What Is the 2026 Subcontract Act Amendment? Key Compliance Points and Practical Measures for Businesses

Why Is the Subcontract Act Being Reviewed Now?

The Act Against Delay in Payment of Subcontract Proceeds, Etc. (Subcontract Act) has been in operation for many years to correct the power imbalance in business relationships between small-to-medium enterprises and large corporations.

It has been decided that the Subcontract Act will be significantly amended effective January 1, 2026. The purpose of this amendment is to address existing structural challenges and establish a more practical and transparent trading environment.

This is driven by the following social changes:

• Difficulty in passing on rising costs to prices

• Increasing multi-layered structure of supply chains

• Growth in diverse forms of outsourcing (e.g., manufacturing, service provision, and logistics)

• Declining labor population and the need for greater transaction efficiency

As the reality of business has expanded beyond what the term "subcontracting" can cover, a legal review has become essential.

Overview of the Amendment and Five Key Points to Note

The key points to understand regarding this amendment are summarized below.

1. Change in Terminology: From "Subcontracting" to "Outsourcing and Contracting"

The traditional terms "Parent Operator" and "Subcontractor" will be replaced by
"Entrusting Operator" and "SME Entrusted Operator."

This shift moves away from terminology based on power dynamics in transactions and
reflects a commitment to prioritizing equal and fair partnerships.

2. Expansion of Scope: Transition to "Capital + Number of Employees"

While the application of these regulations was previously determined primarily by capital,
the "number of employees" will now also serve as a criterion for assessment.

For Example:

• Manufacturing Industry → Companies with 300 or fewer employees qualify as SME Entrusted Operators

• Service and Transportation Industries → Companies with 100 or fewer employees are eligible

While this allows more companies to become legally protected entities, it also increases the complexity of management and compliance assessment for applicable companies.

3. Stricter Consultation Obligations: Unilateral Pricing Is Prohibited

When an entrusted operator requests a "consultation" regarding pricing or contract terms,
the entrusting party is obligated to respond in good faith and provide a reasonable explanation.

For Example:

• I would like to review unit prices in response to the recent surge in raw material costs.

• I would like to negotiate an additional fee for the man-hours required due to the addition of new processes.

Ignoring or dismissing such requests is, in itself, illegal.

4. Restrictions on Payment Methods: Unfavorable Promissory Notes and Factoring Are Prohibited in Principle

Instead of cash transfers, the following payment methods have been widely used:

• Promissory Notes

• Electronically Recorded Monetary Claims

• Factoring (Transfer Type), etc.

These methods are prohibited if they are disadvantageous to the contractor, such as failing to provide full payment or delaying the payment due date.

5. Expansion of Target Industries: Logistics Industry Now Clearly Subject to Regulation

The previously ambiguous practice of consignments from shippers to primary logistics contractors is now clearly covered.
Payment delays and unfair consignment practices within the logistics industry are now subject to corrective measures.

Challenges Faced by Companies

With the amendment of the Subcontract Act, companies will face the following challenges:

Challenge 1: Increased Complexity in Determining Target Companies

With the introduction of new criteria including the number of employees, accurate applicability assessment based on both capital and employee count is required.
For example, even if a company's headquarters does not qualify, its branches or subsidiaries might qualify as small-to-medium-sized contractors, necessitating assessments on a per-transaction basis.

Reliance on individual expertise or ad-hoc research is no longer sufficient, increasing the risk of violations due to misidentification, such as inappropriate pricing or failure to engage in required consultations.

Challenge 2: Inadequate Systems for Identifying and Managing Target Entities

Even if target companies are correctly identified, many organizations lack a centralized system for internal management and updates.
For instance, even if the legal department is aware of the assessment, the information may not be adequately communicated to sales teams, leading to cases where sales staff may propose incorrect contract terms based on their own judgment.

Companies relying on Excel or manual management methods are prone to update omissions and oversights, which can easily lead to legal violations and require careful attention.

Solution: How uSonar Can Help

uSonar Co., Ltd., which provides services centered on a corporate database, offers the following solutions to address these challenges:

1. Data Maintenance: Bulk Identification of Companies Subject to the Subcontract Act

The LBC (Corporate Database) provided by uSonar covers information on over 12.5 million corporate locations nationwide and maintains highly accurate corporate attributes essential for determining the applicability of the Subcontract Act, such as capital, number of employees, and head office/branch classifications.
By utilizing this data, it becomes possible to objectively and consistently determine which companies are subject to the Subcontract Act and whether they fall under the category of a contractor or a subcontractor, without relying on individual expertise.

Furthermore, by integrating this with business card and client information scattered throughout your company, you can achieve normalization and data consolidation at the corporate level, building the "identifiable data infrastructure" necessary for regulatory compliance.

2. Automatic Data Maintenance

Regulatory compliance is not a one-time task; a continuous management system is essential. Corporate information changes daily due to fluctuations in employee numbers, changes in capital, company name changes, and M&A activity.
uSonar provides a mechanism to respond to these changes and maintain a consistently up-to-date status through regular automatic updates.

In addition, we support API integration with external tools such as CRM and Salesforce, enabling departments to reference the same information. This allows you to build a sustainable data management system while reducing the risks of missed updates and duplicate management.

3. Support Including Compliance Management

While not directly related to the amendments to the Subcontract Act, the credit status and potential risk information of partner companies are also critical factors when reviewing business partners and re-evaluating contracts.

uSonar provides an integrated solution featuring proprietary credit scores, negative news detection, anti-social force flags, and corporate affiliation data, enabling instant risk assessment even at the initial stage of business negotiations.
This contributes not only to regulatory compliance but also to building relationships with sound business partners and mitigating reputation risk.

What You Can Do With uSonar

Summary

The amendment to the Subcontract Act, effective January 2026, requires companies to strengthen their practical responses, such as identifying target companies and managing contractual terms.
With the revision of application criteria, including employee counts, and the formalization of consultation obligations, rapid and accurate business partner management will become more essential than ever.

As a means to support these efforts, uSonar's corporate database, LBC, enables the bulk identification and management of target companies, contributing to the reduction of manual tasks and the standardization of regulatory compliance.
By taking this legal amendment as an opportunity to review and improve your business partner management systems, you can reduce operational burdens and build a sustainable compliance framework.
For further details, please feel free to check the following page or contact us for a consultation.

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