A business cooperation contract (BCC) creates no new legal entity, so the entire economic relationship between the parties sits inside a single document: the contract. The profit and cost sharing clause is therefore the heart of a BCC — it decides how much each party actually receives, which costs each bears, and who may inspect the books when the numbers are disputed. Choosing the wrong model at the outset is the most common reason technically sound BCCs collapse financially after two or three years.
The four sharing models in common use
The first model is product sharing: the parties take the output in agreed proportions and sell their own share; it is characteristic of oil, gas and mining, where output is easy to measure and each party has its own sales channel. The second model is gross revenue sharing: all revenue from the joint activity is split by ratio before costs are deducted, suitable where one party contributes the market and sales channel while the other contributes production capacity. The third model is net profit sharing: revenue minus all legitimate costs is divided — the most economically balanced, but it demands transparent joint accounting because the operating party controls how costs are recorded. The fourth model is a fixed fee plus a variable component: one party receives a fixed periodic management or service fee and the remaining profit is shared by ratio; it fits BCCs where one party mainly contributes technology, brand and the management team. Whichever model is chosen, the contract must define exactly which revenue counts, which costs are deductible, who bears cost overruns, and whether the ratio steps up or down at output or time milestones.
Costs, audit rights and how number disputes are resolved
BCC disputes rarely erupt over the sharing ratio — the ratio is written in the contract — but over costs: the operator loads the common cost pool with items the other party considers private costs, or books revenue through a related company at non-market prices. Effective prevention has three layers. Layer one is a schedule of deductible and non-deductible costs annexed to the contract, with approval thresholds for major items. Layer two is inspection rights: each party may engage an independent auditor to review the joint activity’s books periodically, at its own cost unless discrepancies beyond an agreed threshold are found. Layer three is a dispute ladder for figures: reconciliation inside the coordination board, then expert determination of the financial figures by an independent expert, and only where the dispute is legal in nature, arbitration or court under the contract’s dispute clause. For tax, the sharing model determines how each party recognises its income under the Law on Corporate Income Tax 67/2025 and the Law on Tax Administration 108/2025/QH15, so the sharing clause should be cleared by the tax team before signing, not after operations begin.
Frequently asked questions
1. What profit and cost sharing models are used in BCCs?
Four common models: sharing the output product by ratio; sharing gross revenue before costs; sharing net profit after all legitimate costs; and a fixed fee plus a variable profit share. Each fits a different contribution profile: resources, sales channels, capital, or technology and management.
2. Which model is fairest for both sides?
No model is fair in the abstract — fairness lives in the accompanying definitions. Net profit sharing is the most economically balanced but is only fair with transparent joint accounting and real audit rights; a party that cannot control the books is better protected by gross revenue sharing or product sharing.
3. How are sharing disputes resolved?
Through a ladder that should be written into the contract: reconciliation in the coordination board, expert determination of the figures by an independent expert, and finally arbitration or court. Pure figure disputes resolved by expert determination are far faster and cheaper than litigation.
4. Who bears cost overruns in a BCC?
The contract decides. Tight drafting says: costs within the approved budget enter the common pool; overruns above a threshold need prior coordination board approval, otherwise the operator bears the excess itself. Without such a clause, arguments fall back on general principles of legitimate costs shared by contribution ratio.
5. Does BCC profit sharing affect each party’s tax?
Yes. A BCC is not a separate taxpayer; each party recognises its allocated share of income and pays tax on that share. Sharing by revenue versus by net profit produces different timing and bases for income recognition, so the model must be checked with the tax team before it is fixed.
Key takeaways for investors
- Ratios rarely cause disputes — the definitions of revenue and deductible costs are where disputes are born.
- Net profit sharing is only fair when paired with joint accounting and independent audit rights.
- Write a figure-dispute ladder into the contract: reconciliation, expert determination, then arbitration.
- The sharing model drives each party’s taxable income recognition — clear it with tax before signing.
This article has been quality-reviewed by the FLAW AI Legal Council