The process of international integration and foreign investment attraction has created positive outcomes, contributing to the achievement of the nation’s socio-economic development goals and objectives. Among various forms of investment, the Business Cooperation Contract (BCC) enables investors to leverage each other’s capabilities and resources during business operations in Vietnam. 

I. Essential information investors should know about business cooperation contracts

In the situation of the economic crisis caused by the COVID-19 pandemic, Vietnam is expected to remain one of the most promising markets for foreign investment.

The Business Cooperation Contract (BCC) stands out as an investment form that investors should not overlook when entering the Vietnamese market. Accordingly, NPLaw provides a comprehensive legal overview of the Business Cooperation Contract under Vietnamese law.     

1. What is a Business Cooperation Contract?

Clause 14, Article 3 of the Law on Investment 2015 defines a Business Cooperation Contract as a contract signed between investors to conduct business cooperation for profit- or product-sharing purposes in accordance with the Law without establishing a legal entity.

2. Meaning 

The abbreviation “BCC” stands for Business Cooperation Contract. Such an investment form is recognized under the investment laws of many jurisdictions.

A Business Cooperation Contract is an investment model under which parties cooperate to conduct one or more business activities without forming a new legal entity, and the business outcomes are shared among the parties. Throughout the contract term, each party retains its legal status and performs the contract in its own name.

3. Characteristics of Business Cooperation Contracts 

In terms of legal nature, the parties entering into Business Cooperation Contracts are not bound by an organizational structure as in joint ventures or newly established legal entities. It allows the participating investors to remain independent in their legal status, providing flexibility in executing their rights and obligations without depending on other parties. Additionally, such a model minimizes potential conflicts in management since no joint ownership of a new entity is created.

Furthermore, the Business Cooperation Contract form saves time and costs that would otherwise be required to establish and manage a new legal entity. It also offers a practical approach for both the State and investors to mitigate weaknesses while maximizing business advantages.

4. Investment under the Business Cooperation Contract form

  • Business Cooperation Contracts concluded between domestic investors shall comply with civil law.
  • Business Cooperation Contracts concluded between domestic and foreign investors, or between foreign investors, must undergo the Investment Registration Certification process as prescribed in Article 38 of the Law on Investment 2020.
  • The parties to Business Cooperation Contracts shall establish a coordinating Committee to perform the functions, duties, and powers as mutually agreed upon.

5. Principal contents of Business Cooperation Contracts 

The Business Cooperation Contract typically includes the following essential clauses:

  • Names, addresses, and authorized representatives of the parties; transaction addresses or the location of the investment project;
  • Objectives and scope of business cooperation;
  • Capital contributions and distribution of business results among the parties;
  • Progress and duration of contract implementation;
  • Rights and obligations of the parties;
  • Contract amendment, transfer, and termination;
  • Liability for breach of contract and dispute resolution methods.

During the execution of the Business Cooperation Contract, the contracting parties may agree to use assets formed through business cooperation to establish a new enterprise in accordance with the Law on Enterprise.

The parties to the Business Cooperation Contract may also agree on additional terms that do not contravene the law.

In practice, drafting and establishing the executive office for foreign investors under Business Cooperation Contracts is complex and time-consuming. Therefore, investors are strongly advised to seek the assistance of a reputable law firm to resolve the relevant legal issues. With an experienced team of qualified lawyers, NPLaw stands ready to support clients in overcoming legal challenges and ensuring compliance in the execution of Business Cooperation Contracts.