Investors Set to Decide Byju Raveendran’s Fate Amid Management Turmoil.

Stay updated on the latest developments as investors convene for an extraordinary general meeting (EGM), poised to determine the future of Byju Raveendran amidst ongoing management turmoil within the educational technology

In a pivotal development for educational technology giant Byju’s, a group of investors is convening today for an extraordinary general meeting (EGM) to deliberate on the future of founder CEO Byju Raveendran and his family. The meeting comes against the backdrop of mounting allegations of mismanagement and failures within the company’s leadership.

Raveendran and other board members have opted not to attend the meeting, citing procedural irregularities and contractual violations of the company’s articles of association and shareholder’s agreement. However, the investors organizing the EGM assert its validity under applicable law and emphasize that the meeting will proceed as planned, regardless of the founders’ absence.

Byju’s has secured a legal stay from the high court to prevent the immediate implementation of any resolutions passed during the EGM, pending further hearings. Despite this, the court has declined to halt the shareholder meeting, signaling the gravity of the issues at hand.

Central to the dispute is Byju’s acquisition in 2021, valued at $950 million, which has sparked allegations of withheld information and misrepresentation by the company’s management. Investors accuse Byju’s leadership of failing to disclose crucial financial details, including trading financials, capital sufficiency, and material discrepancies between projected and actual results.

Furthermore, concerns have been raised regarding the transparency of ongoing investigations by regulatory bodies such as the Directorate of Enforcement (ED), the Ministry of Corporate Affairs (MCA), and the Serious Fraud Investigation Office (SFIO). Allegations of breaches in shareholding agreements and articles of association compound the growing rift between the company and its stakeholders.

In response to these challenges, shareholders are contemplating decisive measures, including evaluating the status of CEOs and CFOs across Byju’s entities, devising interim succession plans, and potentially appointing a third-party interim CEO. These proposed actions underscore the urgency of addressing governance and leadership issues within one of India’s most prominent ed-tech companies.

As the EGM unfolds and deliberations ensue, the outcome will undoubtedly shape the trajectory of Byju’s and its position in the competitive landscape of educational technology.

Investors Set to Decide Byju Raveendrans Fate Amid Management Turmoil. 1


What are the allegations against Byju’s management?

Byju’s management has faced numerous allegations, primarily concerning mismanagement, failure to disclose accurate financial information, and non-compliance with regulatory requirements. Specifically, the accusations include:

  • Withholding important information from investors.
  • Failure to disclose trading financials and material discrepancies between guidance and actual results.
  • Inaccurate disclosure of available capital leads to misrepresentation of short-term capital sufficiency.
  • Breaches of obligations outlined in shareholding agreements and articles of association.
  • Not providing essential financial data, cap tables, merger and acquisition transaction details, debt negotiation records, and other relevant information.
  • Violations of the Foreign Exchange Management Act (FEMA), amount to approximately $1.12 billion in foreign exchange rule infringements.
  • Missing revenue targets and high-profile resignations, including those of the auditor Deloitte and three board members.

These allegations have resulted in an extraordinary general meeting being held to consider removing Byju Raveendran and his family from their roles in the company. Despite the company’s assertion that the EGM is procedurally invalid and contractually in contravention of the company’s articles of association and shareholder’s agreement, the Karnataka High Court rejected a request to halt the meeting. Shareholders maintain that the EGM is valid and will proceed according to applicable law.

What is the current status of the allegations against Byju’s management?

The allegations against Byju’s management are still ongoing, with the Enforcement Directorate (ED) issuing a show-cause notice to Byju’s in November 2023 for violating the Foreign Exchange Management Act (FEMA) to the tune of $1.12 billion. The ED has also requested a look-out circular (LOC) against Byju Raveendran, the founder and CEO of Byju’s, to prevent him from leaving the country. 

The allegations include failing to submit documents of imports against advance remittances, failing to realize proceeds of exports made outside India, delayed filing of documents for foreign direct investment received by the startup, and failing to file documents against the remittances made by the company outside India.

In addition to the FEMA violations, Byju’s management has been accused of withholding important information from investors, failing to disclose trading financials and material discrepancies between guidance and actual results, and inaccurate disclosure of available capital, leading to a misrepresentation of short-term capital sufficiency. 

Investors have also alleged that the management repeatedly breached obligations listed in the shareholding agreement and articles of association and failed to provide essential financial data, cap tables, M&A transaction details, debt negotiations, and other information.

The matter is currently being addressed through an extraordinary general meeting (EGM) called by select Byju’s investors to potentially remove Byju Raveendran and his family from their positions due to alleged mismanagement and failures. 

Byju’s management has deemed the EGM “procedurally invalid” and in violation of the company’s articles of association and shareholder’s agreement. 

The Karnataka High Court has issued a stay prohibiting the implementation of any resolutions passed during the EGM until the next hearing, but the court has not halted the meeting from proceeding. The shareholders have proposed evaluating the status of CEOs and CFOs across entities, establishing interim succession plans, and potentially appointing a third-party temporary CEO for all entities.

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