In the extraordinary general meeting (EGM) of Byju’s parent company Think & Learn, key investors voted to remove founder Byju Raveendran as the chief executive and also restructured the board, which includes his wife and cofounder Divya Gokulnath, and brother Riju Ravindran.
A resolution passed by a company’s shareholders is a formal agreement that specifies the decisions and policies the company plans to implement. It gives shareholders a voice in important company matters and ensures that the firm is accountable to them. These resolutions are usually voted on at the annual general meetings (AGMs) or extraordinary general meetings (EGM), where the outcome determines whether the proposed action is accepted or rejected.
Why is Byju’s calling the resolutions invalid?
Byju’s stated that the resolutions passed during the EGM, which was attended by only a few shareholders, are invalid. The resolutions were voted on without the necessary quorum, or the minimum number of members required to be present at a meeting for decisions to be valid, as outlined in Byju’s articles of association (AoA), said Byju’s in a statement.
AoA are rules for a company’s internal operations and management.
According to the company, the AoA specifies that a valid quorum requires at least one founder-director to be present. As the founders did not attend the meeting, a legitimate quorum was not established, making the resolutions invalid. Raveendran and his family own about 26% of Think & Learn.
He also told employees that as per the company’s shareholder agreement, the authority to modify the board’s composition, the management team and the CEO’s role is granted “exclusively to the board, not to a group of shareholders”.
How is an EGM different from an AGM?
An AGM is a required annual meeting of shareholders that a company, regardless of size or type, must hold within six months of the ending of the financial year. The primary goal is to present the company’s annual financial statements to shareholders for approval. It also allows shareholders to receive a detailed report on the company’s performance and plans, and participate in decisions like appointment of directors, fixing of the auditor’s pay, and declaration of dividends.
On the other hand, an EGM is held when a matter needs an immediate decision and cannot wait until the next AGM. An EGM deals with specific business matters or decisions requiring immediate attention, such as significant financial decisions, amendments to the company’s constitution, or sudden changes in the management structure.
What were the resolutions passed by Byju’s shareholders?
The resolutions included addressing governance, financial mismanagement, and compliance issues at Byju’s. They also called for a reconstitution of the board of directors to remove control by Think & Learn founders and to change the company’s leadership.
The investor group wants a new board for the company with nine members–one founder, two executives from group companies, three shareholders, and three independent directors.
ET had reported that the investors who voted in favour of the resolutions hold about 60% in the parent company. Among the investors are firms such as Prosus, Peak XV, General Atlantic, Sands Capital, Sofina, and Chan Zuckerberg Initiative. However, in a letter to the company’s employees on February 24, Raveendran wrote that only 35 out of 170 shareholders (representing about 45% of shareholding) voted in favour of the resolutions.
What is shareholder resolution?
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What next?
While the investors have said that the EGM was valid and was conducted in accordance with the rules, no decisions can be implemented at least until March 13, when the Karnataka High Court will hear the edtech startup’s petition against the investor group.
Separately, four investors, led by Prosus, have filed a petition in the National Company Law Tribunal (NCLT) seeking to block the $200-million rights issue, while alleging lack of transparency from the founders and Byju’s management. On February 21, the company informed its shareholders that the rights issue was fully subscribed.
(This story has not been edited by News Mania staff and is published from a Syndicate Release )
