1. What is a Business Cooperation Contract?

According to Clause 14, Article 3 of the Law on Investment 2020, a Business Cooperation Contract (hereinafter referred to as a "BCC Contract") is a contract entered into between investors for the purpose of business cooperation, profit sharing, and product distribution in accordance with the provisions of law, without the establishment of an economic organization.

2. Joint Venture between Individuals and Companies in Business Cooperation for Investment Purposes

Pursuant to Clauses 14, 18, 19, and 20 of Article 3 of the Law on Investment 2020, the relevant terms are defined as follows:

“Article 3. Interpretation of Terms
[...]
14. A Business Cooperation Contract (hereinafter referred to as a “BCC Contract”) is a contract entered into between investors for the purpose of business cooperation, profit sharing, and product sharing in accordance with the provisions of law, without the establishment of an economic organization.
[...]
18. An investor is an organization or individual that carries out business investment activities, including domestic investors, foreign investors, and economic organizations with foreign-invested capital.
19. A foreign investor is an individual holding foreign nationality or an organization established under foreign law that carries out business investment activities in Vietnam.
20. A domestic investor is an individual holding Vietnamese nationality or an economic organization that has no foreign investors as members or shareholders.
[...]”

From the above provisions, the law permits cooperation between organizations and individuals for the purpose of business cooperation.

Current laws and regulations do not specifically define the term “joint venture enterprise” and rarely mention the form of joint venture enterprises.

However, the 2013 Land Law refers to joint venture enterprises in the context of land users. Specifically, Clause 7 of Article 5 stipulates that land users include: “Foreign-invested enterprises, including enterprises with 100% foreign capital, joint venture enterprises, and Vietnamese enterprises in which foreign investors acquire shares, merge, or acquire under the provisions of the investment law.” Based on this, various provisions relating to joint venture enterprises are established, such as: acquiring land use rights, rights and obligations of joint venture enterprises using land contributed as capital, and the conversion of wholly foreign-owned enterprises into joint ventures.

According to various reference materials, a joint venture enterprise is an enterprise jointly established in Vietnam by two or more parties based on a joint venture contract or an agreement signed between the Government of the Socialist Republic of Vietnam and a foreign government, or by a foreign-invested enterprise cooperating with a Vietnamese enterprise, or by a joint venture enterprise cooperating with a foreign investor on the basis of a joint venture contract.

Pursuant to the Law on Investment 2020, the following key aspects are to be analyzed:

Article 21 of the Law on Investment 2020 provides for forms of investment as follows:

1. Investment in the establishment of an economic organization;

2. Investment by way of capital contribution, share purchase, or capital contribution purchase;

3. Implementation of investment projects;

4. Investment in the form of BCC contracts;

5. Other forms of investment and types of economic organizations as prescribed by the Government.

In relation to the establishment of an economic organization, there are two relevant methods:

1. Investment in the establishment of an economic organization;

2. Investment by way of capital contribution, share purchase, or capital contribution purchase.

In the case of capital contribution, share purchase, or capital contribution purchase, an existing economic organization is already in place. The foreign investor invests by purchasing shares newly issued or additionally issued by a joint-stock company, contributing capital to a limited liability company, a partnership, or another economic organization; purchasing shares from the company or shareholders of a joint-stock company; purchasing capital contributions from members of a limited liability company to become a member thereof; or purchasing capital contributions from contributing partners of a partnership to become a limited partner. Foreign investors must register their capital contributions, share purchases, or capital contribution purchases before changing members or shareholders if falling under specified conditions. If not subject to registration, they must still carry out procedures to change members or shareholders in accordance with applicable laws.

Thus, investment by way of capital contribution, share purchase, or capital contribution purchase does not result in the creation of a new economic organization, but rather a change in the membership of an existing company.

By contrast, the joint venture model requires the establishment of a new economic organization. Accordingly, joint venture enterprises are characterized by the provisions relating to investment in the establishment of economic organizations with foreign investors.

Article 22 of the Law on Investment 2020 provides:

“1. Investors shall establish economic organizations as follows:

a) Domestic investors shall establish economic organizations in accordance with the Law on Enterprises and other relevant legal provisions applicable to each type of economic organization;

b) Foreign investors shall establish economic organizations in compliance with market access conditions applicable to foreign investors as prescribed in Article 9 of this Law;

c) Prior to the establishment of an economic organization, foreign investors must have an investment project and must carry out procedures for issuance or adjustment of the Investment Registration Certificate, except for the establishment of small and medium-sized innovative start-ups and venture capital funds in accordance with the laws on supporting small and medium-sized enterprises.

