SUMMARY
BYJU’S had moved the Karnataka High Court against the EGM called by its investors later this week to reconstitute the edtech giant’s board and oust its leadership team
The HC said that any decision taken by the shareholders of BYJU’S in the EGM shall not be given effect to till the next hearing on March 13
Sources told Inc42 that the court didn’t order a stay on the EGM as per BYJU’S plea and most investors are expected to vote in favour of the removal of Byju Raveendran
In what could be seen as temporary relief for beleaguered edtech giant BYJU’S, the Karnataka High Court on Wednesday (February 21) said that any decisions taken by shareholders at the upcoming extraordinary general meeting (EGM) will not come into effect till the next hearing.
The court was hearing a petition filed by Think & Learn, the parent company of BYJU’S, against its investors.
“The decision, if any, taken by the shareholders of the petitioner Company in the extraordinary general meeting scheduled on 23.02.2024, shall not be given effect to, till the next date of hearing. Issue emergent notice to the respondents,” according to the HC’s interim order, a copy of which has been seen by Inc42.
The HC has listed the matter for hearing on March 13.
However, sources told Inc42 that the court did not order a stay on the EGM as per BYJU’S plea. They said that the EGM will be held on Friday and most of the investors are expected to vote in favour of removal of cofounder Byju Raveendran from the company.
BYJU’S investors have called the EGM on February 23 to oust CEO Raveendran, his wife Divya Gokulnath and brother Riju Ravindran from the company’s board and wrest control of the company.
Meanwhile, a BYJU’S spokesperson termed the court’s order an immediate relief. The spokesperson said, in a statement, that the court termed potential resolutions passed at the upcoming EGM as “invalid”.
However, the court’s interim order does not specifically invalidate the EGM or any resolutions passed during the meeting. It only states that any decisions taken cannot be brought into effect till March 13, at the very least.
“The court’s decision to grant immediate relief to BYJU’S by invalidating the resolutions passed by the EGM, underscores its recognition of the need to protect BYJU’S best interests, and uphold the principles of corporate governance. The ruling ensures that the company can continue its operations with stability and focus, safeguarding the interests of all stakeholders,” the company said in the statement.
The edtech giant had filed the plea under Section 9 of The Arbitration and Conciliation Act, 1996. In its petition, it argued that certain investors violated the articles of association, the shareholders’ agreement and the Companies Act, 2013 by calling for an EGM.
As per the company, the investors in question include General Atlantic, Chan Zuckerberg Initiative, MIH EdTech Investments, Own Ventures, Peak XV Partners, SCI Investments, SCHF PV Mauritius, Sands Capital Global Innovation Fund, Sofina, and T. Rowe Price Associates.
BYJU’S Sings A Different Tune
While the HC merely offered an interim relief till March 13, BYJU’S said that the development is a “significant victory” for the company. It added that the court has recognised “the urgent need to protect the company’s interests and uphold the principles established by law”.
BYJU’S also said that its investors are trying to disrupt the company’s operations by depriving it of urgently needed capital (its rights issue of $200 Mn).
“In its petition, BYJU’S highlighted that the purported reasons for the EGM, including the removal of Byju Raveendran as CEO and chairman, as well as Divya Gokulnath and Riju Raveendran as directors, were merely a smokescreen designed to disrupt the management, control, and functioning of the company,” the statement said.
The company also said that the proposed EGM is “vexacious and devoid of merit”, adding that the move is envisaged to disrupt the ongoing rights issue.
Earlier in the day, founder and CEO Raveendran, in a letter to shareholders, said that the rights issue to raise $200 Mn at a valuation cut of 99% has been fully subscribed. He is also said to put $45-$46 Mn in the rights issue to preserve his shareholding in the company.
The development comes at a time when the edtech major has been fighting fires on multiple fronts. BYJU’S has been grappling with issues such as mass layoffs, a looming debt crisis and a bevy of legal cases.
The company is also facing four insolvency pleas before the NCLT filed by the BCCI, Term Loan B lenders, and two vendors. The company has also faced ire of shareholders for delays in filing financial statements, growing losses, scrutiny of the Enforcement Directorate (ED), and other legal battles.
BYJU’S filed its financial statements for FY22 almost 22 months after the end of the year. Its net loss surged 81% YoY to INR 8,245.2 Cr in FY22. Operating revenue grew more than 120% YoY to INR 5,014.6 Cr during the year under review.
