Will Byju’s investors fire founder Byju Raveendran from the ed-tech firm today?

Will it happen? Will Byju Raveendran, founder and CEO of ed-tech giant Byju’s, be ousted today from the company, as it continues its freefall? All eyes will turn towards the extraordinary general meeting (EGM) that has been called today by a consortium of key shareholders, collectively holding a stake of over 30 per cent in the ed-tech company, whose objective is to dethrone Raveendran and his family members and install a new board.

However, Byju Raveendran , and the company’s other board members co-founder Divya Gokulnath and Riju Ravindran have said that they will not attend the EGM, calling it “procedurally invalid”.

What’s going on? We get you the answers.

Agenda for the EGM

Investors such as South Africa’s Prosus, Peak XV Partners (formerly Sequoia Capital), General Atlantic, Sofina, The Chan Zuckerberg Initiative, Owl Ventures and Sand Capital, who have a shareholding of over 30 per cent, as of June 2022, have called for an EGM today (23 February). Incidentally, this is the third time the investors are issuing an EGM notice.

On their agenda is to restructure the board of directors at the ed-tech firm and also appoint new management. Additionally, they want to conduct an independent forensic investigation into various actions, including acquisitions, alleged breaches, regulatory affairs, tax filings, and payments.

As per an Economic Times report, the group of shareholders have also concerns over the management’s failure to enforce the company’s rights related to the acquisition of Aakash Educational Services Ltd (AESL), besides agreeing to “onerous” and “prejudicial” loan terms with Davidson Kempner (DK), among other matters.

There’s also the matter of adding shareholder representation and independent directors to the board, adjusting the Articles of Association (AoA) and Shareholders’ Agreement (SHA).

However, the decision to oust Raveendra and board members Divya Gokulnath and Riju Ravindran — who are his wife and brother respectively — may not be that simple. That’s because the Karnataka High Court on Wednesday (21 February) passed an order asking Byju’s shareholders not to bring in effect any resolutions expected to be passed during the EGM organised by select investors of the ed-tech giant Byju’s until the final hearing of its plea — 13 March.

Byju Raveendran to skip EGM

Hours before the scheduled EGM is to be held, Raveendran Byju, Divya Gokulnath and Riju Ravindran have said that they won’t attend the EGM, calling it “procedurally invalid” and contractually in contravention of the company’s article of association and shareholder’s agreement.

“Byju Raveendran or any other Board member will not attend this invalid EGM. This means the EGM, if it is still summoned, will not have the required quorum and cannot proceed to discuss or vote on the agenda,” they said.

A Byju’s spokesperson was also quoted by the Economic Times as saying, “We are appalled that the investors have leaked the purported EGM notice to the media, despite being bound by confidentiality obligations under the articles of the company and the shareholders’ agreement.”

However, the investors have countered Bjyu’s allegations on the EGM being invalid. A source told news agency PTI, “EGM is valid and fully in accordance with applicable law. EGM to continue as per plan. Incorrect to say that EGM won’t have a quorum if founders don’t attend.”

The many problems of Byju’s

Byju’s, ed-tech company which had once become synonymous with online learning, has run into many troubles recently. The firm has suffered setback after setback; valued at $22 billion in 2022, it is now valued at $200 million.

There have been allegations of a toxic work atmosphere and aggressive marketing practices that allegedly harassed parents. Then Prosus, a major shareholder, slashed Byju’s valuation by a staggering 75 per cent and causing a cascade of events. There were mass layoffs and the company began haemorrhaging money.

It also saw itself in the midst of several legal crises. The ed-tech is battling lenders from abroad over a $1.2 billion loan. There’s also legal action that the Board of Control for Cricket in India (BCCI) has initiated, claiming the company owes them dues to the tune of Rs 158 crore.

Last year in June, Deloitte resigned as the auditor of the firm, saying the company had delayed financial statements for the year ending 31 March 2022. Deloitte said it did not receive necessary documents even after writing several letters to the board.

The shareholders have also raised concerns about the show cause notice by the Enforcement Directorate (ED) on alleged contraventions.

And on Thursday (22 February), problems for Raveendran Bjyu escalated when the ED asked the Bureau of Immigration (BOI) to issue a Lookout Circular (LOC) against Raveendran to stop him leaving India. As per an NDTV report, earlier, the ED had issued a lookout circular ‘on intimation’ meaning that immigration authorities would inform officials concerned about any foreign trip by Raveendran, but now he can be stopped from leaving the country.

The move comes as the agency’s Bengaluru office is currently investigating alleged Foreign Exchange Management Act (FEMA) violations against the company and its founder.

While Byju Raveendran may not necessarily be ousted from the company he founded today, the road ahead for him is not easy. It is strewn with roadblocks and speedbumps and it is left to be seen how he can navigate this.

With inputs from agencies