For a shareholder to verify "whether the company is being run properly," it ultimately comes down to seeing the books. The right to inspect and copy accounting books is the most basic — and most powerful — tool available to minority shareholders for monitoring misconduct and lax management, and for moving on to hold directors accountable (through a shareholder derivative suit) or to claim damages.
What Is the Right to Inspect and Copy Accounting Books?
Article 466 of the Commercial Act allows shareholders holding at least a specified stake to demand inspection and copying of the company's accounting books and the underlying documents. "Accounting books" means the records of transactions — journals, slips, the general ledger, subsidiary ledgers and the like — while "underlying documents" means the contracts, receipts and other records on which those entries are based. The right is highly effective because it goes beyond a look at the financial statements to allow verification, at the source-record level, of how the numbers were produced.
Three Requirements for Exercising the Right
① Shareholding requirement: for unlisted companies, at least 3/100 of the total issued shares (Commercial Act art. 466). Listed companies are subject to separate, relaxed requirements, such as continuous holding for six months or more (Commercial Act art. 542-6). ② In writing, with reasons stated: the demand must state the "reasons" for the inspection sought. ③ Absence of improper purpose: the company may refuse where the demand serves an improper purpose, such as use in a competing business or pressuring the company — but the company refusing bears the burden of proving that impropriety (Supreme Court, Feb. 28, 2018, 2017Da270916, among others).
How Far Does It Reach? — The Question of "Scope"
Scope is where practice is fought hardest. The company wants to show as little as possible; the shareholder wants to see as much as possible. The courts allow inspection only of accounting books and underlying materials substantially related to the "reasons" stated in the demand, but take the view that the range of what counts as related should be read broadly — as broadly as is necessary to uncover the misconduct. Designing "what you want to see, and why" around the real issues at the demand stage therefore determines the scope of inspection.
Recent Trends — Moving in Shareholders' Favor
A lighter burden in stating reasons: shareholders once had to describe suspected misconduct in considerable detail, but the Supreme Court has held that a shareholder need not prove misconduct in advance, and that it suffices if the background and purpose of the demand are stated well enough for the company to determine whether and to what extent a duty to permit inspection exists (Supreme Court, Feb. 28, 2018, 2017Da270916; Supreme Court, May 13, 2022, 2019Da270163, among others). In practice this lowered the threshold for an inspection demand substantially.
A recent Supreme Court judgment (2024Da202652, decided 2025): companies not infrequently refuse inspection while disputing the shareholder's very status, on the basis that "those shares are not really yours." The Supreme Court made clear that a shareholder duly recorded in the register of shareholders may vindicate their rights through proceedings such as an action to confirm shareholder status even where the company disputes that status — affording still stronger protection to the exercise of minority shareholder rights.
Securing Rights Quickly — Provisional Injunctions
Inspection and copying of accounting books may also be sought by provisional injunction, separately from the main action. This requires a prima facie showing of the right to be preserved (the right to inspect and copy) and of the need for preservation. Because delay creates the risk that books will be destroyed or altered, the strategy of securing inspection quickly by injunction and then using the results as evidence in the follow-on dispute is important in practice.
Law Firm Changchun acts for both minority shareholders and companies, and has handled the full arc consistently — from fights over the scope of inspection, through injunctions, to the shareholder derivative suits and director liability claims built on the results. Inspecting the books is not an end in itself but the "first step" toward putting a company's problems right, which is why it matters to map the dispute as a whole from the outset and design the demand accordingly. (Outcomes may differ depending on the facts of each matter.)