Question One(Members' Remedies)

Sam and Kate are the directors and shareholders of Fantastic Graphics Pty Ltd (Fantastic). Recently, the company began to suffer cash flow problems and needed additional capital. Kate persuaded Bob to invest $100,000 in Fantastic. Sam and Kate held a directors' meeting and decided to issue Bob with two shares in the company. A general meeting of shareholders also appointed Bob as a director of the company. At the shareholders' meeting, Bob said that he would not be attending board meetings and wanted to be treated as a 'silent partner'.

The company's financial position improved as a result of Bob's $100,000 investment. Despite the company's increased profits, Sam and Kate decided not to declare a dividend for the current year. Instead, they gave themselves pay rises and arranged for the company to lease two new Mercedes-Benz cars for their personal use.

Bob began attending directors meetings and made a number of suggestions to improve the profitability of the business. He also questioned Sam and Kate about their pay rises. Sam and Kate resented these questions and took the following actions:

They formed another company, Sam and Kate Graphics Pty Ltd, in which Bob was not involved, and diverted a valuable government design contract that they had been negotiating to their new company.

They also called a shareholders' meeting at which they will propose that Bob be removed from his position as a director.

Advise Bob on what legal actions he can take in these circumstances.