Section 35 of the Companies Act 1997 is the escape valve for a company whose own amendment machinery has jammed.
Section 35(1) — the Court’s power
The Court may, on the application of a director or shareholder of a company, where it is satisfied that it is not practicable to alter the constitution using the procedure set out in this Act or in the constitution itself, make an order altering the constitution on such terms and conditions that it thinks fit.
Three elements control the jurisdiction.
- Standing. A director or shareholder may apply. Wider than the derivative action in section 143 (shareholder or director, but only with leave), and narrower than section 142, which extends to an entitled person.
- The threshold: “not practicable”. Not merely inconvenient, and not merely that the applicant lost the vote. The ordinary procedure — a special resolution under section 33(2), or whatever the constitution provides — must be unworkable.
- The remedy. Wide: the Court may alter the constitution on such terms and conditions as it thinks fit.
When is alteration “not practicable”?
| Situation | Why the ordinary procedure fails |
|---|---|
| Deadlock — two equal shareholders in disagreement | No 75% majority can ever be assembled |
| Untraceable or unresponsive shareholders | Quorum or the required majority cannot be achieved |
| A class that cannot or will not meet | The section 98 interest group approval cannot be obtained |
| A deceased or bankrupt shareholder with no representative appointed | Nobody can vote the shares; see ss 73, 74 |
| An entrenched clause requiring a unanimity that has become unattainable | The constitution’s own procedure is impossible to satisfy |
| A clause that has become unworkable — naming an office, body or formula that no longer exists | Compliance is impossible, and amendment is blocked |
| A provision inconsistent with a later statute | It already has no effect under section 32(2), but the text needs correcting |
If a special resolution could be passed but the applicant cannot muster the votes, the alteration is practicable and section 35 does not apply. A shareholder unhappy with how the majority is behaving should look instead to:
- Section 152 — conduct that is oppressive, unfairly discriminatory or unfairly prejudicial, where the Court’s orders can include altering the constitution;
- Section 153 — the Court’s powers in relation to an alteration to the constitution;
- Sections 91 to 99 — requiring the company to purchase the shares; or
- Section 142 — an injunction restraining conduct that contravenes the Act or the constitution.
Sections 35(2) and (3) — filing the order
The applicant shall ensure that a certified copy of the order, together with a certified copy of the constitution as altered, is submitted to the Registrar for registration within one month.
A person who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty in section 413(2).
Note the difference from section 33(3), where the filing duty falls on the board and the offence on every director. Under section 35 the duty and the offence fall on the applicant — the person who obtained the order, who may be a minority shareholder rather than anyone in control of the company.
Once registered, the altered document becomes the constitution under section 30(d), which expressly includes a document “varied by the Court under section 35”, and it binds under section 32 in the ordinary way.
Bringing a section 35 application
- Try the ordinary route first — and record that you did. Evidence of a convened meeting that failed for want of quorum or majority, or of correspondence with an untraceable shareholder, is what establishes impracticability.
- Consider section 89 — unanimous assent of all shareholders can achieve a great deal without a meeting, and its unavailability may itself demonstrate impracticability.
- Consider section 104 — the Court may call a meeting of shareholders, and may direct how it is to be conducted. Where the problem is procedural rather than substantive, that is often the cheaper order to seek.
- Draft the proposed alteration precisely, and be ready to justify each change as necessary rather than opportunistic.
- Anticipate terms and conditions. The Court may impose them — for instance, requiring a buy-out, a valuation, or a corresponding protection for the party that would otherwise be disadvantaged.
- Diary the filing. One month, certified copies of both the order and the altered constitution, and the offence falls on you.
Section 35 sits with a family of provisions allowing the Court to correct the corporate record: section 71 to rectify the share register; section 228 to extend time and rectify the register of charges; section 395B, the Court’s powers over the Papua New Guinea register; and section 379, restoring a company to the register.
Sources
- Companies Act 1997 — ss 30–35, 71, 73, 74, 88, 89, 91–99, 104, 142, 143, 152, 153, 228, 379, 395B, 413
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.