1. What is Business Cooperation Contract (BCC)?

Pursuant to Clause 14 Article 3 of the Law on Investment 2020, business cooperation contract (BCC) means a contract between investors for business cooperation and distribution of profits or products in accordance with the law without the establishment of a business organization.

The parties to the BCC include both domestic and foreign investors.

1. BCC between domestic investors shall comply with the provisions of civil law.
2. BCC between domestic investors and a foreign investors or between foreign investors shall carry out the procedures for issuing an Investment Registration Certificate in accordance with the provisions of the Law on Investment 2020.

2. Requirements for investors when making investments in the form of business cooperation contracts (BCC)

1. Requirements for domestic investors

• Vietnamese investors investing in the form of BCC must satisfy business investment requirements for industries and trades on the list of conditional business lines.
• Vietnamese investors are not restricted from accessing the market for industries like foreign investors, however, when cooperating with foreign investors, Vietnamese investors also need to pay attention to the requirements of the investment industry and the percentage of capital ownership in order to be able to comply with the requirements that the law applies to foreign investors.

2. Requirements for foreign investors

• Foreign investors investing in the form of BCC must meet the following requirements:
  • Market access requirements applied to foreign investors are the same as those applied to domestic investors;
  • Requirements for the industries and trades with restricted market access applied to foreign investors:
    • Prohibited business lines;
    • Restricted business lines.
• Market access requirements for the List of industries and trades with restricted market access, including:
  • Rate of ownership of charter capital in business organizations;
  • Investment form;
  • Scope of investment;
  • The capacity of investors and partners participating in investment activities;
  • Other requirements as prescribed by Vietnamese law and international treaties.
• Foreign investors who are  economic organizations investing in the form of BCC must object to one of the following cases:
  • There are foreign investors who hold more than 50% of charter capital or the majority of the general partners are foreigners in business organization which is a partnership;
  • There are business organizations who hold more than 50% of charter capital;
  • There are foreign investors and business organizations who hold more than 50% of charter capital.

3. Lawyers recommend terms to note when drafting a BCC

In a BCC, it is necessary to have basic terms to ensure in accordance with the provisions of the Investment Law that domestic and foreign investors should pay attention to when establishing:

1. Information of the parties: The contract must clearly show information of the parties such as names, addresses, authorized person to sign the contract... The authorized signer must be the legal representative or authorized person. It should be note that in some cases, the signing of a BCC needs to be approved by the Board of members/General Meeting of Shareholders of the partners in accordance with the Law on Enterprises.

2. Business objectives and scope: The parties need to clearly define objectives and scope of business cooperation because this is not only one of the foundations for the parties to perform the project but also the basis for Vietnamese state agencies to manage and license project. If the description is not clear, the state agency may not approve of project.

3. Contribution and profit distribution: The parties need to clearly define what are the contributed assets of the parties, which can be money, machinery lines, factories, intellectual property assets, land use rights… At the same time, the parties need to clearly determine the value of each asset and the proportion of total investment capital. In particular, if the asset contributed as capital is land use right, it is necessary to comply with the regulations on land when performing the project. The contribution ratio is the basis for profit distribution, however, the parties should further agree on bearing project risks.

4. Deposit: In some necessary cases, it is required a deposit to secure the contract performance. This is considered a commitment of one party to the BCC, also showing the seriousness of investment in a project.

5. Project license: For foreign investors, project licenses are compulsory. However, we need to understand that there are many licenses for a project, which can be mentioned as Investment Approval, Investment Registration Certificate, Enterprise Registration Certificate, Construction License, Fire Protection License, Environment License… Therefore, the parties also need to mention the responsibility for implementing these licenses and in case of necessity, it need to blame the fault party if they fail to secure the project licenses resulting in the project being unenforceable and/or delayed and/or other administrative penalties.

6. Financial principle: For investors, especially foreign investors, finance issues when implementing the project need to be transparent and clear. Only then, investment activities shall be effective, avoiding disputes with partners and being sanctioned by the state, at the same time, there is also a basis to transfer profits back to home countries. Therefore, the parties also need to stipulate financial principles clearly and comply with Vietnamese laws.

7. Establishment of a coordination board to perform the BCC: The business cooperation contract between the parties is considered as “the charter of the enterprise”. Therefore, when participating in the BCC, the parties need to agree on the establishment of a Coordination Board so that each party can show their roles and powers in the process of contract performance.

