A Business Cooperation Contract (BCC) is a common form of investment and commercial cooperation in Vietnam, particularly in projects involving multiple investors without the establishment of a new economic entity. The determination of the contract value plays a crucial role in defining the rights, obligations, benefits, and risks borne by each party. Vietnamese law provides a legal framework governing the determination of the value of a BCC to ensure transparency, fairness, and legal certainty in the course of cooperation. This document outlines the relevant legal provisions, procedures, and potential legal consequences arising from non-compliance.
1. Which laws govern the determination of the value of a Business Cooperation Contract in Vietnam?
The determination of the value of a Business Cooperation Contract in Vietnam is primarily governed by the following laws and codes:
- Law on Investment 2020: This Law defines a Business Cooperation Contract (BCC) as an investment form whereby investors cooperate in business activities, share profits and products, without establishing a new economic organization.
- Civil Code 2015: This Code provides general regulations on cooperation contracts, including contract contents, the rights and obligations of cooperating parties, and other related legal issues.
- Civil Procedure Code 2015: This Code governs the settlement of disputes arising from business cooperation contracts through judicial proceedings before the courts.
Accordingly, the above-mentioned legal instruments collectively form the legal basis for determining the value of a Business Cooperation Contract in Vietnam.
2. What procedures must be followed to determine the value of a Business Cooperation Contract in compliance with the law?
Pursuant to Article 504 of the Civil Code 2015, a cooperation contract is an agreement between individuals or legal entities to jointly contribute property or labor to carry out a specific task, share benefits, and jointly bear liabilities. Therefore, the determination of the value of a Business Cooperation Contract is primarily based on the agreement of the contracting parties.
Pursuant to Article 28 of the Law on Investment 2020 and Article 505 of the Civil Code 2015, a Business Cooperation Contract must contain the following principal contents:
- Names, addresses, and authorized representatives of the contracting parties; transaction address or location of the investment project;
- Objectives and scope of investment and business activities or the term of cooperation;
- Capital contributions or labor contributions of the parties and the distribution of investment and business results;
- Implementation schedule and duration of the contract;
- Rights and obligations of the contracting parties and cooperating members;
- Amendment, assignment, and termination of the cooperation contract;
- Liability for breach of contract and dispute resolution mechanisms;
- Methods for distribution of yields and profits;
- Rights and obligations of the representative, if any;
- Conditions for participation in and withdrawal from the cooperation contract, if applicable.
Based on the above provisions, the procedures for determining the value of a Business Cooperation Contract generally include:
- Negotiation and agreement:
- Determination of objectives: The parties clarify the cooperation objectives, project scope, and business lines.
- Valuation of contributed assets: Assessment and valuation of capital contributions in the form of cash, assets, land use rights, intellectual property rights (if any), or labor contributions.
- Agreement on profit-sharing: Agreement on profit or product distribution ratios based on contribution levels and risk allocation, which may be calculated based on revenue or profit before or after tax.
- Execution and implementation of the Business Cooperation Contract: Drafting and signing a detailed contract specifying capital contributions, management and operation rights, benefit and risk sharing mechanisms, responsibilities, and dispute resolution methods in accordance with applicable laws.
Accordingly, to lawfully determine the value of a Business Cooperation Contract, the parties must follow the procedures outlined above.
3. Are foreign enterprises required to comply with regulations on determining the value of a Business Cooperation Contract in Vietnam?
Pursuant to Clauses 2 and 3, Article 27, and Article 28 of the Law on Investment 2020:
- A Business Cooperation Contract may be entered into between domestic investors and foreign investors, or among foreign investors, and such investors must carry out procedures for obtaining an Investment Registration Certificate in accordance with Article 38 of the Law on Investment 2020. The parties to a BCC shall establish a coordination board to implement the contract. The functions, duties, and powers of the coordination board shall be agreed upon by the parties.
- A Business Cooperation Contract must include the following principal contents:
- Names, addresses, and authorized representatives of the contracting parties; transaction address or location of the investment project;
- Objectives and scope of investment and business activities;
- Contributions of the parties and distribution of investment and business results;
- Implementation schedule and duration of the contract;
- Rights and obligations of the contracting parties;
- Amendment, assignment, and termination of the contract;
- Liability for breach of contract and dispute resolution methods.
- The parties to a BCC may agree on other contents provided that such agreements are not contrary to the provisions of law.
Based on the above provisions, foreign enterprises are fully entitled to enter into Business Cooperation Contracts in Vietnam and are required to comply with Vietnamese legal regulations on the determination of contract value and other contractual terms.
4. What legal consequences may arise if the determination of the value of a Business Cooperation Contract does not comply with the law?
Failure to comply with legal regulations on determining the value of a Business Cooperation Contract may result in the following legal consequences:
- Invalidation of the contract: The contract may be declared invalid pursuant to Clause 1, Article 407 of the Civil Code 2015 if the determination of the contract value violates legal requirements (e.g., due to mistake, fraud, or violation of prohibitions relating to valuation of contributed assets). In such cases, the parties must restore the original state and return to each other what they have received in accordance with Clause 2, Article 131 of the Civil Code 2015.
- Unilateral termination of the contract: The non-breaching party has the right to unilaterally terminate the contract and claim damages if improper valuation of contributed assets seriously affects the cooperation objectives, pursuant to Clause 1, Article 428 of the Civil Code 2015. Under this provision, a party may unilaterally terminate contract performance without compensation if the other party commits a serious breach of contractual obligations, or where otherwise agreed by the parties or provided by law.
- Compensation for damages and contractual penalties: The breaching party may be required to compensate for actual damages incurred by the other parties due to incorrect valuation or delayed capital contribution, and may be subject to contractual penalties if agreed upon in the BCC. Pursuant to Article 13, Article 360, and Clauses 1 and 2, Article 419 of the Civil Code 2015, individuals and legal entities whose civil rights are infringed are entitled to full compensation for damages, unless otherwise agreed or provided by law. Additionally, the breaching party may be subject to penalty for breach at the level agreed upon in the contract in accordance with Article 418 of the Civil Code 2015.
Accordingly, non-compliance with regulations on determining the value of a Business Cooperation Contract may expose the parties to the above-mentioned legal consequences.
In conclusion, the determination of the value of a Business Cooperation Contract is a critical legal and commercial issue that directly affects the enforceability and effectiveness of cooperation arrangements. Strict compliance with Vietnamese legal regulations not only helps mitigate legal risks but also ensures transparency, fairness, and sustainability in business cooperation, particularly in projects involving foreign investors. Proper valuation and clear contractual arrangements are therefore essential legal safeguards for all parties participating in a Business Cooperation Contract.
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