What Is a BCC Contract in Vietnam? A Lawyer's Complete Guide to Its Mechanics, Use Cases, and Model Clauses
01 - The concept of a BCC contract
A Business Cooperation Contract (BCC) is a contractual arrangement under which multiple investors carry out a joint business without establishing a new legal entity, sharing profits and outputs on a contractual basis. It is entered into among investors including at least one Vietnamese entity, and functions as a joint-venture-style scheme without independent legal personality. Examples include the construction and operation of office buildings, the opening of Japanese restaurants, and the operation of Japanese-language education centers.
02 - Advantages and disadvantages of a BCC contract
Advantages: no need to establish a legal entity, reducing the operational burden; high flexibility (a legal entity can still be established later, using assets formed under the BCC); and the ability to contribute in forms other than cash, such as real estate or technical know-how.
Disadvantages: the operating representative bears heavy responsibility; there is a risk that management and accounting can become unclear; and because transactions must be carried out through the legal entity of one of the parties, there is a risk that revenue, tax, and corporate seal management can become ambiguous.
03 - When should a BCC contract be used?
(1) When entering a conditional investment sector that a foreign investor alone cannot satisfy the conditions for; (2) when seeking to secure influence over a business while avoiding restrictions on foreign ownership ratios; (3) when investing in a fixed-term project, to simplify eventual liquidation procedures; and (4) when pursuing a purely financial investment — providing capital without taking on management control.
04 - Key provisions of a BCC contract
For a BCC contract envisioned for a residential construction, leasing, and sale project, a model set of 20 clauses is proposed, covering: the parties, background, purpose of the contract, scope of business, capital contributions, funding arrangements, allocation of roles, the project management committee, profit sharing, confidentiality obligations, termination, force majeure, damages and penalty clauses, and governing law and dispute resolution (via the Singapore International Arbitration Centre), among other matters.
05 - Procedures relating to a BCC contract
Where a foreign investor's contribution ratio exceeds 50%, among other thresholds, the BCC contract must be registered with the investment registration authority. Under a BCC contract, a foreign investor may establish an “operating office” in Vietnam with its own corporate seal, bank account, and authority to hire employees (with the registration certificate issued within 15 working days of application).