Kusto's Extraordinary General Meeting Demand môn Sáp nhập, mua lại và tái cấu trúc doanh nghiệp | Trường Đại học Kinh tế Thành phố Hồ Chí Minh

Issue 4
4a. Kusto convenes an extraordinary general meeting of shareholders, and is the
dismissal and removal of board members and the supervisory board in accordance with the law?
According to Article 115, Clause 2 of the Law on Enterprises 2020:
A shareholder or group of shareholders owning from 5% of the total number of
ordinary shares or more, or a smaller percentage as prescribed in the Company's
Charter, has the right to request the convening of a General Meeting of Shareholders.
in the following cases: (According to Article 115, Clause 3)
1. The Board of Directors seriously violates the rights of shareholders, the
obligations of the manager, or makes decisions that exceed the assigned authority;
2. Other cases as prescribed in the Company's Charter.
In the case of Coteccons, Kusto is a strategic shareholder owning 17.6% of the shares.
Therefore, Kusto has the full right to request the convening of an extraordinary
General Meeting of Shareholders to dismiss members of the Board of Directors and the Supervisory Board.
According to Article 140, Clause 2 of the Enterprise Law 2020:
"Unless otherwise prescribed in the Company's Charter, the Board of Directors must
convene a General Meeting of Shareholders within 30 days from the date of receipt of
the request for convening a meeting from a shareholder or a group of shareholders as
prescribed in Clause 2, Article 115 of this Law."
However, Coteccon's Board of Directors did not convene the General Meeting of
Shareholders as requested. This is a violation of the manager's obligations.
"In the event that the Supervisory Board does not convene the General Meeting of
Shareholders as prescribed in Clause 3 of this Article, the shareholder or group of
shareholders as prescribed in Clause 2, Article 115 of this Law, has the right to
represent the company to convene the General Meeting of Shareholders. 2 shareholders
as prescribed by this Law." (According to Article 140, Clause 4 of the Enterprise Law 2020)
Therefore, Kusto can completely request to convene an extraordinary General
Meeting of Shareholders according to the provisions of Clause 2, Article 115 of the Enterprise Law 2020.
However, for this convening to be completely legal, it is necessary to fully comply
with the regulations on procedures, notification time and meeting content according to
the Enterprise Law 2020 and the Company's Charter (According to Article 140,
Clause 5 of the Enterprise Law 2020):
Procedure for convening: Kusto must follow the correct convening process as
prescribed by law and the Company's Charter, including sending a written
request to the Board of Directors, clearly stating the reason for convening and the issues to be discussed.
Notification time: Kusto needs to ensure the notification time for the
extraordinary General Meeting of Shareholders in accordance with regulations.
(no later than 21 days before the opening day if the Company's Charter does
not specify a longer period) According to Article 143 Clause 1 of the Enterprise Law 2020
Meeting content: The dismissal of members of the Board of Directors and the
Supervisory Board must be carried out in accordance with the provisions of law
and the Company's Charter, ensuring the interests of other shareholders.
4b. Why did Kusto agree to merge with Unicons but then firmly refuse to merge with Ricons later?
1. Kusto agreed to merge with Unicons because:
Business activities: Unicons has its own customer segment and is a large
company in the construction industry with large annual revenue, so the merger
of Unicons has helped Coteccons grow strongly in terms of revenue and
capacity. construction. Moreover, owning 100% of Unicons' capital helps
Coteccons have complete control and create unity in management.
Strategic direction: The merger with Unicons, a company that provides
support activities and does not directly compete with Coteccons, can help
optimize resources, improve operational efficiency and eliminate redundant
resources in the system. birth. Merging the two units helps optimize large
construction projects, increasing Coteccons's competitiveness in the international market.
Increase shareholder benefits: Merging with Unicons is considered part of a
strategy to strengthen internal cooperation and create long-term value for both
Coteccons and shareholders without creating conflicts. significant benefits.The
merger of the two companies can improve resource use, financial transparency and profit optimization.
Kusto agrees with the merger of Unicons because this is a strategic step to help
strengthen Coteccons' strength in the construction industry, does not cause internal
conflicts, and brings long-term value to shareholders.
2. Kusto resolutely opposes the merger with Ricons because:
Conflict of interest:
oRicons is a direct competitor in the same construction field and has
gradually become an internal competitor of Coteccons.The two
businesses are in the same industry, in the same market segment, if
merged, they will not bring benefits. Merging with Ricons could
increase conflicts of interest, especially as Ricons has a stronger position in the ecosystem.
oKusto may be concerned that the merger with Ricons will bring greater
benefits to certain shareholder groups or Coteccons' management instead
of the common interests of all shareholders. Coteccons' management
may use Ricons to redirect profits or create special incentives, harming
the common interests of shareholders.
