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HomeBusinessNCLT refuses to stay Byju’s EGM on rights issue

NCLT refuses to stay Byju’s EGM on rights issue

MUMBAI: The National Company Law Tribunal (

NCLT

) on Thursday refused to stay the extraordinary general meeting (

EGM

) called by Byju’s on March 29 to increase the authorised share capital required to enable its $200 million rights issue, granting some reprieve to the troubled edtech startup.
In the court, Byju’s lawyers argued that the “only objective of the petitioners is to be restrictive.” The company would need more than 50% of votes to raise the authorised share capital.

Four of the firm’s investors who have been attempting to block the rights issue since the outset had approached the NCLT, seeking a stay on the EGM.
Byju’s which is reeling under a cash crunch and has delayed full disbursement of February salaries for some employees has been banking on its rights issue to raise capital and meet its liabilities. Although the company can go ahead with the EGM, it cannot yet use the funds raised through the rights issue due to a court-approved stay on its usage.
Last month, the NCLT in an interim order had directed Byju’s to keep the funds in a separate escrow account while also restraining the firm from withdrawing the funds until the matter is resolved. Sources said that once the rights issue is passed with majority of the participating votes, the issue closes formally and the court is expected to release the escrow.

The startup’s investors Prosus, Peak XV Partners, General Atlantic and Sofina had opposed the rights issue and in their submissions to the NCLT had stated that there are serious allegations of siphoning off funds by Byju’s promoters and the company is being investigated by the Ministry of Corporate Affairs and

Enforcement Directorate

. Founder and group CEO Byju Raveendran in a letter to employees earlier this month had accused the investors of disabling salary payments to the staff through their move to block the funds raised through the rights issue. The case will be next heard on April 4. If Byju’s gets majority of the participating votes, the shareholding of the four investors will get diluted.
Byju’s counsels said that the EGM notice has been sent to all the shareholders including the opposing investors. In a separate development, the Karnataka High court continued extending the stay on implementation of EGM resolutions passed by the investors in February to remove Raveendran as the CEO. The case will now be heard two months later.

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