Summarize

Simplifying... Inshort

The Karnataka High Court has reversed a decision by the National Company Law Tribunal (NCLT) to halt BYJU'S second rights issue, a move that had been requested by investors like Peak XV Partners and General Atlantic.
They argued that the issue would dilute their stakes in the company.
The court's decision allows BYJU'S to proceed with its fundraising plans, despite the NCLT's previous instructions to maintain the status quo and manage funds separately.

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On June 12, the Bengaluru bench of NCLT directed BYJU'S to pause its second rights issue

Karnataka HC overturns NCLT's stay on BYJU'S second rights issue

By Mudit Dube

Jul 02, 2024

05:11 pm

What's the story

The Karnataka High Court has overturned a previous order by the National Company Law Tribunal (NCLT) that had barred edtech firm BYJU'S from initiating a second rights issue. The ruling was made on Tuesday by Justice Krishna Kumar, who referred the case back to the NCLT for further review. A comprehensive copy of the high court's decision is yet to be released.

Investor concerns

Investors challenged BYJU'S second rights issue

Several investors, including Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative, and Prosus lodged a plea with the NCLT to halt BYJU'S second rights issue. They contended that this action would further dilute their stake in the company. Typically, challenges to NCLT orders are made before the National Company Law Appellate Tribunal (NCLAT), but in this instance, BYJU'S filed a writ in the high court.

Tribunal instructions

NCLT's initial order halts BYJU'S second rights issue

On June 12, the Bengaluru bench of NCLT directed BYJU'S to maintain the status quo regarding existing shareholders and their holdings. The order stated: "Status quo with regard to existing shareholders and their shareholding shall be maintained till the disposal of the main petition." This effectively stopped BYJU'S from proceeding with its second rights issue which, according to investors, began on May 13 and was scheduled to conclude on June 13.

Fund management

NCLT directs BYJU'S to manage funds from rights issue

The tribunal also instructed BYJU'S to abstain from using funds collected from the second rights issue and instead deposit them into a separate account. It further directed BYJU'S to provide details of escrow bank accounts from when the right issue opened on January 29 until present within ten days from June 12. Additionally, BYJU'S was required to submit complete details of allotments made on March 2 prior to an increase in authorized share capital.