Business Standard

Byju’s investors vote to remove CEO from board

Company calls resolution­s at EGM ‘invalid’; shareholde­rs move NCLT


Investors of Byju’s, during the extraordin­ary general meeting (EGM) on Friday, voted and passed resolution­s including the removal of founder Byju Raveendran as chief executive officer (CEO), according to Prosus, which too has put money in the edtech firm.

They passed resolution­s to change the board, which includes Byju Raveendran’s wife and cofounder, Divya Gokulnath, and his brother Riju Raveendran.

The Raveendran family didn’t join the meeting. Byju’s said the resolution­s were invalid and ineffectiv­e. Their passing challenged the rule of law at worst, it added.

Prosus said: “At today’s extraordin­ary general meeting, shareholde­rs unanimousl­y passed all resolution­s put forward for vote. These included a request for the resolution of the outstandin­g governance, financial mismanagem­ent and compliance issues at Byju’s; the reconstitu­tion of the Board of Directors, so that it is no longer controlled by the founders of Think & Learn, (Byju’s parent); and a change in leadership of the company.”

According to investor sources, holders of over 60 per cent of the cap table voted in favour. Byju’s founders hold 23-25 per cent of the cap table.

Meanwhile, a group of four investors have filed an oppression and mismanagem­ent suit against the company’s management in the National Company Law Tribunal (NCLT), Bengaluru Bench, to declare the founders unfit to run the company. The group has also asked for the appointmen­t of a new board, declaring the rights issue as void.

The petition has been signed by Prosus, General Atlantic, Sofina, and Peak XV (formerly Sequoia), along with support from other shareholde­rs including Tiger Global and Owl Ventures, according to sources. There was high drama at the EGM. The day started with a phishing attack to attempt to disrupt the meeting, according to people familiar with the matter. Attendees received a random notificati­on from an unidentifi­ed source, saying that the meeting was cancelled.

The EGM was for authorised and registered shareholde­rs and not for Byju’s employees, according to investor sources.

The EGM kicked off as scheduled at 9 am. Several unauthoris­ed persons sympatheti­c to Byju’s tried to join and ambush the meeting. They used background whistles and sharp noises to sabotage the event.

“Some users said ‘we need our CEO, Byju sir’,” according to a person. “Unidentifi­ed people with fake names like Natalia Cruz, Kevin Pietersen and Sir Michael Knight attempted to join the video conference.”

The person said unauthoris­ed persons sympatheti­c to Byju’s also impersonat­ed investors.

“The right investors were identified to avert any such attempts of impersonat­ion and the meeting proceeded in accordance with the law,” said a person.

The unauthoris­ed persons were removed.

All investors who had confirmed attendance were allowed to attend. Auditors MSKA and Associates (BDO) were present at the EGM throughout, according to sources.

‘Resolution­s invalid’

Byju’s said these resolution­s merely requested the board to “consider” the recommenda­tions passed at the EGM. They are not binding on the company or its decision-making processes.

“The resolution­s lack the necessary authority to impose any obligation­s on Byju’s or its directors,” said the company.

Byju’s said the Karnataka High Court had granted interim relief, clearly stating that any decisions made during the meeting would not take effect until the next hearing. This order, coupled with numerous procedural irregulari­ties and deficienci­es, invalidate­s the resolution­s passed by a select, narrow group of shareholde­rs.

It also said the resolution­s were voted upon without the valid constituti­on of a quorum, as stipulated in the Byju’s Articles of Associatio­n (AOA).

Taking Byju’s to NCLT

According to investor sources, the concern raised in the suit at the NCLT includes alleged financial mismanagem­ent by the founders, which led to losing control of test-prep subsidiary Aakash and defaulting on a $1.2 billion term loan B (TLB). The suit also highlighte­d multiple insolvency petitions filed by the Board of Control for Cricket in India, TLB lenders and Surfer Technologi­es Pvt Ltd.

“The relief sought includes declaring the present management as unfit to run the company and appointmen­t of a new CEO and board,” said a person familiar with the developmen­t.

The suit includes directing the management to share informatio­n with the investors and conducting a forensic audit of the company.

The company has raised $5.08 billion from investors. The cash-strapped firm is now looking to raise $200 million via the rights issue. If that goes through, its post-money valuation will be between $230 million and $250 million, a 99 per cent drop from the $22 billion valuation the firm had in 2022, according to sources.

A Byju’s spokespers­on said the firm had not received any formal intimation of the petition.

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