On BharatPe Board desk: Ouster of Grover, share buyback

The Board of Directors of fintech firm BharatPe is learnt to be setting the stage for terminating the employment of its co-founder and MD Ashneer Grover, who, alongside together with his partner, are beneath the scanner for alleged monetary fraud.
The transfer by the Board will probably leverage provisions within the firm’s Articles of Association (AoA) to purchase again sure restricted shares held by Grover at a decrease truthful market worth, sources advised The Indian Express.
The Board has appointed Big 4 audit agency PwC to analyze these allegations.
The firm’s AoA gives for a founder’s shares to purchased again by the corporate if it has terminated the stated founder’s employment for “Cause”.
The Indian Express reviewed the AoA of Resilient Innovations Pvt Ltd (father or mother firm of BharatPe) that was filed with the Registrar of Companies (RoC) on September 3, 2021.

Among the seven situations that fall beneath the definition of “cause”, is “gross negligence or wilful misconduct by such Founder, as determined by a Big 4 Firm, which does not have any relation with the Company, after which the Board shall, through a simple majority, take a decision on such Cause event based on the report shared by the appointed Big 4 Firm after following principles of natural justice”.
The AoA defines “Big 4” as any of: KPMG, PricewaterhouseCoopers, Ernst & Young or Deloitte Touche Tohmatsu Limited, or their respective associates in India. Separately, efficient April 1, 2019, BharatPe had onboarded Deloitte Haskins & Sells LLP as its statutory auditor till March 31, 2024.
PwC was roped in by the corporate’s Board late final month to analyze facets akin to accounting, approval processes, bills and hiring. As part of this course of, PwC can also be involving its forensic workforce, which is prone to research the findings submitted by unbiased advisory agency Alvarez & Marsal (A&M).
A&M was appointed by BharatPe by means of its authorized agency Shardul Amarchand Mangaldas to look into inside governance points — particularly assessing if senior executives have been making correct inside disclosures about private investments and test for conflicts.
According to a number of the early findings by the advisory agency, funds have been allegedly made into “dubious” recruitment companies with bills working into crores of rupees spent on “non-existing” distributors and “questionable invoices” created to substantiate such spends.
The different situations the place a ‘Cause’ may be established consists of the founder being chargesheeted for any offence involving “moral turpitude or fraud in relation to the affairs of the company” that’s not quashed, stayed or put aside inside 60 days.
However, by means of this clause that permits the purchase again of a founder’s shares — the corporate can solely purchase again the founder’s restricted shares.
The AoA defines restricted shares as 75% of the shares held by founders on September 5, 2019 (the deadline of the BharatPe’s Series C fundraising spherical), and follow-on shares issued on the closing of Series E funding spherical.
Queries despatched to BharatPe and Grover didn’t obtain a response.
Grover presently owns 9.5% stake in BharatPe, whereas his co-founder Shashwat Nakrani owns 7.8%. VC investor Sequoia Capital India is the most important shareholder in BharatPe with 19.6%, adopted by Coatue at 12.4% and Ribbit Capital at 11%. In addition to those three, Tiger Global, Steadview Capital and Beenext have additionally backed BharatPe, and collectively these marquee buyers maintain 60.4% stake, as of August final yr.
To activate the buyback clause, along with approval from the Board, consent of 51% of the buyers can also be wanted.
All anomalies allegedly contain Ashneer Grover’s spouse and the corporate’s head of controls, Madhuri Jain Grover. The preliminary findings of A&M’s unbiased audit got here simply weeks after the controversy involving Ashneer and Madhuri Grover erupted within the wake of a leaked audio clip, the place the previous was allegedly hurling abuses at a Kotak Mahindra Bank worker for presumably not with the ability to safe shares of e-commerce firm Nykaa throughout its IPO.
Soon after that, on January 19, Ashneer Grover went on depart of absence until March-end, adopted by Madhuri additionally happening depart from January 29.