Ricons triggers legal dispute against Coteccons over unsettled debt

July 26, 2023 | 09:54
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A longstanding financial dispute involving outstanding debts from economic contracts has culminated in a bankruptcy petition against Coteccons Construction JSC by Ricons Construction JSC.
Ricons triggers legal dispute against Coteccons over unsettled debt

Coteccons Construction JSC, Vietnam's leading construction firm, is facing a bankruptcy petition initiated by another construction company, Ricons Construction Investment JSC.

The notice of the filing was issued by Ho Chi Minh City People's Court on July 4, according to a recent disclosure by Coteccons.

The roots of the bankruptcy filing can be traced back to a complex dispute over an economic contract between the two companies, involving unsettled transactions related to accounts receivable and payable.

These debts originated before 2019 when both Coteccons and Ricons were part of a seven-company ecosystem, alongside Unicons, Newtecons, BM Windows, Sol E&C, and Boho. This interconnected business network functioned as a collaborative entity, with each company contributing to a shared operational architecture.

As members of this ecosystem, Ricons undertook a number of construction projects in which Coteccons played the role of a subcontractor. These included the Regina Hung Yen project, East Asia project design, and the Golden Palace project, among others.

Furthermore, several equipment rental transactions were made between the two companies. The disputes over the outstanding receivables from these deals remain unresolved, largely due to complications in establishing the legal veracity of the documentation and quantifying the exact value of the debts.

A parallel situation occurred on projects where Coteccons was the main contractor, resulting in outstanding debts to Ricons, who served as a subcontractor. Notable among these projects are the Newtaco project, Regina Stage 4, Regina Miracle factory, Regina Stage 6, Regina Hung Yen project, Vinfast factory project, and the Simco project.

Coteccons has stated that it had sought resolution to these issues, repeatedly requesting direct meetings and written communication with Ricons. However, they claim Ricons failed to provide the requisite legal documentation that matches the claimed debt value.

According to the firm’s announcement, Coteccons is in the process of bidding on key projects of national significance. Despite this discord, Coteccons is seeking a swift and cooperative resolution via arbitration. However, Ricons has shown a lack of collaboration and escalated the issue to court with a bankruptcy petition. Coteccons perceives this move as a strategically timed, rather than spontaneous action.

In its 19 years of operation, including two years of restructuring, Coteccons has consciously chosen to step away from the competitive tactics of rumour-spreading and price wars, undergoing a thoughtful examination of the construction sector and resolving to drive change.

"As a result, Coteccons suggests that the Ricons contractor collaborate, submit documents that fulfill legal criteria immediately, and assess the worth of debts originating between the two parties so that Coteccons’ bidding process is not hampered," Coteccons said in its official statement.

The firm maintains that this measure is vital to ensure a fair competition and the successful execution of significant national projects.

During the 2023 AGM, Ricons' leadership brought up the issue of debt from significant shareholders. They asserted that failure to meet debt payment obligations was contrary to the principle of cooperation and the responsibility of major shareholders.

Despite numerous written requests for payment and efforts to discuss the issues at stake, there has been no breakthrough in the deadlock.

A Ricons representative said, "When a partner lacked goodwill and cooperation, and neglected commitments, leading to persistent debts, Ricons was compelled to resort to more assertive legal measures. These include seeking the support of state management agencies in safeguarding our legitimate rights and interests."

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