Oleksandr Hlus, head of the Supervisory Board of Nemiroff Ukrainian Vodka Company, Nemiroff Vodka Limited director and owner of a blocking stake, is sure that in the conflict there is no room for emotion - only the interests of capital. At a private meeting with a Ukrinform reporter he told when the Nemiroff plant will resume production and outlined his position in dealing with the corporate conflict.

Q.: Nemiroff Company on August 29, 2013 halted production at the plant in Nemyriv due to a shortage of empty bottles. What happened?

A.: Production is really suspended due to a shortage of empty bottles. Absurd lawsuits have been filed against our glassworks partners. Together, we worked out the options to address the issue legally. All manufacturers of the components expressed a desire to continue cooperation and are completely at a loss why they are being drawn into a corporate takeover as the side that pressures the Ukrainian company.

While our partners deal with their risks and decide what to do next, we are in talks with other glass companies. After all, there are no barriers for our company to produce alcoholic beverages. We and glassworks are well aware that we are dealing with ordinary legal manipulations.

Q.: Hrybov and Kipish have repeatedly stated about the deprivation of rights of Nemiroff Company to produce products under the Nemiroff brand. How is this justified?

A.: That's right, they stated. Show us just a single decision of the Shareholders' Council or an effective court ruling that would prohibit Nemiroff Company to use our own brand! All the rest is manipulation intended to mislead our partners. The ownership structure and decision-making are as follows. Nemiroff Vodka Limited (Hlus - 25.04%; Hrybov - 20%; Filkinshtein - 20%; Anatoliy Kipish - 17.48% and Viktor Kipish - 17.48% of shares) is registered in the British Virgin Islands. We have signed the Shareholders' Agreement, which clearly spelled out the procedure of trademark management.

A trademark holder in the interest of all shareholders is a 100% subsidiary of Nemiroff Intellectual Property Establishment (NIPE), registered in Liechtenstein. This is an administrative unit, the tasks of which boil down to the accounting and payment of taxes, registration fees, as well as accounts of our patent attorneys. The company or its administrative director has no rights to manage trademarks without a decision of the Shareholders' Council!

The operating subsidiary Nemiroff Holdings Limited, registered in Cyprus, is a 100% owner of all the companies, including Nemiroff Company". It is Nemiroff Holdings Limited that has been prohibited any changes in its structure and all its subsidiaries; replacement of directors and charter documents under the ruling of the District Court of Cyprus in Nicosia, which is in effect today! But despite the ban of the European court, non-authorized representatives of Nemiroff Holdings Limited with Ukrainian passports sue in Ukrainian courts, receive decisions on Ukrainian companies owned by Nemiroff Holdings Limited. And all that is contrary to the ruling of the Cypriot court. These very non-authorized representatives attack producers of glass and labels to ensure by any means that production in Ukraine is suspended. It's complete chaos!

It's important to remember that the main holding company has always been and is Nemiroff Company. It, as the principal company, operates all of the key business processes - management, production, distribution, and marketing. Until January 31, 2014 the license agreement for all trademarks remains in force. Just look, there is a lot of hype, misinformation in mass media around the issue of licenses. But there has been no appeal to the court from the owner of brands on the invalidity of the License Agreement. There are only interim reliefs of the Ukrainian court on the claim by the non-authorized representatives.

The Ukrainian Institute of Industrial Property has registered industrial samples: the entire product as a whole - the bottle and the label, logos, and so on. And most trademarks. So their cancellation is another fiction, legal manipulation, which can be eliminated eventually.

Q.: And how will the London Court of International Arbitration influence the settlement of the conflict of shareholders in your company?

A.: I can't divulge the details of the process before the final decision - it's strictly prohibited to all parties. We have received a preliminary decision that suited us, we are waiting for the final one in the near future.

And my opponents, the united minority shareholders, at this time are trying to change directors of key companies of the holding, block production in Ukraine, replace the original product with vodka produced in Bashkortostan. That is, they ignore the regulations and interim reliefs of all international courts, designed to protect the business until the conflict is settled.

Q.: Your opponents said their company LVN-Trading begins deliveries of TM Nemiroff to key markets of the EU and the Duty Free. What is your estimate of their prospects?

A.: LVN-Trading was set up by an individual close to other shareholders. With a registered capital of as much as USD 120, at one time without the knowledge and consent of Nemiroff Company, it tried to be our financial surety provider in the amount of approximately USD 300,000 to Nemiroff Holdings Limited. Such schemes are usually used for a raider transfer of assets to other structures. But under pressure from Nemiroff Company, part of the shareholders has been forced to put LVN-Trading into the structure of the Nemiroff group of companies.

So it is too early to talk about the feasibility of the ambitious claims on the development of LVN-Trading business, since the company was established for other purposes.

Q.: How would you comment on a statement about the arrest of the Nemiroff Company accounts?

