In a few hours from now, investors of embattled edtech company Byju’s will begin the proceedings of the extraordinary general meeting (EGM) in a bid to oust founder and CEO Byju Raveendran.
Even as Raveendran, his co-founder and wife Divya Gokulnath, and his brother Riju Ravindran have decided to sit out of the meeting, sources told Moneycontrol that the EGM will continue as planned.
To be sure, together the three board members hold about 26.3 percent of the shares in Think and Learn Pvt Ltd - the parent company of Byju’s, while the investors that are seeking their ouster have a shareholding of over 30 percent, as of June 2022.
These investors include General Atlantic, Chan Zuckerberg Initiative, Owl Ventures, Peak XV Partners (formerly Sequoia Capital India & SEA), Sands Capital Global Innovation Fund, Sofina, and T Rowe Price Associates.
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 has allowed investors to hold the EGM.
Ousting the founder, restriction on share transfer and changes to shareholder agreement, among other issues are to be discussed at the EGM, according to a notice that Moneycontrol has sourced.
Here’s everything you need to know:
Rejig the Board: The group of investors plan to restructure the board of directors to increase shareholder representation, incorporate independent input, and improve corporate governance, they said.
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.
Fire promoters: Investors seek to pass a resolution to allow the newly appointed board to make immediate management changes, including removing Byju Raveendran as chief executive officer, along with Gokulnath and Riju Ravindran from their respective roles.
Bar share sales: The resolution may restrict the founders from transferring any shares without shareholder approval.
Find new management: The group seeks to then determine CEO and CFO (chief financial officer) status for each entity under Byju’s and the same on the group level. Investors then plan to also establish an interim succession plan, including hiring a third-party temporary CEO for the consolidated entity.
Appoint compliance captains: A chief compliance officer and a senior regulatory affairs official reporting to the new board might be appointed to address compliance, regulatory, and government affairs across the group.
Start forensic probe: Investors plan to conduct an independent forensic investigation into various actions, including acquisitions, alleged breaches, regulatory affairs, tax filings, and payments. A forensic expert might also be appointed within thirty days to investigate and suggest improvements.
Amend shareholder agreement: The resolutions to be discussed also include adding shareholder representation and independent directors to the board, adjusting the Articles of Association (AoA) and Shareholders' Agreement (SHA). Investors might also appoint a Company Secretary to fulfil obligations under the SHA, AoA, and applicable law.
This comes at a time when Byju's floated rights issue to raise $200 million, at a valuation cut of 99 percent, has been fully subscribed. Meanwhile, the “dissenting investors” stand to have their stakes diluted massively if they do not participate in the issue till February 29.
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