Company Law and Practice · Distribution of Profits

Distribution of Property of Company (Section 320) Explained

Updated 11 October 2026 · Fact-checked

Section 320 of the Companies Act, 2013, headed "Distribution of property of company", is omitted w.e.f. 15 November 2016 by section 255 and the Eleventh Schedule. It is not live law. In winding up by the Tribunal, the Company Liquidator works under section 290 and distributes sale proceeds by the Act's priorities.

Understand Distribution of Property of Company (Section 320)

Many students search for this topic under section 320 and expect a rule to learn. There is none to learn.

The official text is short. Section 320, headed "Distribution of property of company", reads: Omitted by section 255 and the Eleventh Schedule, with effect from 15-11-2016. There is no operative rule in that section. Do not write answers as if section 320 gives members any right to the company's property.

In a winding up by the Tribunal, the Company Liquidator realises the assets and pays out. Under section 290(1)(c), the Liquidator can sell immovable and movable property and actionable claims by public auction or private contract, or in parcels. Under section 290(1)(d), the Liquidator can sell the whole undertaking as a going concern. Under section 290(1)(g), the Liquidator invites and settles claims of creditors, employees or any other claimant and distributes the sale proceeds in accordance with the priorities established under the Act. Section 290(1)(m)(ii) also lets the Liquidator take the actions needed for distribution of assets.

So the usual route is sale first, then distribution of proceeds by priority. Section 290(2) says these powers are under the overall control of the Tribunal. Section 290(3) adds that the Liquidator performs any other duties the Tribunal specifies. If the Tribunal's orders or directions are needed, the Liquidator can apply for them under section 290(1)(n).

For a petition to start such a winding up, section 272 lists who may file: the company, any contributory, the Registrar, a person authorised by the Central Government, or the Central Government or a State Government in a case under section 271(b). Learn this as the gateway to the Liquidator's work.

Key rules to remember

Status of section 320: Section 320 = Omitted w.e.f. 15-11-2016 (section 255 and the Eleventh Schedule); The section has no operative text. Do not quote any rule from it.
Liquidator's power to sell property: Section 290(1)(c): sell immovable and movable property and actionable claims by public auction or private contract, or in parcels; Section 290(1)(d) allows sale of the whole undertaking as a going concern.
Liquidator's power to distribute: Section 290(1)(g): invite and settle claims, then distribute sale proceeds as per priorities under the Act; Distribution under this clause is of sale proceeds, in order of priority. Section 290(1)(m)(ii) also refers to actions for distribution of assets.
Control of the Tribunal: Section 290(2): powers are subject to the overall control of the Tribunal; Section 290(1)(n) lets the Liquidator apply to the Tribunal for orders or directions.
Who may petition for winding up: Section 272(1): company; contributory; Registrar; person authorised by Central Government; Central or State Government in a section 271(b) case; Section 272(1)(c) also covers all or any of the persons in clauses (a) and (b) together.
Contributory's right to petition: Section 272(2): the shares were originally allotted to the contributory, OR were held and registered in his name for at least six months during the eighteen months before commencement of winding up, OR devolved on him through the death of a former holder; The six-month holding test applies only to shares held and registered in his name. A holder of fully paid-up shares can petition, even if the company has no assets.

How to solve Distribution of Property of Company (Section 320) questions

Use this method for any question on distribution of company property to members on winding up.

1Check the question. Does it cite section 320 as a working provision? If yes, state that it is omitted w.e.f. 15-11-2016.
2Identify the mode of winding up. If by the Tribunal, bring in the Company Liquidator and section 290.
3State the Liquidator's powers that apply: sale of property under section 290(1)(c), sale of undertaking under (d), settling claims and distributing proceeds under (g).
4Say that the Liquidator distributes sale proceeds in accordance with the priorities established under the Act (section 290(1)(g)). Mention that section 290(1)(m)(ii) refers to actions for distribution of assets.
5Note that all powers are under the overall control of the Tribunal (section 290(2)), and the Liquidator can seek directions under section 290(1)(n).
6If the facts involve who can start the winding up, apply section 272 to the parties.
7End with a clear conclusion applying the law to the facts.

Quickest way: Three-line answer for section 320 questions

When to use it: Use it for short-answer questions or when you are short of time.

Line 1: Section 320 is omitted w.e.f. 15-11-2016 by section 255 and the Eleventh Schedule.
Line 2: The Company Liquidator sells assets (section 290(1)(c), (d)) and distributes proceeds by the priorities in the Act (section 290(1)(g)).
Line 3: All this is under the Tribunal's overall control (section 290(2)). Then give your conclusion.

