Conflict between Ilia Kenigshtein and Roman Khmil – in-depth review. Valuation of Creative Quarter’s business

On October 3, 2016, Ilia Kenigshtein and Roman Khmil presented a new project –b2b-coworking network “Creative Quarter”. Two years later Ilia Kenigshtein accused his cofounder and other investors of the Company of being raiders. Roman Khmil called it a slander. The Parties are going to apply to the court. [Editor's note: the original article was published on October 11, 2018]

What had happened?

On October 8, 2018, Ilia Kenigshtein announced, “he was forcibly removed from running the Company and dismissed from the Board of Directors”. Roman Khmil described it, as follows: “On Friday, October 5, the Board of Directors of the American company took a decision to dismiss Ilia as a TOP-Manager (Chief Creative Officer). At the same time, the latter is a shareholder of the company.” In addition, he started from calling Ilia Kenigshtein a “former partner.”

What American Company are we talking about?

There are three Ukrainian LLC— Creative Quarter – Kyiv.1”, 2 and 3. “1” was registered at the day of project presentation, “2” — in two months before announcement of launching the second location on Podol, “3” — in two weeks before Ilia Kenigshtein stated that he was removed from office. All three of them belong to Ukrainian Limited Liability Company Creative Quarter Ukraine, registered on August 19, 2016. Creative Quarter Ukraine, LLC belongs to the US parent company Creative Quarter Inc., registered on October 11, 2016 in Delaware. According to the analytical system YouControl, this company was registered in the Ukrainian State Register in four months. Board of this company’s Directors took a decision on removal of Ilia Kenigshtein.

Who are the members of the Board of Directors of Creative Quarter Inc.?

In October 2016, it became known that the partners Ilia Kenigshtein and Roman Khmil attracted investors. Then Ilia Kenigshtein just told, “Money is “clean” and is not related to politics”. In spring of 2017, he clarified in the interview to AIN.UA that the investors were “the Ukrainian venture fund with clean money”.“It is highly professional guys with colossal investment background. Although, in terms of publicity, they are not stars. The precise figure is a subject to NDA. If we are talking about an approximate figure – it is from hundred thousand dollars to a million.”

On November 13, 2017, a list of beneficiaries of Creative Quarter Ukraine in the State Register, previously including only Ilia Kenigshtein and Roman Khmil, has been extended by two more names.

“The highly professional guys with colossal background” turned to be Dmitri Isupov and Andrey Zolotukhin. Both are the Managing Directors and co-owners of assets management company Ozon Capital. This company runs a few Ukrainian investment funds and non-government pension fund Laurus. As of August 31, 2018, the latter managed (PDF) 12.3 billion UAH.

Dmitri Isupov and Andrey Zolotukhin provided no response to the direct request for comments on the situation with Creative Quarter. We phoned to Ozon Capital and they promised to notify management of our request, although, as of the moment of this material publication, the editorial team received no feedback.

Answering to the question who attracted the investors, Roman Khmil says that cofounders were jointly involved in search and, “therefore, they found investors together”. CEO of Creative Quarter adds, “However, that’s true, these are the guys that I knew before, as we studied together at the university.” Artem Afian, the Attorney and Managing Partnet at law company Juscutum, who represent the interests of Ilia Kenigshtein, states (our editorial team has the respective letter) that the investors “were attracted by Roman and they are good friends with Roman.”

Dmitri Isupov and Andrey Zolotukhin became shareholders of Creative Quarter Inc. from Delaware. As Roman Khmil told us, firstly, they were not included into the membership of the Board of Directors, but had a representative in the person of the company’s Chief Financial Officer. CEO states, “Although, actually it was an independent market representative, who occupied their place in the Board.” Thus, until autumn of 2018 the Board of Directors comprised two cofounders and Chief Financial Officer. Roman Khmil clarifies, “However, Ozon was entitled to obtain a seat, which they deed a week ago […]. Instead of CFO, the investor personally became a member of the Board.”

Could the Board of Directors be authorized to dismiss a cofounder and partner from operating position? From the Board of Directors? Without any explanation?

Nataliya Solomakhina, former Chief Legal Officer of investment company Digital Future, believes that, most probably, the Board of Directors may be authorized to dismiss a cofounder from the operating position:

“Corporate law of Delaware is very flexible. There are no such mandatory rules as “transactions in the amount, exceeding 50% of the company’s assets cost in the previous period, shall be the subject to approval at the general meeting.” It is only the company, which determines who, how, when and what for takes one or another decision, as well as the competence of management bodies (Board and meeting of shareholders) in their internal documents. Therefore, we should address to these documents to find a definitive answer. Nevertheless, pursuant to a common practice, the Board of Directors may dismiss TOP-Manager and is not obliged to explain the reasons for this decision. They just vote and that’s it, unless the employee had an employment contract, excluding dismissal “at will”, i. е. just by employer’s decision and without prior notice.”

