Any Kiis FM radio program hosted by Kyle Sandilands and or Jackie “O” Henderson must not air strong sexual content for the next five years or ARN Media could face penalties as serious as the cancellation of the radio station’s licence.

However, the penalty from broadcasting authorities has come two weeks after the Kyle & Jackie O Show was taken off the air and Henderson’s contract with ARN was terminated.

ARN provided written notice to Sandilands stating that it considered his behaviour during a show last month to be “an act of serious misconduct which is in breach of ARN’s services agreement”.

Sandilands has until Tuesday 17 March to show how he will “remedy” the alleged breach of ARN’s “services agreement” or his contract will be torn up too.

Henderson said she could no longer work with Sandilands after an ugly incident on 20 February, in which Sandilands mocked her for her interest in astrology.

The Australian Communications and Media Authority (Acma) imposed additional licence conditions on the licensees of the Kyle & Jackie O Show, KIIS FM Sydney and Kiis FM Melbourne, after repeated breaches of the decency provision of the commercial radio code of practice.

The media authority said the licence conditions would apply to any new show the two broadcasters host on Kiis, whether separately or together. In its statement to the ASX ARN had offered Henderson the possibility of an alternative show on the ARN network.

Acma chair Nerida O’Loughlin said the licence condition follows multiple failures by the licensees to meet their obligations under the code.

“To date ARN management have been unwilling or unable to control the content that has gone to air,” O’Loughlin said.

Acma said the breaches include: two episodes of a guessing game where audio clips of male and female staff members urinating were aired; a game where a contestant provided an offensive description of a sexual position and a segment which contained lewd discussions about masturbation and pornography websites.

ARN Media notified the ASX on Monday that Acma had imposed a licence condition for a period of five years, applying to both KIIS Sydney and KIIS Melbourne.

“ARN acknowledges and respects the decision by ACMA,” ARN said. “ARN will review the decision and consider options. ARN has already taken steps to ensure compliance and brand safety in line with these licence conditions.”

Sandilands has apologised to Henderson and accused the ARN of not running a “genuine process”.

“On 20 February, I had an argument with Jackie on air about something that had been bothering me for a while,” he said last week.

“I said things I wish I had said differently. That same evening, I sent Jackie a message telling her I was sorry for anything I said that didn’t go down well, that I love her and care for her, and that I could have handled it better.”

On Friday 6 March, Henderson said she did “not quit or resign” from the program and was “deeply saddened” the hit breakfast radio show may come to an end.

Henderson and Sandilands have engaged lawyers.