8. Violation of contracts and penalty: In the process of cooperation, it is inevitable that the parties will violate and such violations are likely to affect the cooperation process, even the legitimate interests of the partner. Therefore, it is necessary to clearly regulate violations and penalty for violations. This is considered as a method to limit the violation, not for the purpose of imposing penalty.

1. Contract termination and consequence settlement: There are violations that seriously or repeatedly resulting that the original purpose of the parties cannot be achieved. At that time, contract termination is necessary to minimize the loss for both parties. The parties need to prognosis and carefully agree on the cases of termination, the violations too serious to terminate. Settlement consequences after termination are also required in the contract: Liability for penalties, compensation of the violating party, rights of the violated party, the settlement of assets, projects, profit and risk distribution, etc.

10. Force majeure clause: Force majeure is raised to create a liability waiver mechanism in some situations and events that the parties cannot foresee during the cooperation process, leading to the inability to fulfill the obligations according to the contract.

11. Governing law and Dispute resolution: Vietnamese law allows the parties to choose the law, except for some special cases. Usually, the parties choose Vietnamese law to resolve because the project is implemented in Vietnam. In addition, it is necessary to clearly agree on what are dispute resolutions in the contract: negotiation, conciliation, arbitration, court. It should be note that many type of dispute resolutions may applied.

In addition, depending on the reality of cooperation, foreign investors and partners need to agree on other terms that are not contrary to the law to best ensure their legitimate interests and ensure the project’s success.

4. What does a Business cooperation contract lawyer do?

Investment under the method of signing a BCC is a relatively easy form to implement compared to other forms of investment, investors only need to sign a contract without establishing a new legal entity. Therefore, the business cooperation contract is considered as “the charter of the enterprise”, acting as the backbone of investment - business activities between investors when cooperating in this form. To ensure the validity of the contract; the terms are tight, clear, in accordance with the law, investors, especially foreign investors, will always ask for advice from Business cooperation contract lawyers. This is considered a smart investment because it brings more value than what investors are paying. Accordingly, a Business cooperation contract lawyer will help investors perform the following tasks:

1. Counseling on investment model, rights and obligations of investors, issues of investment license, tax, property, capital contribution... when making investment in the form of BCC;

2. Counseling, drafting and revising BCC;

3. Counseling and participating in negotiation stages to sign BCC;

4. Counseling, translating and explaining terms in BCC;

5. ​Counseling, representing, resolving contract disputes.

5. Where can I find a Business cooperation contract lawyer?

Investors can refer to many sources to find a Business cooperation contract lawyer in accordance with the request of investors, which can be through a number of sources such as:

• Websites and fanpages of law offices or law firms;

• Through the introduction of other associations and businesses;

• Through specialized newspapers, forums, conferences

• Through the introduction of clients who have used the service of a Business cooperation contract lawyer;

Business cooperation contract lawyer at Phong & Partners Law Firm which has headquartered in Danang city, Vietnam - a city considered a “bright spot” to attract domestic and foreign investment. Led by Master, Lawyer Le Ngo Hoai Phong - who has nearly 20 years of professional experience with comprehensive experience in the legal field, Phong & Partners is one of the leading prestigious legal service providers in the region. With the mindset that “every smart investment is a valuable investment”, the Business cooperation contract lawyer at Phong & Partners will accompany investors to build optimal strategies and achieve the most favorable results in their investment projects.

​6. How much does it cost to hire a Business cooperation contract lawyer?

The cost of hiring a Business cooperation contract lawyer will depend on the scope, goals and complexity of the project that the investor plans to implement. Clients can choose to charge an hourly service fee or a fixed service fee. Note that this service fee is the lawyer’s fee to perform the work.

Remember, a successful BCC  is a foundation for fostering positive relationships with your partners. Don’t let your fear of costs stop you from succeeding. Instead of focusing on thinking, hesitating for financial investment to work with a Business cooperation contract lawyer, you should think about the benefits that will bring to your business relationships.

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PHONG & PARTNERS LAW FIRM

Add: 6th Floor, Thanh Loi Building, 249 Nguyen Van Linh Street, Danang city -0905.102425

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Email: Phongpartnerslaw@gmail.com

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