[3 Months Since Chutekihou Enforcement] Challenges in Rationalizing Business Entrustment - Contract Reviews Demanded of Large Enterprises
Three months after the enforcement of the 'Small and Medium-sized Subcontracting Transactions Rationalization Act' (Chutekihou), the expanded applicability and the structural compliance risks of 'disguised outsourcing' in large enterprises are becoming apparent.
📋 Article Processing Timeline
- 📰 Published: April 7, 2026 at 19:00
- 🔍 Collected: April 7, 2026 at 10:30
- 🤖 AI Analyzed: April 21, 2026 at 00:39 (326h 8m after Collected)
The "Small and Medium-sized Subcontracting Transactions Rationalization Act" (commonly known as Chutekihou), which came into effect on January 1, 2026. This law, a fundamental revision of the former Subcontract Act, has now reached its three-month mark since enforcement. With the newly established employee count criteria, the scope of application has expanded significantly, and it includes many revisions that heavily impact large enterprises utilizing business entrustment transactions.
However, on the frontlines, response efforts are lagging. Furthermore, as an issue predating the Chutekihou, workplaces that have operated with a blurred line between business entrustment and temporary staffing harbor the structural risk of "disguised outsourcing" (Giso Ukeoi).
Recently, debates surrounding disguised outsourcing in business entrustment structures have rapidly spread on social media, increasing the situations where corporate compliance postures gain societal scrutiny. What used to be handled as an internal company issue is now instantly visualized and disseminated through SNS.
In this press release, we will organize the current state and basic knowledge of business entrustment rationalization, as well as the points that must be checked for future contract reviews.
## ■ 3 Months Since Chutekihou Enforcement - The Current State of Business Entrustment Rationalization
### [What is the Chutekihou (Small and Medium-sized Subcontracting Transactions Rationalization Act)?]
The formal name of the Chutekihou is the "Act against Delay in Payment of Subcontract Proceeds, Etc. to Small and Medium-sized Subcontractors in Manufacturing Entrustment, Etc." It is a fundamental revision, after approximately 70 years, of the Subcontract Act enacted in 1956 (Showa 31), and it went into effect on January 1, 2026. The main revision points are as follows.
- **Addition of Employee Criteria**: In addition to the conventional capital criteria, a new standard based on the number of regularly employed workers was established. For manufacturing entrustment, etc., companies with over 300 employees, and for service provision entrustment, etc., companies with over 100 employees fall under "Entrusting Enterprises". Because the Chutekihou applies if either the capital criteria or the employee criteria are met, the scope of regulation has vastly expanded.
- **Prohibition of Promissory Notes**: Payment of subcontracting fees via promissory notes has been prohibited in principle. Even for electronically recorded monetary claims, methods that make it difficult to obtain the equivalent cash amount by the due date are banned.
- **Mandatory Price Negotiation**: The act of unilaterally determining prices without responding to requests for price negotiations from small and medium-sized subcontractors is now prohibited.
- **Name Changes**: "Parent Enterprise" has changed to "Entrusting Enterprise", and "Subcontractor" to "Small and Medium-sized Subcontractor". The attitude aiming for equal transaction relationships is reflected in the legal terminology as well.
[Experts discuss, 3 months post-enforcement
However, on the frontlines, response efforts are lagging. Furthermore, as an issue predating the Chutekihou, workplaces that have operated with a blurred line between business entrustment and temporary staffing harbor the structural risk of "disguised outsourcing" (Giso Ukeoi).
Recently, debates surrounding disguised outsourcing in business entrustment structures have rapidly spread on social media, increasing the situations where corporate compliance postures gain societal scrutiny. What used to be handled as an internal company issue is now instantly visualized and disseminated through SNS.
In this press release, we will organize the current state and basic knowledge of business entrustment rationalization, as well as the points that must be checked for future contract reviews.
## ■ 3 Months Since Chutekihou Enforcement - The Current State of Business Entrustment Rationalization
### [What is the Chutekihou (Small and Medium-sized Subcontracting Transactions Rationalization Act)?]
The formal name of the Chutekihou is the "Act against Delay in Payment of Subcontract Proceeds, Etc. to Small and Medium-sized Subcontractors in Manufacturing Entrustment, Etc." It is a fundamental revision, after approximately 70 years, of the Subcontract Act enacted in 1956 (Showa 31), and it went into effect on January 1, 2026. The main revision points are as follows.
- **Addition of Employee Criteria**: In addition to the conventional capital criteria, a new standard based on the number of regularly employed workers was established. For manufacturing entrustment, etc., companies with over 300 employees, and for service provision entrustment, etc., companies with over 100 employees fall under "Entrusting Enterprises". Because the Chutekihou applies if either the capital criteria or the employee criteria are met, the scope of regulation has vastly expanded.
- **Prohibition of Promissory Notes**: Payment of subcontracting fees via promissory notes has been prohibited in principle. Even for electronically recorded monetary claims, methods that make it difficult to obtain the equivalent cash amount by the due date are banned.
- **Mandatory Price Negotiation**: The act of unilaterally determining prices without responding to requests for price negotiations from small and medium-sized subcontractors is now prohibited.
- **Name Changes**: "Parent Enterprise" has changed to "Entrusting Enterprise", and "Subcontractor" to "Small and Medium-sized Subcontractor". The attitude aiming for equal transaction relationships is reflected in the legal terminology as well.
[Experts discuss, 3 months post-enforcement
FAQ
What is the Subcontracting Act (Act for the Proper Transaction between Small and Medium-sized Subcontractors)?
It is a law that fundamentally revises the Subcontracting Act, established in 1956, and came into effect in January 2026. It prohibits the principle of payment by promissory note and mandates price negotiation.
How has the scope of application of the Subcontracting Act expanded?
In addition to the existing capital base criteria, new employee base criteria have been added (over 300 employees for manufacturing subcontracting, over 100 employees for service provision). The act now applies if either criterion is met.
What are the main current risks associated with business subcontracting contracts?
There is a risk of 'fake subcontracting' where the line between dispatch and subcontracting is ambiguous. This risk can lead to compliance issues that may escalate and spread through social media.