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.