The Ministry of Corporate Affairs is likely to investigate the flow and use of funds in a Special Purpose Vehicle (SPV) called Byju’s Alpha, the US entity of the embattled Indian edtech startup Byju's. The move comes as the company is facing legal action from its US lenders.
The MCA decision to investigate the SPV comes after the Registrar of Companies (ROC), Bengaluru, recently submitted its report on Byju's, a government official, aware of the issue, said.
“The ROC report on Byju’s has led to further investigation. Investigation will focus on Byju’s SPV, its money usage, and flow of funds. It’s at an advanced stage,” the official told Moneycontrol on condition of anonymity.
The ROC, which operates under MCA, has completed an initial probe into Byju’s, following which the need for an advanced investigation was felt, considering allegations of financial irregularities in the company. The ROC is responsible for overseeing the administration of companies. It compiles a report on a company after online and offline inspections of documents or records.
Depending on the findings, the investigation may take time, he said.
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On June 26, the ministry had refuted reports that it cleared the struggling online-education startup of financial fraud. It said no conclusion had been reached in the matter.
In November 2021, Byju’s secured a loan from some US-based lenders, for which Byju’s Alpha was incorporated in Delaware for managing the funds.
The corporate affairs ministry has the authority to investigate the affairs of an Indian company's foreign SPV if there are concerns about compliance with Indian laws, particularly if it impacts the company in India.
Think & Learn, which is the owner of Byju’s brand, has been fighting the US lenders in courts in Delaware and New York over a $1.2 billion it owes them.
In a big relief for Byju's, the NCLAT on August 2 dismissed the insolvency proceedings against the company and approved a settlement with the Board of Control for Cricket in India (BCCI). However, American lenders have alleged that the funds being used for the settlement were lent by them to Byju’s Alpha.
The edtech firm refused to comment on the email query sent by Moneycontrol.
Byju’s came under the MCA scrutiny in July 2023 over alleged governance lapses and compliance issues under the Companies Act, 2013.
Three key directors representing some of the largest shareholders of Byju's — GV Ravishankar of Peak XV Partners (formerly Sequoia Capital India), Russell Dreisenstock of Prosus and Vivian Wu of Chan Zuckerberg Initiative — had stepped down from the Byju's board in 2023.
Deloitte, Byju's auditor and one of the largest audit firms globally, also resigned citing a "long delay" in the company's FY22 results.
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