Ilia Kenigshtein told about removal from the Board, while Roman Khmil, said in the commentary to AIN.UA only that “a membership of the Board of Directors has been changed”. To change the membership of the Board, the company had to hold a meeting of shareholders, where a majority of votes takes a decision. Nataliya Solomakhina explains, “It means that if Ilia Kenigshtein has 30%, the remaining 70% are sufficient for taking such decision.”

What is the reason for dismissal?

Roman Khmil, СЕО of Creative Quarter, refuses to comment the reasons for Keningstein’s dismissal:

“We, as a company, cannot disclose this information – it is unethical. Public discussions of this issue cannot be objective. […] There is a comprehensive assessment of the Board of Directors. If the Board of Directors considered that it would be better for the company to retain Ilia, he would have continued working there. He had been working there for two years. During these two years, the Board of Directors has considered that it was more advantageous to have Ilia in-house, than outside the company. Two years later the Board of Directors concluded that since that time it would be more useful that somebody else continued doing this job. Why is it so? I am not willing to comment the details.”

Ilia Kenigshtein said that nobody explained him the reason as well:

“It is difficult for me to understand the statement that somebody is not satisfied with my work. Neither I, nor my lawyers got clear response to the question: “Why did they dismiss me?” either orally or in writing. No one disclosed the reason for such decision. I think that it is a part of the plan.”

According to posts in Facebook, it follows that the cofounders had disputes since the second months. They started interpreting initial agreements (described by Ilia Kenigshtein as “parity in all areas”) differently. He states, “We have shared the duties equally. This decision turned out to be my major strategic mistake.”

To the question what is meant by parity, Roman Khmil answers that, first of all, it is about a share in the company. He tells, “At the beginning we had equal shares in a Company […]. Further Ilia started interpreting it as if we should do everything in the company together. In my view, it is a very foolish thing. No company works like this. From the very beginning, I have been CEO, and CEO plays a key role. That is how it works. Since the beginning, Ilia understood that I was CEO and for me it meant that he also understood that I take a final operating decision in the Company. Two-three months later this (editorial note – misunderstanding) came out.”

In fact, a position of Ilia Kenigshtein confirms his partner’s story about different understanding of the roles, “Roman could not accept the fact that his status in the Company is nominal, and we both were running the startup. We had different functions and areas of responsibility, but we discussed all matters. This was originally.”

Three months later Roman Khmil stated, “his partner was willing to influence all decisions in the company and to have veto power.”

Roman Khmil tells us the point of disagreements,

“Neither I, nor our shareholders accepted this, because:

  • Firstly, you have no corporate background;
  • Secondly, if I am СЕО, then I am ready to discuss and listen different points of views for a long time, but, finally, a decision for each case is taken at the operating level and by CEO. If there is anything that you, as a shareholder, do not agree with, you bring it for consideration by the Board of Directors and replace CEO. CEO is the key person.

That was the beginning of misunderstanding, which escalated into more complex conflict. I tried to minimize it by sharing the areas of responsibility. He was responsible for sales. I said, “You are responsible for that and I do not interfere in it. We just have a business plan for a year and you have to implement it. If you fail to do it, we discuss this matter at the meeting of the Board.”

According to Ilia Kenigshtein, in three months after the first disagreement the situation looked like that:

“It was more and more difficult to work. I sincerely had no idea why this was so. At a certain point, Roman suggested dividing our teams, and further asked me to cease communications with his team. Business suffered from it, although, the disagreements were rather at some kind of psychological level.”

Despite this misunderstanding, both cofounders have been remaining in their positions in the Board of Directors as well as in operating positions for two years. However, at the beginning of October the Board decided to dismiss Ilia Kenigshtein from his position.

“Acquisition of share for peanuts”

The major emphasis of the first Keningstein’s message, probably, is laid not on the fact of dismissal without explanations, but on linkage of the dismissal with the actions, leading to deprival of not just position, but also shares.

He writes, “Right now, these days, there is a final stage of unfriendly pressing me out the company, initiated by the group of co-shareholders headed by CEO.”

In support of this statement, he says that he received a proposal from the shareholders to sell his share for peanuts – at the price of $50,000. As a proof of it, he showed a screenshot of the correspondence with the company’s shareholders and investors – Dmitri Isupov and Andrey Zolotukhin. The underlining of the text fragments was made by Ilia Kenigshtein.

