The purpose of an extraordinary general meeting (EGM) held by certain investors of the struggling edtech business Byju’s is to remove CEO and founder Byju Raveendran and his family from their positions due to mismanagement and other issues.
Byju’s Board Battle Escalates: Founder Defies Investors’ Call for Change, Legal Turmoil Ensues
For an extended period, several stakeholders of Think and Learn Private Limited, the main organization behind Byju’s, had been requesting that Raveendran and his relatives be removed from their positions of authority. This group of shareholders also wants to name a new board; among them is international tech investor Prosus.
Byju Raveendran made it very clear that he and the other board members would not be attending the EGM that the investors had called because it is “procedurally invalid” and goes against the terms of the company’s articles of association and shareholders agreement.
“It is with firm resolve that I inform you that neither I nor any other Board member will attend this invalid EGM. Under the AOA and the SHA, the attendance of at least one of the Founders is necessary to form the quorum for a valid EGM,” Raveendran addressed stockholders in a letter.
The investors who had called the EGM responded by saying it was legal and legitimate. They stated, “The EGM will continue as per plan.”
Byju’s has obtained a stay order from the Karnataka High Court, deeming resolutions passed at the EGM as “ineffective” until the next hearing. The issue revolves around the acquisition of the company in 2021 for 950 million USD, with 70% of the payment made in cash and the remainder to be adjusted against Think & Learn equity. Allegations have surfaced against Byju’s management for allegedly withholding crucial information from investors, exposing a growing divide between the company and key stakeholders.
These accusations include failure to disclose trading financials, material discrepancies between projected guidance and actual results, and inaccurate disclosure of available capital, leading to a misrepresentation of short-term capital adequacy. Investors have raised concerns regarding ongoing investigations by the Enforcement Directorate , the Ministry of Corporate Affairs and the Serious Fraud Investigation Office. Shareholders have proposed 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.
From Unicorn to Legal Battle: Byju’s Journey Amid Allegations and Valuation Plunge
- Started in 2006, offering classes for MBA aspirants preparing for CAT exam.
- Diversified offerings to include postgraduate, undergraduate and school students.
- Launched Byju’s learning app in 2015, becoming India’s first ed-tech unicorn in four years.
- Led extensive marketing campaign during Covid pandemic, hiring thousands for online education.
- Secured sponsorship deals with the Indian cricket team and Lionel Messi as global ambassador.
- Allegations of a toxic work atmosphere and aggressive marketing practices led to Prosus’s 75% valuation cut, mass layoffs and billions lost.
