Investment in Vietnam through Business Cooperation Contracts (BCC): Legal Framework and Key Notes for Foreign Investors

In Vietnam’s diverse landscape of investment forms, the Business Cooperation Contract (BCC) stands out as a flexible option for investors, especially foreign investors who wish to collaborate with local partners without establishing a new legal entity. This form enables the parties to directly share profits, products, and risks while avoiding the complexities of setting up a company.

However, to ensure effectiveness and compliance, investors must understand the governing legal framework, the procedural requirements, and the critical considerations for risk management.

Legal Framework

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Investment through a Business Cooperation Contract (BCC) is primarily governed by:

Law on Investment 2025 (No. 143/2025/QH15)
Decree No. 31/2021/ND-CP guiding the implementation of the Law on Investment
Civil Code 2015 and Commercial Law 2005 governing general contractual principles
Specialized laws (e.g., telecommunications, oil & gas, construction, energy), where BCC structures are applied in sector-specific projects

The Law on Investment 2025 officially recognizes BCC as one of the four basic investment forms in Vietnam, alongside: (i) establishment of an economic organization; (ii) capital contribution, share purchase, or acquisition of capital contributions; and (iii) investment under the Public–Private Partnership (PPP) model.

Characteristics of a BCC

A BCC is a contractual arrangement between investors to cooperate in business and share profits or products without forming a separate legal entity. Its key features include:

– Flexibility: The parties may freely agree on the scope of cooperation, management, profit allocation, and dispute resolution mechanisms.

– No independent legal entity: Each party is responsible before the law using its own assets.

– Project-specific focus: BCCs usually target a particular business goal, such as joint exploitation of oil fields, development of infrastructure, or provision of telecom services.

– Joint management: Parties often set up a Coordination Committee to oversee project implementation, though this body has no legal personality.

For foreign investors, BCCs are especially common in sectors where 100% foreign ownership is restricted, but cooperation with a Vietnamese partner is permissible.

Procedures and Legal Process

To establish a BCC project in Vietnam, the following steps are required:

Step 1: Contract Execution

The parties must sign a written BCC. Essential clauses include: party details, objectives, scope, contribution commitments, profit-sharing mechanism, management structure, dispute resolution, and contract duration.

Step 2: Investment Registration Certificate (IRC)

If a foreign investor is a party to the BCC, the contract must be registered to obtain an Investment Registration Certificate (IRC) from the Department of Planning and Investment (or the relevant Management Board of industrial or economic zones).

Step 3: Formation of Coordination Committee

As the BCC does not create a new legal entity, the parties may establish a Coordination Committee to manage daily operations.

Step 4: Business Implementation

All business activities, transactions, and contracts are executed directly by the parties in their own names, with profit and risk allocation strictly based on the BCC.

Step 5: Reporting Obligations

Foreign-invested BCC projects must submit regular reports on investment implementation, operations, and financial matters in line with Vietnamese law.

Rights and Obligations of Investors

Rights:

Share in profits or products according to the contract.
Participate in project management via the Coordination Committee.
Legal protection of lawful rights and benefits.

Obligations:

Fulfill capital or asset contribution commitments.
Comply with tax, reporting, and regulatory requirements.
Bear direct liability before the law with their own assets.

The crucial point is that a BCC does not provide limited liability, and investors remain directly responsible for obligations arising from the contract.

Key Considerations for Foreign Investors

Market Access Conditions

Foreign investors must carefully review Vietnam’s market entry restrictions. Certain industries limit foreign ownership but allow cooperation via BCCs, such as oil & gas, power generation, and telecommunications with infrastructure.

Contract Drafting

Since the BCC has no separate legal entity, the contract is the sole legal foundation for cooperation. It must clearly regulate contributions, financial arrangements, technology transfer, profit sharing, management, and dispute resolution.

Asset and Liability Risks

Foreign investors should note that liability is unlimited. Risk allocation, indemnity provisions, and possibly insurance should be considered to mitigate exposure.

Taxation and Foreign Exchange

Profits derived from a BCC are taxable in Vietnam. Foreign investors must open a direct investment capital account, comply with tax obligations, and ensure lawful foreign exchange transactions.

Dispute Resolution

Given the cross-border nature, disputes often arise. The BCC should stipulate arbitration (e.g., VIAC in Vietnam or international arbitration such as SIAC or ICC) to ensure neutrality and efficiency, rather than relying solely on Vietnamese courts.

Case Example: Sectors Where BCCs Are Common

Telecommunications: Foreign partners cooperate with Vietnamese telecom providers in network development.
Oil & Gas: Exploration and exploitation projects between Vietnamese state-owned enterprises and international oil corporations.
Construction and Infrastructure: Collaboration in developing industrial parks, power plants, or highways.

These cases show that BCCs provide a practical solution when foreign investors cannot directly establish wholly-owned subsidiaries in restricted industries.

The Role of Legal Advisors

Although the BCC is flexible, its legal risks are significant. Professional legal assistance is essential to ensure enforceability and safeguard investor rights.

La Défense offers comprehensive legal services for BCC investments, including:

Assessing whether a BCC is a viable option in a given sector.
Drafting, reviewing, and negotiating BCC contracts to align with both Vietnamese law and international standards.
Representing investors in obtaining the Investment Registration Certificate.
Advising on tax, foreign exchange, and financial arrangements.
Supporting investors in risk management and dispute resolution.

With extensive experience in cross-border investments, La Défense ensures foreign investors can execute BCC projects in Vietnam with confidence and legal certainty.

Investment through a Business Cooperation Contract (BCC) offers foreign investors a unique gateway into Vietnam’s market, especially in restricted sectors. While this model brings flexibility and efficiency, it also entails complex legal risks due to the absence of a legal entity and unlimited liability for the parties involved.

By thoroughly understanding the legal framework, drafting robust agreements, and engaging competent legal counsel, foreign investors can leverage BCCs as a powerful tool to achieve business goals in Vietnam.

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