Investing in the form of BCC contracts: Benefits and risks

Investing in the form of BCC contracts brings many benefits to investors. This form allows cooperative parties to flexibly share profits and risks, optimize resources, and take advantage of each other’s expertise. This helps reduce investment costs, improve efficiency, and create sustainable development opportunities for both parties without having to establish a new business.

Concept of business cooperation contract (BCC)

Pursuant to Clause 14, Article 13 of the Law on Investment 2020, a BCC contract is a contract signed between investors to cooperate in business, divide profits, and divide products according to the provisions of law without establishing economic organization.

BCC contract implementation process

Pursuant to Clause 3, Article 27, Article 49 of the Law on Investment 2020, after signing the BCC contract, the parties will proceed to implement the contract as follows:

1. The parties participating in the BCC contract establish a coordination committee to implement the BCC contract. How the contract will be implemented will be agreed upon by the parties in the contract or attached appendix.
2. Because the BCC contract will have one party as a foreign investor, the foreign investor can establish an executive office in Vietnam. At this time, the foreign investor will submit an application to establish an executive office at the investment registration agency where the executive office is expected to be located. The application file will include:

• The registration document to establish an executive office includes: name and address of representative office in Vietnam (if any) of the foreign investor in the BCC contract; name and address of executive office; content, duration, and scope of operations of the executive office; Full name, place of residence, ID card number, Citizen Identification card or Passport number of the head of the executive office;
• Decision of the foreign investor in the BCC contract on the establishment of an executive office;
• Copy of the decision to appoint the head of the executive office;
• Copy of BCC contract.

After submitting the application, within 15 days from the date of receiving the above application, the investment registration agency shall issue a Certificate of registration of executive office operations to the foreign investor in the BCC contract.

Benefits when investing in the form of BCC contract

From the provisions of Article 27 and Article 28 of the Law on Investment 2020, we can draw the benefits that BCC contracts bring when investors decide to invest in this form:

• Freedom of agreement: Signing parties do not need to be legal entities, helping to create flexible conditions for cooperation.
• Save time and costs: No need to establish an economic organization, helping to save on complicated legal procedures.
• Mutual support: The parties can provide support in terms of experience and investment capacity, helping to optimize business operations.
• Independent legal status: Investors still maintain separate rights and obligations, ensuring fairness in operations.
• Support coordination board: Improve responsibility and work efficiency through the coordination board according to agreement between the parties.
• Long-term cooperation: Parties can use assets formed from cooperation to establish businesses and expand long-term relationships.
• Clarity in profit division: The BCC contract specifically stipulates profit division based on the level of contribution of the parties.

Potential risks in BCC contracts

Although business cooperation contracts (BCCs) bring many benefits, these forms also have notable risks that investors need to consider before deciding to participate. Some risks to keep in mind include:

• Unclear rights and obligations: If the contract does not clearly stipulate the division of profits, costs and responsibilities between the parties, disputes can easily arise when one party feels that it is not getting its fair share.
• Unfair profit sharing: Parties may not be satisfied with sharing profits or bearing costs. A lack of transparency or specific terms can lead to conflicts.
• Difficulties in property ownership: When parties cooperate without clearly defining the ownership of common property (both physical and intellectual property), disputes are likely to arise when using or dividing the property.
• Failure to perform financial obligations: If one party fails to fully perform its financial obligations, such as failing to pay expenses on time or failing to repay debts, it will affect the stability of the contract and the partnership.
• Legal risks and dispute resolution: If the contract does not clearly stipulate the method of dispute resolution or does not ensure legal compliance, the parties may encounter difficulties when incidents occur or when cooperation is ineffective.

Investment consulting in the form of BCC contract

Investing in the form of BCC contracts is increasingly becoming an attractive choice for investors who want to optimize profits without having to establish a new business. At Long Phan, we help you easily access and optimize investment opportunities in the form of BCC contracts. Services at Long Phan will include:

• Strategic consulting and providing optimal solutions for customers.
• Consulting on analysis and risk assessment of factors that can affect investment results.
• Support drafting and checking contract terms, ensuring the legality and rights of customers.
• Support finding cooperation partners and connecting with potential partners in the industry.
• Consulting on supervision, monitoring and management of investment projects.
• Assist in negotiating contract terms.

With a team of experienced experts in consulting on investment issues, Long Phan will bring you safe and effective investment solutions, while minimizing risks and maximizing benefits from Investment in the form of BCC contract. Please contact us immediately via the hotline 0906735386 to receive in-depth and specific advice for your investment strategy.