NCLT rejects Byju’s EGM because of a rights concern

MUMBAI: On Thursday, the struggling edtech company received some respite when the National Company Law Tribunal (NCLT) declined to postpone the extraordinary general meeting (EGM) that Byju’s had scheduled for March 29 to raise the approved share capital needed to permit its $200 million rights offer.
The “only objective of the petitioners is to be restrictive,” Byju’s attorneys said in court.

To increase the approved share capital, the firm would need more than 50% of the votes. Four of Byju’s investors had applied to the NCLT for a stay on the EGM in an effort to thwart the rights issue from the beginning.

Byju’s, which is experiencing financial difficulties and has postponed paying certain workers’ wages in full for the month of February, has been depending on its rights issue to earn money and pay its debts. The firm is able to proceed with the EGM, but a court-approved stay on its use prevents it from using the cash acquired via the rights issue just yet. The monies were instructed to be kept in a separate escrow account by Byju’s, and the company was prohibited from withdrawing them until the dispute was settled by an interim order issued by the NCLT last month.

According to sources, the rights issue officially ends and the court is anticipated to release the escrow once it has the support of a majority of the participating ballots. Prosus, Peak XV Partners, General Atlantic, and Sofina, the startup’s investors, had been against the rights offering. In their arguments before the NCLT, they said that the Ministry of Corporate Affairs and the ED are looking into the firm due to severe claims of fund-syphoning by Byju’s promoters.
The EGM notification, according to Byju’s attorneys, has been sent to all shareholders, including those who are opposed.