Four investors of Byju’s have filed an oppression & mismanagement suit against the management of the company in the Bengaluru Bench of NCLT to declare founders as unfit to run the company, appoint a new board, declare the rights issue as void, conduct a forensic audit, among other reliefs, said investor sources.
This comes even as the investors held an extra-ordinary general meeting today (February 23) to oust the founder and his family from the edtech firm. The result of the voting is awaited.
Concerns raised in the NCLT suit include financial mismanagement by the founders leading to losing control of Aakash, Byju’s Alpha (TLB loan) default, prolonged corporate governance issues including non-hiring of CFO & independent director, oppressive nature of the $200 million rights offer, regulatory non-compliances, oppressive opacity and wilful default in sharing information with stakeholders.
The petition has been signed by four investors – Prosus, GA, Sofina, and Peak XV along with support from other shareholders including Tiger, Owl Ventures.
“The petition has been filed to prevent value erosion for all shareholders as well as preserve worth for other stakeholders’ – employees and customers”, said a source close to the developments.
Sources said the plea seeks declaration of the just-concluded USD 200 million rights offer as void and sought a direction that the company should not take any corporate actions that will prejudice the rights of the investors.
The plea has also mentioned about inter-corporate loans on undisclosed terms and multiple insolvency petitions filed by BCCI, TLB lenders and Surfer Technologies Pvt Ltd.
Byju’s had earlier filed a petition under Section 9 of the Arbitration and Conciliation Act, seeking from the Karnataka High Court restraint on these shareholders from holding the EGM. While the court said that the implementation of resolutions passed will be subject to the final hearing of the petition on March 13, it allowed investors to hold the EGM.
The group of investors plan to restructure the board of directors to increase shareholder representation, incorporate independent input, and improve corporate governance, they said.
“The Company has not received any formal intimation of any such petition being filed in the NCLT. It cannot comment on rumours on the same. Indian regulations stipulate due process for conducting an EGM, intimation of petitions being filed in NCLT, etc. But certain shareholders prefer to manufacture a media spectacle as opposed to following due process. If such a petition has been filed, the Company shall respond to the same as per Applicable Law and due process,” said a Byju’s spokesperson.
Byju’s investors seek to create a nine-member board within 30 days, nominate three independent directors by shareholders, appoint three shareholder directors, and two company executive management employees on the new board.
Byju’s, which was once India’s most-valued startup, has been under fire since the start of 2022 for a range of issues, including accounting irregularities, alleged mis-selling of courses, and mass layoffs.
The company has laid off thousands of employees in the last 12 months as it battled a double blow of drying venture capital funding and slowing demand for online learning services. Since then, its investor board members have left too, citing differences with Raveendran.
The company has tried to fix some of the problems since then. Its early investor Ranjan Pai ploughed in the capital, it set up an advisory council with veterans such as Mohandas Pai and Rajnish Kumar and elevated Arjun Mohan as CEO. It is also in talks to divest assets such as Great Learning and Epic.
Source: MoneyControl