СЕО of CQ himself tells that he made no proposals to buy the partner’s share. In particular, concerning the offer amounting to $50 000 Roman Khmil says that he is not aware of the details and he was not present at the meeting.

Roman Khmil states, “I proposed to pay certain amount as a severance pay in order to part in amicable way. Although, as far as the negotiations (whether he stays in the company or leaves it) were held until the last moment, so, we have not managed to reach this proposal. Further, on Monday, he came to public attention and it became irrelevant to discuss it. Therefore, he decided to make it a mess.”

The Lawyer Solomakhina believes that the fact of offering $50,000 for a share in the company’s capital does not mean collusion as Ilia Kenigshtein believes. In Lawyer’s opinion, the co-founder could refuse from the proposal and, as a shareholder, request financial statements of the company (according to the law of the state) and propose business valuation. Ilia Kenigshtein asserts, “I proposed. A few times. It was ignored.”

However, it retains the issue with the knock-down price. Why did the shareholders believe that the proposal can be accepted? A position of Ilia Kenigshtein is clarified in more details by a message of his Attorney Artem Afian, who prefers not to express the process in such terms,

“Ilia uses the term “raidership” and “unfriendly pressing out”, but these processes have not been implemented yet. I represented Ilia’s interests at the shareholder’s meeting and undertook non-disclosure obligation. Nevertheless, I can say that all taken decisions lead directly to diluting down Ilia’s share. Therefore, he will just be tossed overboard of the project. Now he has already been deprived of operating income from the project. To my regret, Ozon Capital ignored mediation proposal that Ilia and I spoke about. This, in my opinion, confirms their plan to press out the minority partner.”

How much does Creative Quarter earn?

The editorial team of AIN.UA made calculation of the amount, which CQ can earn. All information is taken from public data or sources of AIN.UA on the market.

CQ has two sites – 2,800 sq. m in Business Center Gulliver and 2,000 sq. m in Business Center Astarta:

  • In Business Center Gulliver 5 sq.m of the working area is allotted per person (let’s assume that the working area is 90% of the total office space) ~ 500 workplaces.
  • Business Center Astarta has 400 workplaces – it was told during the launch.

An average vacancy of coworkings of A class at the end of 2017 is 8.8%. About 820 people y paid from $250 to $470 monthly. It is ~ $3.4 million of income per year.


  • Business Center Gulliver charges $28 per sq.m on monthly basis, minus 20% discount to a big client (a discount for huge clients can be up to 40%) = $62,720.
  • Business Center Astarta charges a rentof $27 per sq.m, minus the same discount of 20% = $43,200.

Salary budget. Personnel of ~25 employees for both sites costs ~ $20,000 per month. $20,000 more we budget per month for salaries to two CEOs (market price for founders of business with such a turnover). $2,000 will be spent on single tax for all employees.

Taxes. $1.77 million/year – rent and salary budget. Most probably, this amount + 18% of tax on this amount are incurred by LLC. All other costs are incurred by business entity – 5% of the costs.

Outcome: $1.25 million of income per year.

As an example of mediation proposal, Ilia Kenigshtein tells about his initiative to find CEO outside the company. He suggested that he and Roman could disengage themselves from operating activities. His suggestion was rejected.

By “decisions, which directly dilute down Ilia’s share” Artem Afian means additional share issue to raise additional funding. These shares can be registered on Ozon (current investor – editorial note) that will dilute down Ilia’s share.”

Solomakhina believes that such course of events is possible.

The Lawyer adds, “If there is no shareholder’s agreement, according to the law the shareholders have no pre-emptive right.”

It means that in case of any issue of shares, including when the shares are not intended for minority partner like Ilia, the share of the latter is diluted down.

In the comment to AIN.UA Roman Khmil told that the Creative Quarter was going to raise two investment rounds – “in the nearest time and next year”. Roman says, “When we receive real money and sign papers of the deal, we would understand what the price was, whether it was successful or not. It can be that we invested more money than the amount, which would be received for sale of the company in full or partially. Therefore, it is early to comment it.”

Until the deal is closed, it will not be known how Ilia’s share changes in case of raising the round and evaluating the company’s value.

What comes next?

The parties state that they are preparing for applying to court. Ilia Kenigshtein – for raidership, Roman Khmil – for slander. Although, they do not exclude the possibility to come to an agreement. Artem Afian says that he tries to persuade another party, “but without any results to date”.

Roman Khmil, while talking with a journalist about the court, gets annoyed:

  1. “Raidership would be the case if someone grabbed his shares, and the shares are not grabbed. It is a slander. Previously I preferred him to apply to court and prove something, but now I will apply to court. It is the first time ever that I am accused of raidership, for no reason. He should not have said this. Everyone should carefully chose the words and be responsible for these words.

