Byju’s gets breather: NCLT allows EGM slated for March 29 amid $200 mn rights issue despite investor objections

While the NCLT has listed the case for a hearing on April 4, where other related issues will be addressed, the tribunal’s decision to allow the EGM to proceed provides Byju’s with a window of opportunity to raise the much-needed funds to alleviate its cash crunch situation, the report further added.

Livemint could not independently verify this news development.

During the hearing, investors raised objections, claiming that the EGM was being called to circumvent the NCLT’s previous order dated February 27, which directed Byju’s to keep the rights issue proceeds in an escrow account until the disposal of an oppression and mismanagement plea filed by four investors, the report added.

Additionally, investors argued that they were not permitted to inspect documents to decide on their voting stance at the EGM and alleged that not all shareholders received the notice as required by law. However, Byju’s contended that investors were provided with an opportunity for inspection and that the EGM notice was duly served to all shareholders, as per the report.

Earlier in February 2024, investors, including Prosus, General Atlantic, and Peak XV, voted to remove Byju Raveendran and his family from the board of Byju’s during an EGM. This decision was part of a series of resolutions aimed at addressing governance, financial mismanagement, and compliance issues at Byju’s, as well as changing the leadership of the company

The NCLT noted that since the case is already scheduled for a hearing on April 4, there was no need to pass an interim order, allowing the EGM to proceed as planned.

If the shareholders approve the increase in authorised share capital during the EGM, Byju’s will be one step closer to utilising the proceeds from the rights issue to address its liquidity crisis, which has been a subject of intense scrutiny and legal battles.

While the NCLT’s decision provides a reprieve, Byju’s still faces challenges from investors who have questioned the legality of the rights issue and have sought a stay on the process. The outcome of the April 4 hearing will likely play a crucial role in determining the company’s ability to successfully raise funds and deal with its financial troubles.

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Published: 28 Mar 2024, 02:48 PM IST