Reference no: EM133267135
Denver International Pty Ltd (Denver) is a tourist company based in Byron Bay. During the COVID pandemic it struggled to keep afloat due to lack of customers and had to borrow $1.5m from BHV bank. Due to Denver'sstrong credit reputation with the bank, they were given an unsecured loan of $1.5 million which kept them afloat throughout the pandemic. With the international borders open, the market is now booming, and the board has decided to raise $2 million through the sale of two million ordinary shares at $1 per share to pay off the loan. The $2 million ordinary shares were sold to Zino, Mano, Rino and Tino at 500,000 ordinary shares to each of them. The company secretary is yet to enter their names in the register of members of the company, but a share sale agreement was signed on behalf of Denver by the company secretary and the managing director. The relevant information for the sale of shares was entered into the appropriate ASIC forms and has been lodged with ASIC. Also lodged with ASIC is a copy of the share sale agreement. The company is now back in business, sales are very good, and the company is making profit. At a meeting of the board of directors, the following resolutions were passed.
1. To hold its Annual General Meeting (AGM).
2. To pay back $1.5m from the funds raised through the sale of 2 million ordinary shares to Zino, Mano, Rino and Tino.
3. That brand new Model S Teslas be acquired for each director and that the salaries of the directors be increased by 10% with immediate effect.
4. That no dividends will be paid to shareholders for the financial year
5. That the debt owed by TT Tourist Ltd to Denver worth $400,000 be waived and forgiven.
Zino, Mano, Rino and Tino did not receive the notice for the AGM but found their way to the AGM. At the meeting they were not allowed to vote. They discovered the company was not going to pursue the debt owed by TT Tourist worth $400,000 because the MD of Denver was also a Director in TT Tourist Ltd. Zino, Mano, Rino and Tino contend that their collective purchase of 2 million ordinary shares salvaged the company from a $1.5m financial mess and put them back on their feet. This has given them the right to have received the notice of meeting and to vote. The Directors and one of the other shareholders mentioned that they were duly excluded considering they are not members of the company. Zino, Mano, Rino and Tino are furious with the Directors because they did not receive the notice of meeting, could not vote, and for the decision to waive and forgive the $400,000 debt owed by TT tourist Ltd to Denver. They would like to sue the directors for breach of directors' duties, bring an action against TT tourist on behalf of the company to claim the debt, and explore their options in seeking members' remedies for what they believe are breaches to their rights as members of the company. Please advise them as to what duties if any, the directors' have breached, the members' rights that might have been breached, the options available to them for breach of members' right and their likelihood of success. Please support your answers with relevant case law and statutory provisions in NSW, Australia. Provide references aswell.