BCC contract is a type of contract singed between investors to devide profits or products without establishing an economic entity. This form of cooperation brings some advantages to the investors such as: time-saving and cost-saving for not doing the formality to set up a business organization; helping other investors to overcome their shortages in the process of operating; performing contract with individual legal capacity, independence and flexiblility…This kind of contract is regulated by The Investment Code 2014, specificially in Article 28:
- BCC contracts signed between domestic investors shall comply with The Civil law.
- BCC contracts signed between domestic investors and foreign investors or among foreign investors shall follow the procedures of applying for the investment registration certificates according to Article 37 of this Law.
Here are some suggestion for drafting a BCC contract:
Form of contract: The Investment Code 2014 does not clearly stipulate that a BCC contract must be written, but for projects having to carry out investment registration or investment verification procedures, the contract must be in writing.
Main contents of a BCC contract (reference only):
- Information of the parties in the contract and the authorized representative person of each party.
- Information of the places that the project is implemented
- Objectives and bound of business activity
- The form of contribution and form of division the result of each party:
- Division of products
- Sharing revenue
- Sharing income before tax
- Sharing income after tax
- Duration of contract performance, progress of implementation stages (if the projects have many stages)
- Rights and obligations of parties
- Responsibilities of the parties in breach of the contract and the level of compensation for damages, method of dispute settlement
- Terms of amending, supplying or cancelling the contract.
- Other terms upon the agreement of the parties but not agaisnt the law.
- 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.