Ed-tech firm Byju’s has scored legal victories that allow the company to move forward with its scheduled Extraordinary General Meeting (EGM) on Friday -- a relief to the financially troubled startup.
The National Company Law Tribunal (NCLT) has rejected the request to postpone Byju’s planned EGM, where the Indian startup aims to boost the authorised share capital to facilitate a $200 million rights issue.
The court has scheduled another hearing for April 4 to revisit the matter.
Despite objections from four estranged investors, a lawyer highlighted that once the authorised share capital is increased, it cannot be reversed, reported TechCrunch.
A group of Byju’s investors, which includes Prosus, Peak XV, Chan Zuckerberg Initiative, and Sofina, are legally contesting Byju’s recent fully subscribed rights issue and are aiming to oust founder and CEO Byju Raveendran from the company.
The Karnataka High Court announced Thursday that it will hear the case concerning Raveendran's removal in two months' time.
The rights issue holds significant importance for Byju’s as it aims to utilize the $200 million received from investors, including Raveendran to pay liabilities.
In a temporary ruling last month, the tribunal directed Byju’s to transfer the funds into an escrow account and refrain from using them until the disputes are resolved.
Sources close to Byju’s argue that the estranged investors are attempting to delay the rights issue to financially strain the ed-tech company.
Byju’s and several of its investors have been embroiled in a nearly year-long battle, with shareholders alleging operational and governance issues inside the Indian firm, which till last year was on the brink of securing approximately $1 billion in funding.
However, negotiations fell apart when auditor Deloitte and three key board members, representing Prosus, Peak XV, and Chan Zuckerberg Initiative, abruptly resigned from the company.
After the deal's scuppering, Byju’s managed to raise less than $150 million in debt from Davidson Kempner but faced complications when it defaulted on a separate $1.2 billion term loan B, leading to the full repayment of the committed amount to the investor.
Facing the financial strain, Byju’s hurriedly launched a rights issue, resulting in a staggering 99 per cent reduction in its valuation.
Prosus, Peak XV, Chan Zuckerberg Initiative, Sofina, and other investors opted out of participating in the rights issue.
Instead, they voted to remove founder Raveendran and his family from the start-up last month. Raveendran reassured employees afterward, affirming his continued role as chief executive and dismissing rumors of his dismissal as exaggerated.
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