A.: There has been much noise around the arrest of accounts, designed to destabilize our work and put pressure on the partners. In fact, the enforcement proceedings have been initiated only against a certain amount and certain accounts of the company. Therefore, the economic activity of the company is provided by the accounts that we can use legally.

Q.: Meanwhile, the plant in Bashkiria already produces Nemiroff Vodka and retails in Russia...

A.: Here I see the biggest challenge for the brand already at consumer level. The end user defines the success of the produce. Moving their raider intents to consumer level can cause irreparable damage to the brand. In Russia, the Nemiroff brand first formed and became the leader of a specific segment of the market - the Ukrainian horilka. They know and love our horilka as a produce of Ukraine. And judging by the meager sales of the Bashkir analog of Nemiroff, produced without our technology and author recipes, the Russians did not accept the copy of Nemiroff: they are still looking on the stall the original Ukrainian product. Bashkir vodka stands on the stall like a dead weight. Sales plans failed. And this is the frozen money.

This situation like a boomerang will hit the manufacturers, they will be forced to stop the illegal production by orders of Hrybov and Kipish due to insolvency and risk of claims on the trademarks. And given the fact that the raised money is spent on war against me, no sane bank will open a credit facility for such a risky "bubble". In Ukraine, their prospects are even worse. To offer our consumers a Ukrainian brand, manufactured in Bashkortostan, is a complete nonsense. I'm sure that Hrybov, who once dealt with marketing, is well aware of these risks. Obviously, the agreement with Kipish before the attack on the partner prevents him from making sound decisions.

Another very important point. The establishment of Nemiroff Vodka Rus LLC (NVR) has been initiated by the part of shareholders to replace Trading House Nemiroff, which does its business as part of the Shareholders' Agreement. However, the legality of creating NVR is now being challenged in court. The basis for the lawsuit was the violation of intellectual property rights of Nemiroff when registering an individual name of the company - Nemiroff Vodka Rus LLC. Thus, the registration of NVR and its economic activities may be considered illegal, which would entail a violation of obligations to partners.

Q.: How does the suspension of production in Nemyriv influence the local budget?

A.: Nemiroff Company is one of the largest taxpayers across the state, and damages to the local budgets as a result of the raider blockades of the scheduled work are tremendous. Indeed, Nemiroff Company is not just a payer of excise duty and VAT, but a major platform for the tax base. This is the other taxes of the enterprise itself (social benefits, pension funds, income tax, etc.) in size equal to the excise and a chain of taxation of all partners. In Ukraine, the company is a major employer, it buys components and raw materials (bottles, caps, labels and alcohol) produced in Ukraine, and it's thousands of jobs and tens of millions of revenue to the Ukrainian budget.

In January -June, Nemiroff Company paid to the budget about half a billion hryvnias. And also - VAT and income tax. Now - only excise duty (about UAH 80 million per month). But after the reopening of production, all will resume its normal course.

Q.: How many people have been dismissed?

A.: Since 2006, the rate of staff turnover in the company never exceeded 10%. This is a very good indicator for any manufacturing enterprise. During the downtime we have not dismissed a single person. No "massive layoffs" about which our opponents have trumpeted in the media. Of course, like elsewhere, there is staff turnover, layoffs due to violations of labor regulations (theft, systematic absenteeism, drunkenness, etc.). But even in the case of gross violations we do not spoil people's future working career - provide the opportunity to leave the company by mutual agreement of the parties.

Q.: It's said that the head of Nemyriv District State Administration is allegedly lobbying for your interests. There have been even protests demanding his resignation. Do you associate these events with the situation in your company?

A.: It's politics. A struggle for the position of the head of administration. And Nemiroff Company in this situation is a convenient trump card for political consultants. And in this short span of time, I think their interests coincided with my opponents. Today in Ukraine there are many examples where raiders are trying to drag the authorities into their dirty deeds. And if they fail, they begin to pursue individual officials. There is a constant substitution of concepts, legal manipulation, attempts to discredit the reputation via the mass media - that is the algorithm of corporate takeover in Ukraine today. But I want to warn these spin doctors: soon everything will be back in its place, and they will have to be responsible for the losses inflicted on the company.

We operate transparently, pay all taxes in full, are a socially responsible company and are one of the best Ukrainian employers. Local authorities have always been comfortable working with us.

Q.: The conflict between the Nemiroff shareholders has lasted since May 2011. Are there chances for a compromise?

A.: I've repeatedly called on the united minority shareholders to stop violating the Shareholders' Agreement, stop attacking the company in pursuance of the ruling of the Cyprus court and the conflict will be solved. The goal is clear - buying my shares on the cheap in order to sell them at a higher price and earn on the difference.

I'm firmly convinced that it's necessary to look for a compromise to save the company and the brand. Two years of war have brought nothing but losses. It's just necessary to stop, drop emotions and take a pragmatic decision. Given these circumstances, there may be some hard document-agreement between Kipish and Hrybov, which does not allow to resolve the conflict peacefully.

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