Concern about governance:
oKusto has repeatedly expressed concerns about governance issues in the
ecosystem of Coteccons' subsidiaries, including Ricons. They allege that
Coteccons' revenue and profits may have been diverted through
companies such as Ricons. Merging Ricons could exacerbate this
problem instead of solving it. Increase management and transparency issues.
oIn addition, Kusto expressed concern when some members of
Coteccons's leadership are holding important management positions at
Ricons, including the position of chairman and legal representative. This
company, in addition to being a subcontractor of Coteccons, is also a
direct competitor in the field of general contracting, design and
construction in the same segment. This raises questions about how
Coteccons's senior management chooses companies to bid for projects
when they simultaneously manage two businesses that compete directly;
as well as how to allocate profits to each party in the contracts.
Kusto's opposition to the merger with Ricons shows concerns about corporate
governance and conflicts of interest, as well as the potential to damage Coteccons's control and value.
4c. Why did the satellite company system, the "ecosystem" of Coteccons, operate
for many years, and only in 2018-2019 did Kusto raise concerns about issues in corporate governance?
Due to the increase in allegations of inefficient governance in the period 2018-2019,
as well as the benefits from Coteccons being diverted to satellite companies, was the
main reason why Kusto, as the strategic shareholder holding 17.6% had to speak out.
At the same time, conflicts of interest and control as the founding group no longer
maintains major influence in the current shareholder structure. The shareholder
structure charted reflects the shift of power from the founding group (Mr. Nguyễn Bá
Dương held 4.9% of shares in 2019) to the strategic shareholder group and other minority shareholders.
4d. What do you think about Mr. Nguyễn Bá Dương's statement regarding his
concern that foreign investors might "take over" the company he founded and
built with great effort? If this concern is valid, then what is the cause, why is it
happening, and how could this issue have been avoided? (Note that Kusto
invested in CTD in 2012, but this issue only officially arose in 2020)
Mr. Nguyễn Bá Dương is worried that foreign investors may take over the company
he founded. His concern is well-founded as Kustocem has steadily increased pressure
through immunization proposals on him and other senior leaders to control Coteccons, despite their 17.6% ownership.
The main cause of this risk is due to the share-based voting mechanism, the chart
shows that the “Others” group currently holds the largest share (57.7%) which reduces
the defense of the founding shareholder group against the strategic shareholders,
which has allowed the large shareholder group like Kusto to easily direct the strategic
decision. In addition, allegations of poor governance and even a requirement for
leadership immunity were also reasons and moves that Kusto exploited for the takeover plan.
To prevent the risk of takeover, Coteccons can offer concrete solutions such as
improving the governance mechanism, ensuring public transparency of transactions
involving satellite companies to avoid alleged strategic shareholding. At the same
time, to solve the problem related to voting rights, Coteccons can apply voting rights
(the mechanism of shares with different voting rights) to ensure that the founding
group and small individual shareholders can protect their interests and maintain control.
4e. Analyze and evaluate the M&A "takeover" activity of Coteccons by the
foreign investor Kusto and relate it to Chapter 11, which discusses whether
M&A activities help companies improve governance quality and business
efficiency. And is this true in the case of Coteccons?
Kusto's holding of stable ownership ratios while exerting strong pressure on
management and personnel indicates that Kusto conducted M&A with typical hostile
takeover strategies (increasing shareholding ratios, requiring special audits, and
seeking to replace senior management). According to Chapter 11 theory, M&A can
improve the quality of governance if it removes poor governance, imposes higher
standards, and enhances operational efficiency.
In the case of Coteccons, M&A presents both opportunities and risks. Although M&A
was expected to improve governance or resolve conflicts of interest involving satellite
companies, however, severe internal conflict within Coteccons and allegations of poor
governance during this period caused major instability and disrupted internal
cohesion, thereby negatively affecting operational efficiency. In particular, Coteccos'
Q3 2020 financial report was published with revenue and profit decreased by 55% and
46% respectively compared to the same period in 2019, while after-tax profit reached
only 88 billion VNĐ, only half compared to the same period in 2019 and the lowest level since Q1 2015.
In conclusion, in the case of Coteccos, Kusto's M&A did not significantly improve the
quality of governance, balance of power between the parties or resolve internal
conflicts, but instead increased internal conflict, creating the risk of lowering the value
of the enterprise and causing losses to shareholders.
1. Gia Miêu; 03/11/2020; "Sau "cuộc chiến" quyền lực, doanh thu và lợi nhuận
Coteccons sụt giảm mạnh". Available at: https://laodong.vn/bat-dong-san/sau-
cuoc-chien-quyen-luc-doanh-thu-va-loi-nhuan-coteccons-sut-giam-manh- 850913.ldo
2. Chân Dung Kusto group: Công Ty cổ Phần Chứng Khoán Funan (FNS) (no
date) Chân dung Kusto Group | CÔNG TY CỔ PHẦN CHỨNG KHOÁN
FUNAN (FNS). Available at: https://www.funan.com.vn/vi/chan-dung-kusto-
group.1021652 (Accessed: 22 November 2024).