms of registrations

　There is a possibility that the corporate registry has been changed without any notice to the shareholders, even though they have the right to vote at the shareholders’ meeting. In many cases, especially in the case of privately-held companies, the application for registration (Note: There are some registration changes’ matters that do not require a shareholders’ meeting, such as the transfer of the head office within the jurisdiction or the cancellation of treasury shares), the minutes of the shareholders’ meeting are required to be attached to the application. In other words, the fact that the shareholders has not received notice of such changes in advance should be questioned.
In some cases, it may be necessary to consider filing an action for the absence of a resolution of the shareholders’ meeting. The following are some of the methods you may want to request documents in advance.

Method 1: Make a request directly to the Kabushiki-Kaisha for inspection of the minutes, etc. of the shareholders’ meeting.

As mentioned above, each shareholder has the right to request the company to inspect (or deliver a copy of) the materials kept in the company. On the other hand, if you have already developed a problem with them, you may not be able to get the documents you want delivered as you wish, or you may feel uncomfortable even simply contacting the company. In such cases, the following methods are also, available.

Method 2: Application to inspect documents annexed to the application for registration

The application for registration and annexed documents are kept at the Legal Affairs Bureau for 10 years from the date of receipt. Inspection of those documents may be permitted for shareholders and other interested parties. However, this is a somewhat difficult procedure for ordinary shareholders to apply.
In order to obtain permission for inspection, specific reasons for the request, identification of the documents to be inspected, and a documents to certify that the shareholder is an interested party are required. Also, those documents to be submitted will need to be discussed with the Legal Affairs Bureau.
Therefore, if you are considering filing a lawsuit against the company, it is advised to ask your attorney to obtain the documents on your behalf.

In any case, as a shareholder of a company, you have the right to ask the company for documents describing the company’s business conditions. It is important to keep a close eye on your investments to ensure that your money is not used for something you did not intend.

MK @ 08/21/2022