  2. What does it have to do with Ukraine, when we are U.S. company. This is a manipulation and stupidity. He believes that he will get away with it. He used to talk a lot and bear no responsibility for these words. However, it is a corporate story – there is no way to avoid responsibility for his words. It is not a public story or social company. It is business. If he does harm to business reputation of the partner or the company, we will apply to court. We will anyway bring a suit against him in the USA.”


When we are talking about mediation, he says that there are “always a chance” to solve all problems without going to court. Although, last week the chances were higher. “Now the situation is a little bit emotional. I think that the pressure will go down and some further steps will be done. As for me, there is no conflict. If you are dismissed as a TOP Manager, you should take it easy. Despite of the fact whether you are a shareholder or not, a co-owner or not. We discussed with Ilia many times that the company should employ people, who are in the right place. If, in a certain moment, someone of us has to leave, he should stand up and go out. We own a share in the company and, therefore, we deeply care for life and progress of our company as our brainchild.”

Nataliya Solomakhina also added, “Officials of US company have fiduciary duties against the latter. It includes a duty of loyalty, namely: to put the company’s interests before one’s own. I would leave open the question whether these duties are terminated after dismissal. In my opinion, the duties are not terminated. In case of violation of fiduciary duties, the court may award damages against the official.”

Could this whole thing have been avoided or any minority partner has a chance to face with it and there is no protection?

The relationships between shareholders, rules for leaving the company and purchasing of shares are stipulated by shareholder’s agreement. It is not a standard document and it is not required to establish a company. If there is no shareholder’s agreement, the relationships between the parties are regulated by general law of Delaware and so-called ByLaws of the company.

Nataliya Solomakhina explains, “Corporate law of Delaware does not provide for any special regulations, aimed at protection of the rights of minority shareholders, except, may be, “inspection right”, i.e. rights of access to the company’s documents, including financial statements. As for all other standard (for investment deals) rights of minorities, like right of veto and protection from diluting down a share, they are stipulated by the shareholder’s agreement.”

Why co-founders of CQ did not enter into the shareholder’s agreement?

Roman Khmil provides the clearest answer to the question about shareholder’s agreement:

“There was no shareholder’s agreement in the standard package, offered by the US lawyers, who registered the company for us. It is not a binding document and we considered that ByLaws would be quite enough.”

The journalist asked the above-stated question four times, but received no reply from Ilia Kenigshtein. Cofounder told that the document was “set forth but postponed indefinitely”, but he “believed that sooner or later it would be signed”.

His lawyer gives more clear reply. Artem Afian says, “Firstly, they had other things on. For a year and a half, Kenningstein have not insisted on it. The project was in progress and Ilia, like many other businessmen, put legal details aside and was occupied with development of the project. When Ilia made a proposal (about a month ago), firstly his request was ignored and later – rejected.”

Roman Khmil confirms that within a year and a half after registration of the company the document has not been drawn up, because “nobody raised this issue”. Then he agrees that, in fact, Ilia Kenigshtein raised the issue, when we “proposed him to resign on voluntary basis”. Further, other shareholders “asked him to submit all proposals in the form of legally correct documents, which could be seriously discussed”. In response to comments of Artem Afian that the shareholders refused to consider the issue, CEO of Creative Quarter responded in the following way:

“(а) this document just was submitted for consideration, and (б) this proposal came when we started the procedure of dismissing Ilia. Under such circumstances, why the Company should weaken its position by signing something in a hurry?

Ilia proposed to sign shareholder’s agreement and make respective amendment to ByLaws. At the meeting of shareholders, we told that we were ready to consider Ilia’s proposal, which would be drawn up by the lawyers. This fact is recorded by the minutes of the meeting of shareholders. Still we haven’t received back from Ilia any documents, elaborated by our lawyers and submitted for consideration. Nattering and PR.”

In response, Kenningstein and Afian declare that the minutes of the meeting of shareholders, mentioned by Roman Khmil, are invalid. The Attorney says, “there are inconsistencies and some clauses were not included. We submitted comments and corrections to this document.” Ilia Kenigshtein states, “The meeting was audio recorded. The other party sent us draft minutes. We made corrections. Most of our corrections were not taken into consideration. The minutes shall be signed by all members in order to confirm that all parties agree with it. In this case, the minutes were signed just by the Secretary of the Board. It means that the minutes are invalid.”


On October 5, the day when the Board of Directors took a decision on dismissal, Ilia Kenigshtein, wrote in Facebook and it was not an angry post. He called Creative Quarter his second child that he managed to grow “not owing to, but rather despite the circumstances, which occur daily as annoying fly”.