Business Cooperation Contract and Issues Needed Notes

Business cooperation contract (hereinafter referred to as BCC contract) is a contract signed between investors for business cooperation, profit sharing, product distribution in accordance with the law without establishing economic organizations.

Investment under BCC contract is one of the investment forms specified in the Investment Law 2020 and consists of the following features: 

1. BCC contracts signed between domestic investors are in accordance with civil law. 
2. The BCC contract is signed between a domestic investor and a foreign investor, or between foreign investors who complete the procedures for the issuance of an Investment Registration Certificate in accordance with Article 38 of the Law on Investment 2020. 
3. The BCC contract’s parties form a coordination committee to carry out the BCC contract. The parties must agree on the coordination board’s functions, tasks, and powers. 

As a result, investors can work on a variety of projects with a variety of partners without having to establish economic organizations, thereby saving money on company operations and management. 

The BCC Contract enables investors to be proactive in freely agreeing on rights and obligations, profit sharing, and project operation. However, in order to be successful in signing the BCC Contract, investors must have prior experience negotiating these BCC projects in order to avoid conflicts and not underestimate the risks involved. 

Investors should keep the following points in mind when signing the BCC Contract: 

1. Determine the appropriate Investor 

Finding investors is critical when launching a medium and long-term business collaboration project. Investor selection is influenced by similarities in orientation, business strategy, and vision. 

The improper selection of investors leads to cooperation, making it difficult to agree on the project’s orientation and operation. 

2. Basic contents of a Business Cooperation Contract 

The following are the main contents of the BCC contract:

1. Contracting parties’ names, addresses, and authorized representatives; transaction address or location of the investment project; 
2. Business investment activities’ objectives and scope; 
3. Contractual contributions of the parties and distribution of business investment results among the parties; 
4. Contract performance progress and duration; 
5. Contracting parties’ rights and obligations; 
6. Contract modification, transfer, or termination; 
7. Contractual liability and dispute resolution methods. 

The parties to the BCC contract have the right to agree on other contents as long as they do not violate any laws. 

3. Request an Investment Registration Certificate 

The BCC contract is signed between a domestic investor and a foreign investor, or between foreign investors who complete the procedures for obtaining an Investment Registration Certificate. If a BCC project is subject to investment policy approval, the investor must first apply for investment policy approval before proceeding with the issuance of the Investment Registration Certificate. 

This step is not required for BCC Contracts signed between domestic investors. Unless the investment project requires a sub-license before operation (if any), investors can carry out project implementation after signing the BCC Contract and complying with the agreed terms. 

4. Contribute capital to the project 

The BCC contract is signed between a domestic and a foreign investor, or between two foreign investors. Following the completion of the application for an investment registration certificate, participating foreign investors BCC contracts must open a direct investment capital account and meet the following basic requirements:

1. Must open a foreign currency direct investment capital account with a single authorized bank in order to conduct lawful foreign currency revenue and expenditure transactions related to foreign direct investment activities in Vietnam. 
2. For each type of foreign currency in which the capital contribution is made, only one (1) direct investment capital account in that currency can be opened at one (1) authorized bank. 
3. When investing in Vietnam dong, one (one) direct investment capital account in Vietnam dong is permitted at an authorized bank where the foreign currency direct investment capital account has been opened to carry out the following transactions: Legal revenue and expenditure transactions in Vietnam dong associated with foreign direct investment activities in Vietnam; 
4. If a foreign investor participates in multiple BCC contracts, he or she must open a separate direct investment capital account for each BCC contract. 

Investors contribute funds to the direct investment capital account within the time frame specified. 

If the BCC Contract is signed between domestic investors, the investors must contribute capital in accordance with the terms of the BCC Contract. Domestic investors are not required by Vietnamese law to open a separate account for the project in order to contribute capital. As a result, investors can agree on a flexible capital contribution plan and how to manage capital accordingly. 

5. Establishment of an operating office

To carry out the BCC contract, the foreign investor may establish an operating office in Vietnam. This office has a seal; it may open accounts, hire employees, sign contracts, and conduct business activities within the parameters of the BCC contract and the Certificate of registration for the establishment of an executive office. 

It is optional to establish this office. The establishment of an executive office, on the other hand, makes it easier for investors to manage the project’s financial resources and to separate project activities from those of the investor company and its employees. 

Above are some issues related to the BCC Contract that Investors need to pay attention to before implementing a certain project. Basically, the laws of Vietnam are not too detailed for this Contract, so the parties can flexibly adjust and stipulate the rights and obligations to ensure the interests of the parties as well as actively adjust the BCC Contract during project implementation. 

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