2.From the date the Enterprise Registration Certificate or an equivalent legal document is issued, the economic organization established by a foreign investor shall be the investor implementing the investment project in accordance with the provisions of the Investment Registration Certificate.”

Point b, Clause 1, Article 126 of Decree No. 31/2021/ND-CP dated March 26, 2021, which details and guides the implementation of certain provisions of the Law on Investment, provides:

“1. Enterprises operating under an Investment License shall continue to operate in accordance with the provisions of such license and their charter. For any matters not provided for in the Investment License and the charter, enterprises shall comply with the Law on Enterprises, the Law on Investment, and other relevant legal regulations, on the following basis:

b) Wholly foreign-owned enterprises with two or more foreign investors and joint venture enterprises shall comply with regulations applicable to limited liability companies with two or more members.”

Based on the above provisions, joint venture enterprises possess the following characteristics:

- The establishment of a joint venture enterprise is a form of foreign direct investment in Vietnam. A joint venture enterprise has legal person status under Vietnamese law and is formed and operates from the date of issuance of the Investment License;

- A joint venture enterprise is typically organized as a limited liability company with two or more members and bears the characteristics of this organizational model under the Law on Enterprises;

- Joint venture enterprises may only conduct business in sectors permitted under Vietnamese law. The application dossier for registration of a joint venture company must comply with Vietnamese legal requirements;

- Foreign investor eligibility requirements must comply with the provisions of the Law on Investment 2020 (Article 23), and Chapter V of Decree No. 31/2021/ND-CP dated March 26, 2021, which provides detailed regulations and guidance on the implementation of certain provisions of the Law on Investment.

Form of Business Cooperation Contract in Investment

Pursuant to the provisions of Article 27 of the Law on Investment 2020 regarding investment in the form of a Business Cooperation Contract (BCC), the law provides as follows:

“Article 27. Investment in the Form of a BCC Contract

1. BCC contract entered into between domestic investors shall be implemented in accordance with civil law.

2. BCC contract entered into between a domestic investor and a foreign investor, or between foreign investors, shall be subject to procedures for the issuance of an Investment Registration Certificate in accordance with Article 38 of this Law.

3. The parties to a BCC contract shall establish a coordination committee to implement the contract. The functions, duties, and powers of the coordination committee shall be agreed upon by the parties.”

Accordingly, a BCC contract may be entered into between a domestic investor and a foreign investor or between foreign investors and is subject to the procedures for the issuance of an Investment Registration Certificate under Article 38 of the Law. The parties to the BCC contract are required to establish a coordination committee to implement the contract. The functions, duties, and powers of such committee shall be determined by mutual agreement of the parties.

3. Contents of a Business Cooperation Contract (BCC Contract)

Pursuant to Article 28 of the Law on Investment 2020, the contents of a Business Cooperation Contract are regulated as follows:

“Article 28. Contents of a BCC Contract

1. BCC Contract shall include the following principal contents:

a) Names, addresses, and lawful representatives of the parties to the contract; transaction address or the location of the investment project;

b) Objectives and scope of business and investment activities;

c) Contributions of the parties to the contract and distribution of business investment outcomes among the parties;

d) Schedule and duration of contract implementation;

đ) Rights and obligations of the parties to the contract;

e) Amendments, assignment, and termination of the contract;

g) Liability for breach of contract and dispute resolution mechanisms.

2. During the implementation of a BCC Contract, the parties may agree to use the assets formed from business cooperation to establish an enterprise in accordance with the law on enterprises.

3. The parties to a BCC Contract may agree on other contents not contrary to the provisions of law.”

Accordingly, a Business Cooperation Contract (BCC Contract) shall include the following:

- The names, addresses, and authorized representatives of the parties; the transaction address or project implementation location;

- Objectives and scope of the investment and business activities;

- Capital contributions by the parties and the allocation of business investment outcomes;

- Implementation timeline and contract duration;

- Rights and obligations of each party;

- Provisions on amendment, assignment, and termination of the contract;

- Liability for contractual breaches and methods of dispute resolution.

In addition, during the implementation of the BCC Contract, the parties may agree to use the assets formed through business cooperation to establish a new enterprise in accordance with the applicable enterprise law. The parties also have the right to agree upon other terms and conditions, provided they are not contrary to the law.

Thus, under the above provisions, a BCC Contract is concluded in accordance with civil law and must include the contents set forth under Article 28 of the Law on Investment 2020.