Legal consultation on business cooperation for foreign investors

In the context of increasingly intensive international economic integration, Vietnam has been emerging as an attractive market for foreign investors. In their search for development opportunities in Vietnam, many foreign individuals and organizations choose business cooperation as a flexible and effective method to expand trade and investment activities. The below article by NPLaw provides legal consultation on business cooperation for foreign investors under the regulations of Vietnamese law.

In the context of increasingly intensive international economic integration, Vietnam has been emerging as an attractive market for foreign investors. In their search for development opportunities in Vietnam, many foreign individuals and organizations choose business cooperation as a flexible and effective method to expand trade and investment activities. The below article by NPLaw provides legal consultation on business cooperation for foreign investors under the regulations of Vietnamese law.

I. Current situation of business cooperation for foreign investors

There has been a significant increase in projects involving foreign cooperation, particularly in the fields of real estate, manufacturing, and technology.
Common forms include the establishment of joint venture companies, business cooperation contracts (BCC), and franchise agreements.
Main issues include a lack of understanding of Vietnamese law, language barriers, prolonged administrative procedures, and legal risks arising from unclear contractual terms.

II. What is business cooperation for foreign investors?

1. Definition

According to Clause 14, Article 3 of the Law on Investment 2020:

A Business Cooperation Contract (hereinafter referred to as a BCC) is a contract signed between investors for the purpose of business cooperation and profit/product distribution as prescribed by law without establishing an economic organization.

Accordingly, business cooperation for foreign investors refers to cooperation between foreign individuals/organizations and Vietnamese entities or individuals to jointly invest and implement profit-generating business activities in Vietnam. It may be implemented without establishing a new legal entity (in the case of a BCC) or through the establishment of a joint venture company.

2. Is business cooperation for foreign investors difficult to implement?

Difficulties: Complex laws, mandatory compliance with the Law on Investment, Law on Enterprises, Law on Commerce, and sectoral regulations.
Advantages: With proper legal consultation and compliance with procedures, risks can be effectively controlled.

3. What must be included in the Business Cooperation Contract (BCC)? Which content is most important and why?

Pursuant to Article 28 of the Law on Investment 2020, the Business Cooperation Contract must include the following:

Names, addresses, and authorized representatives of the contracting parties; transaction address or project implementation site.
Objectives and scope of business investment activities.
Contributions of the parties and the allocation of business results.
Schedule and duration of the contract.
Rights and obligations of the parties.
Amendments, assignments, and termination of the contract.
Liability for contractual breaches and dispute resolution mechanisms.

The most critical provision is contributions of the parties and allocation of business results as they are the primary source of disputes if not clearly and transparently defined.

III. Legal regulations governing business cooperation for foreign investors

1. Necessary regulations

Law on Investment 2020 governing the Business Cooperation Contract.
Civil Code 2015 governing cooperation contracts.
Under Article 27 of the Law on Investment 2020, the Business Cooperation Contract may be signed between domestic investors and foreign investors or among foreign investors themselves, subject to procedures for obtaining an Investment Registration Certificate (IRC) under Article 38. The contracting parties must establish a coordination board to implement the Business Cooperation Contract, whose functions and powers are determined by mutual agreement.
Under Article 49 of the Law on Investment 2020, foreign investors in the Business Cooperation Contract may establish an executive office in Vietnam. The office has its own seal, may open accounts, recruit staff, sign contracts, and conduct business activities within the authorized scope and the Investment Registration Certificate.

2. Procedures for business cooperation for foreign investors

Step 1: Negotiation and execution of the Business Cooperation Contract. Accordingly, The Business Cooperation Contract must comply with the requirements of Article 28(1) of the Law on Investment 2020.
Step 2: Investment registration under the Business Cooperation Contract:
+ For projects requiring investment policy approval under Articles 30–32 of the Law on Investment 2020: The Investment Registration Certificate is issued within 5 working days after approval or within 15 days for other cases.
+ For other projects: Investors are required to comply with conditions in Clause 2, Article 38 (including without prohibited sectors, and compliance with investment sites, planning, capital and labor requirements, and market access conditions).
Step 3: Establishment of the coordination board: After registration, the parties must establish a coordination board to manage the Business Cooperation Contract. Foreign investors may also establish an executive office in Vietnam under Article 49.

3. Necessary issues

Strictly compliance with all investment and enterprise laws.
Implementation of proper investment registration.
Verification of investment sectors and market access conditions.
Draft of contracts with detailed and transparent provisions.
Compliance with regulations on capital contribution, capital transfer, and foreign exchange.

IV. Questions on business cooperation for foreign investors

1. How to ensure the rights and interests of both parties?

Both parties need to carefully consider the following elements to ensure their rights and interests:

Drafting a clear, comprehensive contract specifying capital contributions, rights and obligations, profit-sharing, governance, dispute resolution, and termination.
Establishing fair control mechanisms.
Agreeing on language and governing law.
Conducting regular dialogue and review of cooperation activities including financial audits.

2. What risks should be noted when participating in business cooperation in Vietnam with foreigners?

Legal risks: Late capital contribution, operation without the Investment Registration Certificate, and activities outside permitted scope.
Contractual risks: Vague or incomplete contracts.
Cultural and management conflicts.
Financial risks: Compliance with foreign exchange and taxation for profit repatriation.
Governance risks: Imbalance in management authority.

3. Can foreigners participate directly in company management?

Foreigners are allowed to participate directly in management, provided that:

They are listed as members/shareholders and appointed as directors/representatives.
They hold valid residence status and work permits (unless exempt).
Their rights and obligations are clearly recorded in the charter and investment agreements.

4. How to handle if one party in the Business Cooperation Contract breaches the contract?

Handling of breach of contract is executed in the following steps:

Conducting negotiation/mediation.
Applying contractual remedies (sanctions, damages, termination).
Filing litigation or arbitration (domestic courts or agreed arbitration body).
Seeking intervention from competent authorities if necessary.

5. Can the contents of a signed Business Cooperation Contract be amended?

It is possible to change the content of a Business Cooperation Contract for foreigners after it has been signed, but the following conditions must be complied with:

Amendments are agreed upon in writing by all parties.
Necessary adjustments are registered with competent authorities.
Updates are filed with tax and banking authorities if relevant.

V. Why should legal counsel engage in business cooperation in Vietnam?

Business cooperation with foreign investors involves complex regulations on investment, taxation, foreign exchange, intellectual property, and contracts. Legal counsel ensures proper structuring, risk management, and protection of interests, as well as effective dispute resolution and compliance with administrative procedures.

For further consultation on business cooperation for foreign investors, please contact NPLaw for direct legal advice and assistance.