Things seem to be worsening for the beleaguered edtech Byju’s, as a consortium of its investors, which last month sought out an extraordinary general meeting (EGM) to vote out company’s leadership, today unanimously voted to reconstitute the Byju’s board with an aim to remove the company’s control from its founders.
The shareholders, which represented about 60% of the company’s captable, also passed resolutions to request to resolve outstanding governance, financial mismanagement and compliance issues at Think & Learn Pvt Ltd, the owner of Byju’s.
“As shareholders and significant investors, we are confident in our position on the validity of the EGM meeting and its decisive outcome, which we will now present to the Karnataka High Court in line with due process,” the shareholders said in a statement.
Further, four of the company's investors led by Prosus, General Atlantic, Sofina, and Peak XV, took legal action against the edtech in a first, since taking the feud public.
These investors, along with support from other shareholders including Tiger Global and Owl Ventures, approached the National Company Law Tribunal on Friday, asking for relief concerning the ‘oppressive nature’ of a rights offer. The consortium has filed an oppression and mismanagement suit against the Byju’s management.
Byju’s, which has been struggling to raise capital for months, in January launched a rights issue, intending to raise $200 million, with valuation taking a whopping 99% blow compared to its last valuation of $22 billion. A rights issue in case of Byju’s at new valuation diluted the stake of shareholders if they did not participate. The company received commitments totalling $300 million earlier this week.
In a statement, Byju’s said the resolutions are invalid and ineffective.
“Byju's ï¬rmly declares that the resolutions passed during the recently concluded Extraordinary General Meeting (EGM) — attended by a small cohort of select shareholders — are invalid and ineffective,” the company said. “The passing of the unenforceable resolutions challenges the rule of law at worst.”
The EGM, already on February 22 declared ‘invalid’, and unattended by the founder Byju Raveendran himself, his wife and brother, was held amid a lot of chaos on Friday. Several uninvited participants joined the meeting, causing disruptions, and were later asked to leave the online call.
Byju’s also argued that the violation in procedure and ‘improper conduct’ would cause the company to violate its Articles of Association. It said the Karnataka High Court had previously stated that any decisions made during the meeting would not be given effect until the next hearing.
“These resolutions merely request the Board to ‘consider’ the recommendations passed at the EGM,” Byju’s said in a statement. “They do not have any binding effect whatsoever on the company or its decision-making processes. As such, the resolutions lack the necessary authority to impose any obligations on Byju’s or its directors.”
The investor’s suit further sought relief from the Bengaluru Bench of NCLT on issues such as financial mismanagement, opacity in sharing information, prolonged corporate governance issues including non-hiring of CFO and independent director, regulatory non-compliances amongst other things. The suit asked the NCLT to declare Byju’s present management as ‘unfit’ and appoint a new CEO and new board, and conduct a forensic audit of the company amongst other things.
