The embattled edtech giant, Byju's, finds itself in the legal problems as it tries to deal with the liquidity crisis and pursue a crucial rights issue. The National Company Law Tribunal (NCLT) is at the center of these legal fights, with investors and the company's board of directors locked in heated debates over an upcoming important meeting called the extraordinary general meeting (EGM).
NCLT Refuses to Defer EGM
The NCLT, on March 28, declined to postpone an EGM called by Byju's board of directors. This meeting, scheduled for March 29, aimed to increase the company's authorised capital to facilitate a rights issue. Despite investors' claims that the EGM was designed to avoid the NCLT's previous directives, the tribunal opted to proceed with the hearing on April, 4.
Investor's Plea Denied
Prosus, General Atlantic, Peak XV Partners, and Sofina - a significant investors in Byju's- sought a stay on the EGM and the rights issue, citing concerns over financial transparency and governance issues.
However, the NCLT refused to grant their plea, scheduling further hearing fon April 4. Moreover, the tribunal directed Byju's to provide investors with a financial information related to the rights issue.
Allegations of Illegality and Obstruction
During the legal proceedings, investors alleged that Byju's was unlawfully increasing its authorised capital and impeding their ability to scrutinise company documents. Conversely, Byju's defended its actions, asserting that the EGM notice was duly served to all shareholders and accusing investors of obstructing the company's efforts to address its financial woes.
Byju's to raise authorised share capital through right issue
In a bid to bolster its financial standing, Byju's proposed to raise its authorised share capital through a rights issue. However, investors raised concerns about the legality of the EGM and questioned the adequacy of notice dissemination. Byju's, on its part, maintained that the EGM was essential for its financial viability and accused investors of attempting to derail the rights issue.
The outcome of the legal battles of Byju's EGM holds a major implications for the company's financial restructuring efforts. With the NCLT scheduled to reconvene on April 4, both parties await further judicial rulings that could determine the fate of Byju's rights issue
The NCLT's forthcoming decisions will not only impact Byju's immediate financial maneuvers but also set precedents for corporate governance standards within the burgeoning edtech sector.
