Drafting Business Cooperation Contract (BCC) in Vietnam

To be able to invest effectively and bring the highest profits to investors, the first important thing investors must do is choose the form of investment. According to the Investment Law 2020, investors can choose one of four investment forms. Among them, the form of investment under a business cooperation contract (also known as a BCC contract) is the most commonly used.

Legal basis

• Civil Code 2015;
• Law on Investment 2020, as amended and supplemented in 2022;
• Documents of the parties to the contract (Decision of the General Meeting of Shareholders/Board of Members).

What is a business cooperation contract?

According to the definition in Clause 14, Article 3 of the Investment Law 2020, a business cooperation contract (hereinafter referred to as BCC) is a contract signed between investors for business cooperation, profit sharing, distribution dividing products according to the provisions of the law without establishing an economic organization.

It can be understood that a Business Cooperation Contract is a document signed between two or more parties to conduct business investment in Vietnam, which stipulates the responsibilities and business results for each party without establishing a new legal entity.

Performance of BCC contracts

A business cooperation contract is signed and implemented by one of the following two methods:

• BCC contracts are signed between domestic investors by the provisions of civil law.
• BCC contracts are signed between domestic investors and foreign investors or between foreign investors carrying out procedures for the issuance of Investment Registration Certificates according to the provisions of the Investment Law 2020. Accordingly, the BCC contract is one of the documents required to issue an Investment Registration Certificate in the form of BCC business cooperation in Vietnam.

Note: The form of investment under a BCC contract does not require the establishment of a new legal entity, but the parties participating in the BCC contract establish a coordination board to implement the BCC contract and register its operation and termination with the investment licensing agency according to the provisions of the Investment Law 2020. The functions, tasks, and powers of the coordination board are agreed upon by the parties.

Business cooperation contract when one party in the contract has a foreign element

According to the provisions of the Investment Law, when a BCC contract involves the participation of a foreign investor, procedures for issuance of an Investment Registration Certificate must be carried out.

Contract form

• For BCC contracts between domestic investors, the law does not regulate the form of the contract. Therefore, the parties can choose the form of contract in writing, speech, or specific conduct (according to civil law). Normally, to ensure strict legality of cooperative activities, the form of the contract is often drawn up in written form.
• For BCC contracts signed between domestic investors and foreign investors or between foreign investors and must carry out procedures for issuance of Investment Registration Certificate, the contract BCC must be made in writing and cannot be chosen in other forms such as for contracts signed between domestic investors.

Basic terms when drafting business cooperation contracts (BCC)

The Civil Code does not regulate the content of BCC contracts. However, this content is stipulated in Article 28.1 of the Investment Law 2020, according to which the BCC contract must have the following main contents:

• Names, addresses, and authorized representatives of the parties to the contract; transaction address or location of investment project implementation;
• Objectives and scope of business investment activities;
• Contributions of the parties to the contract and division of business investment results between the parties;
• Progress and deadline for contract implementation;
• Rights and obligations of the parties to the contract;
• Modification, transfer, termination of contracts;
• Liability due to breach of contract, dispute resolution methods.

The parties participating in a BCC contract can rely on the will and desires of each party, based on the main contents of the legalized contract and the provisions of civil law to agree on the terms of the contract. The parties to the BCC contract have the right to agree on other contents that are not contrary to the provisions of the law.

Notes:

• Although the BCC contract have some strong points as mentioned above, there are some drawbacks of this contract that the investors should pay attention:
  • Not establishing an economic organization also exists some limitations such as no mutual seal. In Vietnam, the use of seal is compulsory in some cases, so the parties have to make an agreement to use the seal of a certain party, thereby rising additional liability to that party to the contract.
  • Form of investment under BCC contract should be quite easy to implement, suitable for short-term projects. Long-term, complicated projects are not appropriate due to the need for mutual management and the complex of business activites.
  • The risks in this contract is rather high because there is no specific legal document that regulates the rights and obligations of parties in the BCC contract.
• The number of participants in a BCC contract is unlimited, depending on the capabilities and the needs of the investors.

Some notes when drafting a BCC business cooperation contract

Regarding the subject signing the BCC contract

• The parties in a business cooperation contract must be legally represented by the competent authority according to the provisions of the law.
• The signature of both parties must show each page of the contract and at the end of the contract.

Regarding the legal effect of the BCC contract

The BCC contract between the Vietnamese party and the foreign party is only effective from the date the foreign party is granted an Investment Registration Certificate, which is recognized as legal for investment activities in Vietnam, not from the date of signing the Business Cooperation Contract between the Vietnamese party and the foreign party.

Regarding the terms of execution and termination of the BCC contract

• It is necessary to pay attention to the provisions on the operating mechanism and management of cooperation activities, issues of settlement, and disposal of assets upon termination of business cooperation contracts.
• During the implementation of the BCC contract, the parties to the contract may agree to use assets formed from business cooperation to establish an enterprise according to the provisions of law on enterprises.
• In fact, many disputes occur during the cooperation process and the lack o,f clear provisions on dispute resolution and termination mechanisms can lead to deadlock or damage to one party.

Consulting and drafting contracts services of Viet An Law Company

• Legal advice on contracts for businesses.
• Review and give feedback to Clients on contract terms;
• Establishment company service for foreign;
• Draft contracts according to Clients’ requirements.

If you need advice or drafting business cooperation contracts (BCC), please contact Viet An Law for the most effective support.