Amazing Magazines Ltd (AM) is a publishing house with three directors: Miriam (the Managing Director), Bruce (Domestic Operations) and David (International Operations). The company has been delivering strong profits for a decade and in the last five years has consistently made just over $3AUD million profit per annum.

The company constitution contains the following select clauses:

24. Notwithstanding anything set out in the law, the signature of three executive directors is required to directly bind the company in contract.

52. Any resolution raised within a directors meeting which purports to alter director remuneration must be agreed by at least three directors.

AM is the parent company of Remote Learning Pty Ltd (RL). They are experiencing fierce competition and decide to expand into development of online applications for primary schools experiencing the advent of home learning. To fund this endeavour, RL applied for a $600,000 loan with a bank called Quickcash Ltd (Quickcash Ltd). The bank requires that AM guarantee the loan.

At the April 2019 directors meeting, the following resolutions occur:

• All three directors agree that it is in the best interests of RL if AM guarantee the loan; and

• All three directors agree that for the fifth year in a row, they will be paid their full annual bonuses of $1 million each, as all KPIs have been met.

The next day, Bruce sees Murray the bank manager. They have been doing business for years and Murray asks how Bruces family are going. After chatting for a while, Bruce explains that he popped in to sign paperwork on behalf of RL. Bruce signs the loan documents enabling AM to be a loan guarantor. As a thank you for bringing business, Murray invites give Bruce a bottle of expensive Grange wine.

At the November 2019 shareholders meeting, a group of shareholders request that a vote be put to the members to require the directors to pay out a dividend. They also express concern at the increasingly high levels of remuneration and incentives paid to the directors which are detailed in the director remuneration report.

Explain whether any directors have breached their duties, whether any valid defences apply, and the possible consequences and penalties that a court could impose if any of the directors are found to be liable? Support your answer with reference to statutory and case law.

Can the shareholders force the directors of AM to start issuing a dividend?

Can the shareholders of AM force the directors to stop issuing large bonuses to themselves?