Common mistakes in Distribution of Property of Company (Section 320)

Treating section 320 as a live provision and quoting rules from it.
Older notes may still refer to it, and the heading is easy to find.
Fix: Always state that it is omitted w.e.f. 15-11-2016 and move to section 290.
Saying members can claim the company's assets in kind under section 320.
Students assume the section still gives members a right to property.
Fix: Write that section 320 gives no basis for the claim. The Liquidator ordinarily sells property and distributes sale proceeds by the Act's priorities, under the Tribunal's control. Mention that section 290(1)(m)(ii) refers to distribution of assets.
Forgetting the Tribunal's control.
The powers list looks complete on its own.
Fix: Add section 290(2) in every answer: powers are subject to the Tribunal's overall control.
Mixing up who can petition under section 272.
The list has several parties and conditions.
Fix: Learn the list: company, contributory, Registrar, authorised person, and Central or State Government in a section 271(b) case.
Saying a contributory with fully paid-up shares cannot petition.
Students assume such a member has no stake.
Fix: Recall section 272(2): the contributory may petition even with fully paid-up shares or when the company has no assets.

Worked examples

Example 1

Sunrise Textiles Ltd is being wound up by the Tribunal. Its members ask the Company Liquidator to transfer the company's land to them in kind under section 320. Advise.

Show the solution

Provision: section 320 is omitted w.e.f. 15-11-2016 by section 255 and the Eleventh Schedule. It gives no basis for the members' claim.
Analysis: under section 290(1)(c), the Liquidator may sell immovable and movable property by public auction or private contract, or in parcels.
Under section 290(1)(g), the Liquidator settles claims and distributes sale proceeds according to the priorities established under the Act. Section 290(1)(m)(ii) also refers to actions for distribution of assets.
These powers are subject to the overall control of the Tribunal under section 290(2), and the Liquidator can seek directions under section 290(1)(n).
Conclusion: section 320 cannot support the members' demand. The Liquidator will ordinarily sell the land and distribute the proceeds by the Act's priorities, subject to the Tribunal's control.

Answer: Section 320 is omitted, so it gives members no basis to claim the land in kind. The Liquidator ordinarily sells it and distributes the proceeds by the Act's priorities under the Tribunal's control.

Example 2

Mr Rao holds fully paid-up shares in Kaveri Foods Ltd, which has no assets left. He wants to petition for winding up. Can he do so?

Show the solution

Provision: section 272(1)(b) allows any contributory to present a petition.
Section 272(2) says a contributory may petition even if he holds fully paid-up shares, or the company has no assets or no surplus assets.
Condition: the shares must have been originally allotted to him, or held and registered in his name for at least six months during the eighteen months immediately before commencement of winding up, or have devolved on him through death of a former holder.
Facts: fully paid-up shares and no assets do not bar him. If he was an original allottee, he qualifies without any six-month period. Otherwise he must meet the six-month holding test, or the shares must have devolved on him by death.
Conclusion: he can petition if he meets one of these three conditions.

Answer: Yes. Fully paid-up shares and an asset-less company do not bar him. He qualifies if he was an original allottee of the shares. If not, he must have held the shares, registered in his name, for at least six months during the eighteen months before commencement of winding up, or the shares must have devolved on him through the death of a former holder.

Exam tips

Open any answer on section 320 by stating that it is omitted w.e.f. 15-11-2016. This shows you know current law.
Quote section 290(1)(c), (d) and (g) by letter. They carry the marks for the Liquidator's role.
Close with a conclusion in ICSI style: provision, facts, then a clear finding.
Link the Tribunal's control (section 290(2)) to every power you list.
If a question is on petition, apply section 272 to each party named in the facts.

Practice questions from Distribution of Profits

Distribution of Property of Company (Section 320) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Distribution of Property of Company (Section 320): frequently asked questions

Is section 320 of the Companies Act, 2013 still in force?

No. It is omitted by section 255 and the Eleventh Schedule, w.e.f. 15-11-2016. It has no operative text, so you cannot apply any rule from it.

Can a company distribute property to members instead of cash?

Section 320 gives no such rule because it is omitted. In winding up by the Tribunal, the Liquidator ordinarily sells property and distributes sale proceeds by the priorities in the Act under section 290(1)(g), under the Tribunal's control. Section 290(1)(m)(ii) refers to actions for distribution of assets.

Who distributes the assets in a winding up by the Tribunal?

The Company Liquidator does, under section 290. He acts subject to the Tribunal's directions and overall control.

Who can file a winding-up petition under section 272?

The company, any contributory, the Registrar, a person authorised by the Central Government, or the Central or State Government in a case under section 271(b). A company petition must come with a statement of affairs.