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CS Executive · Company Law and Practice · Distribution of Profits

Aarav Textiles Ltd's secretary says the company must follow Section 320 while distributing its property among members in kind. Based on the official text of the Companies Act, 2013, what is the correct response?

The secretary is wrong. Section 320 was omitted by Section 255 and the Eleventh Schedule with effect from 15 November 2016, so it contains no operative requirement for distributing company property and cannot be cited as a compliance requirement.

  1. AAgree, since Section 320 requires a special resolution for such distribution
  2. BAgree, but only if the company is unlisted
  3. CDisagree, because Section 320 stands omitted w.e.f. 15-11-2016 and cannot be relied uponCorrect
  4. DDisagree, because Section 320 applies only to government companies

Explanation

The official text records Section 320 as omitted by Section 255 and the Eleventh Schedule w.e.f. 15-11-2016. No compliance can be claimed under an omitted provision. The options attributing conditions to it are wrong because the section has no operative text.

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