Business Report
Business reports are reports about the overview of business created by stock companies every fiscal year.
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Overview of Business Report
Business reports are annual reports that stock companies are obliged to create for each fiscal year by Article 435 of Companies Act (enforced in May, 2006) in place of "sales reports" that were used in the past. The content of the reports is "overview of business," including details of business, status of fund, information about executive officers in each year, etc. In addition, although sales reports were one of Financial Statements under Old Commercial Law, business reports under Companies Act is not included in Financial Statements and thereby not subject to audit by accounting auditors. However, they are still important for companies as media to provide external entities with information. Especially in public companies, they are used as the basis of decision making regarding investments by general investors. Therefore, like Financial Statements, they are supposed to be created strictly.
Detail
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Companies Act Article 435 (1) A Stock Company shall prepare a balance sheet as at the day of its formation pursuant to the applicable Ordinance of the Ministry of Justice. (2) A Stock Company shall prepare Financial Statements (meaning balance sheets, profit and loss statements and other statements prescribed by the applicable Ordinance of the Ministry of Justice as necessary and appropriate in order to indicate the status of the assets and profits and losses of a Stock Company) and business reports for each business year and supplementary schedules thereof pursuant to the applicable Ordinance of the Ministry of Justice. (3) Financial Statements and business reports and supplementary schedules thereof may be prepared by Electromagnetic Records. (4) A Stock Company shall retain its Financial Statements and supplementary schedules thereof for ten years from the time of preparation of the Financial Statements. |
Article 118 and Article 119 of Companies Act Enforcement Regulations require the following matters to be included in business reports.
- Important matters concerning the status of the company
- Resolution matters regarding Internal Control (systems to ensure that the execution of the duties complies with the laws and regulations)
- (The followings are applied to public companies.)
- Matters concerning the current situation
- Matters concerning executive officers of the company
- Matters concerning the corporate stock
- Matters concerning new share subscription rights, etc.
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Companies Act Enforcement Regulations Article 118 Business reports must include the matters listed below. 1. Important matters concerning the status of the company (excluding the matters to be included in Financial Statements and annexed detailed statements of them or Consolidated Financial Statements) 2. When there are decisions or resolutions regarding the establishment of systems defined in 3-(4) of Article 348, 4-(6) of Article 362, and 1-(1)-(b) and 1-(1)-(e) of Article 416, the overview of those decisions and resolutions |
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Companies Act Enforcement Regulations Article 119 In case the stock company is a public company at the last day of the fiscal year, the company must include the following matters in the business report in addition to the matters described in Article 118. 1. Matters concerning the current status of the stock company 2. Matters concerning the executive officers of the stock company (Here after, executive officers include ones appointed after the last day of the previous annual meeting of stockholders and stepped aside before the last day of the fiscal year.) 3. Matters concerning the stock of the stock company 4. Matters concerning the new share subscription rights of the stock company |
In addition, Article 128 of Companies Act Enforcement Regulations requires the following matters to be written in annexed detailed statements of business reports.
- (The followings are applied to public companies.)
- Combination of offices of executive officers
- Details regarding the conflict of interest etc.
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Companies Act Enforcement Regulations Article 128 Annexed detailed statements of business reports must include important matters that supplement the contents of business reports. Under this condition, if the stock company is a public company as of the last day of the fiscal year, the annexed detailed statements of the business reports must contain the following matters (excluding unimportant matters). 1. Details regarding combination of offices concerning the executive directors of other companies, executive officers, employees that execute duties, and executives that are also supposed to be in charge of the duties defined in Article 598(1), excluding accounting advisors (If the business of corresponding other companies is of the same category as the business of the stock company, it must be indicated.) 2. Details regarding the deals with third parties in which there is the conflict of interest between the stock company and executive officers or a majority stockholder (the parent company of the stock company or a stockholder, excluding the parent company of the stock company, that owns more than half of the votes of all stockholders (excluding votes concerning the stock that can not be used in the meeting of stockholders for all of the issues regarding the appointment of the executive directors except for executive officers and amendments of regulations) |
