The Karnataka High Court has refused to stay an extraordinary general meeting (EGM) convened by the shareholders of Indian edtech firm BYJU’s to oust founder Byju Raveendran. However, in a partial relief for Raveendran, the court said any decision taken at the EGM cannot be implemented until the next court hearing on March 13.
The EGM will take place as planned on Friday (Feb. 23), investor sources told DealStreetAsia following the court order.
The shareholders of the edtech firm are looking to remove Byju Raveendran as the founder and put in place restrictions on the transfer of shares by founders. They also want a forensic expert to scrutinise various company actions including acquisitions, alleged breaches, regulatory affairs, tax filings, and payments.
BYJU’s had moved the court to quash the EGM saying the requirements for convening such a meeting have not been met, and “no notice has been issued as stipulated under Section 100(3) of the Companies Act, 2013”.
BYJU’s said certain investors—General Atlantic, Chan Zuckerberg Initiative, MIH EdTech Investments, Owl Ventures, Peak XV Partners, SCI Investments, SCHF PV Mauritius, Sands Capital Global Innovation Fund, Sofina, and T. Rowe Price Associates—had violated the Articles of Association (AoA), the Shareholders’ Agreement (SHA), and the Companies Act, 2013 by calling for the EGM on February 23, 2024.
“In the 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 company firmly argued that the proposed EGM was vexatious and devoid of merit, put forward to disrupt the ongoing rights issue which offers all shareholders an equal opportunity to maintain their shareholding in the Company via participation,” BYJU’s said in a statement.
Granting a partial respite to the beleaguered firm, the court ruled: “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.”
“The EGM will continue on Friday and it is incorrect to say that the court has invalidated the resolutions,” investor sources told DSA after the court ruling.
Once considered the poster child of edtech in India, with a peak valuation of about $22 billion, BYJU’s has now come under scrutiny for a range of issues, leading to its shareholders pushing for significant changes.
The company has witnessed the resignation of its auditor Deloitte, and several board members. Furthermore, it faces legal challenges in the form of a US lawsuit disputing the terms and payment of a substantial $1.2 billion Term B loan.
