Business Cooperation Contract

9 May 2019

According to the Vietnam’s Law on Investment (2014), there are various forms for investment in Vietnam including investment under business cooperation contract (“BCC”). Nowadays, domestic and foreign investors tend to choose BCC as a form of investment in Vietnam.

BCC means a contract between a Vietnamese investor with a foreign investor, or between foreign investors for business cooperation and distribution of profits and products. This form of investment does not creat a new and separate legal entity. Therefore there is no limitation on liability of parties which arises from or relates to BBC contract.

The parties to a BCC contract shall establish a coordinating board to supervise the performance of the BCC contract. The functions, duties and powers of the coordinating board shall be agreed by the parties. At anytime during performance of the BCC contract, the parties to the contract are entitled to establish an enterprise in accordance with the Vietnam’s Law on Enterprises (2014). Foreign investors who participate in BBC contract are allowed to established representative offices in Vietnam, which are entitled to have its own seal, open banking account, recruit employees, and implement other activities in order to perform the BBC contract.

BCC offers many advantages as follows:

  • First of all, this form of investment helps investors save on the time and cost of setting up and operating a new legal entity. In addition, they must not worry about dissolution when the investment project complete.
  • Secondly, each party can support each other to remedy their shortcomings. For example, foreign investors who plan to invest in a new market are able to quickly approach information of such market through the understanding of domestic partners. Simultaneously, domestic investors also receive from foreign partners financial and technological.
  • Thirdly, the investors can participate independently in their own name to exercise rights and perform contractual obligations as agreed.

However, investors may also face some difficulties while investing under BCC, specifically:

  • The implementation of the sideline contracts and the transactions serving the BCC may confuse the third party because of not establishing a legal entity;
  • There are no provisions in Vietnamese Law regulating the rights and responsibilities of the parties and the third party related to invest under BCC;
  • BCC is only suitable for a few investments that is profitable, fast-generating profit and implement time of project is short.