BYJU'S boardroom drama: Here's what led to resignation of directors
The last few days have been critical for BYJU'S, India's most valuable start-up. The company lost its auditor and three non-promotor directors in the same week, raising questions about its corporate governance. Directors representing three BYJU'S investors, Peak XV Partners, Prosus, and Chan Zuckerberg Initiative, left the edtech giant last week. Let's see how the boardroom drama unfolded.
Why does this story matter?
The resignation of directors is a massive setback for BYJU'S, which has been struggling for the past year. The company is facing issues on multiple fronts, including with investors, lenders, and regulators. With half of its board gone, the firm is facing a significant challenge that could have rippling effects. It might also affect how foreign investors view Indian start-ups.
Board members sought more transparency from Byju Raveendran
Byju Raveendran, the company's founder and CEO, is known for running a tight ship. He is the last word on communications, fundraising, and operations. Investors rarely questioned Raveendran's methods. That's unsurprising considering the company's 22-fold growth between January 2018 and March 2022. However, according to Moneycontrol, investors have been seeking more transparency from Raveendran and other promoters.
Board members didn't want to be liable for statutory violations
There is no doubt investors were happy with BYJU'S growth to a $22 billion empire. However, 2022 saw several allegations being leveled against the company, including foreign exchange violations, failure to pay statutory dues, and predatory marketing practices. The allegations spooked other directors. They grew increasingly impatient with the company's activities, as they did not want to be held liable for statutory violations.
Board was unhappy with long delays in filing financial statements
BYJU'S is also known for being notoriously slow in filing its financial results. There was an 18-month delay in filing the FY21 results. The company is yet to file its FY22 results. Deloitte severed its ties with the firm over the "long-delayed" financial statements. The board was also unhappy with this. Investors typically ask their representatives to step down in case of such delays.
BYJU'S sued its lenders
It is clear that BYJU'S non-promoter directors were unhappy with the company. Per Moneycontrol, the start-up's decision to go after its lenders proved to be the last straw. Earlier this year, its creditors sued BYJU'S Alpha, its US arm. They later pulled out of debt restructuring talks. BYJU'S countered by filing a lawsuit against lenders and disqualifying one of the creditors.
BYJU'S tried to reverse the resignations of board members
All the above factors culminated in the resignation of BYJU'S non-promoter board members. They reportedly resigned between June's first and second week. The company denied their resignations for a while. The investors confirmed the resignation of their representatives on June 23. According to Moneycontrol, BYJU'S efforts to reverse the resignations by offering more transparency and board expansion were in vain.
Company promised to file FY22 and FY23 results this year
BYJU'S attributed the resignations to their shareholding falling below a threshold. That seems off considering the company hasn't raised any equity funding recently. As damage control, the start-up has promised investors it would file FY22 earnings by September and FY23 results by December. The company also told its shareholders it was focusing on appointing new independent directors.
