An EGM initiated by a group of investors of embattled edtech firm Byju’s is currently in the spotlight as they strive to eliminate the company’s founder and CEO Byju Raveendran and his family from their leadership positions due to mismanagement and other challenges. Over the course of many months, numerous investors of Think and Learn Private Limited, the parent company of Byju’s, have been calling for the removal of Raveendran and his family members from their leadership roles. This consortium of shareholders, which includes the global tech investor Prosus, is also aiming to appoint a new board.
Byju Raveendran has made it clear that he and the other members of the board will not be attending the EGM called by the investors. According to Raveendran, the EGM is “procedurally invalid” and goes against the company’s article of association and shareholder’s agreement. In a letter to shareholders, Raveendran stated that the attendance of at least one of the founders is necessary to form the quorum for a valid EGM.
The investors who called the EGM, however, argue that it is valid and in accordance with the law. They have stated that the EGM will proceed as planned.
It is important to note that Byju’s has obtained a stay order from the Karnataka High Court, which means that any resolutions passed at the EGM will be considered “ineffective” until the next hearing.
While there is a stay order on resolutions, the court has not issued any direction to stop the EGM from taking place today.
The main issue at hand revolves around the acquisition of the company in 2021 for $950 million, with the majority of the payment made in cash and the rest to be adjusted against Think & Learn equity.
Allegations have been made against Byju’s management for allegedly withholding important information from investors, leading to a growing divide between the company and some of its key stakeholders.
These allegations include failure to disclose financial information, discrepancies between projected guidance and actual results, and inaccurate disclosure of available capital, which has resulted in a misrepresentation of short-term capital adequacy.
Investors have also expressed concerns about ongoing investigations by the Directorate of Enforcement (ED), the Ministry of Corporate Affairs (MCA), and the Serious Fraud Investigation Office (SFIO).
Moreover, they assert that the management has persistently violated the obligations outlined in the shareholding agreement and articles of association by failing to provide essential financial data, capital tables, M&A transaction details, and information on debt negotiations. Consequently, shareholders have suggested several next steps, including evaluating the status of CEOs and CFOs across entities, establishing interim succession plans, and potentially appointing a third-party temporary CEO for all entities involved.