i) What is a proof of debt?

A general form of proof of debt, form POD, is the prescribed form on which a creditor makes his/her claim in a bankruptcy or a winding-up matter. The proof of debt allows a creditor to 'prove' his/her debt by submitting a claim in writing to the official receiver. 

A proof of debt is a statutory form, the basic format cannot be altered by individual creditors although minor variations may be made for example, some government departments such as HMRC use their own form. Each completed proof of debt received by the official receiver must be recorded on LOIS (CA31) and kept on the office file. 

 

ii) The Insolvency (Amendment) Rules2004

On 1 April 2004, The Insolvency (Amendment) Rules 2004 came into force which changed the way in which proofs of debts were dealt with. The legislation applies to all cases as from that date regardless of whether or not the bankruptcy/winding-up order was made on or after 1 April 2004. Generally, the provisions removed the requirement for the official receiver to automatically send out a proof of debt form to all creditors in every case and abolished the obligation to file proofs of debt in court when closing a case. The rules also introduced a new shorter proof of debt (form POD). 

However, the official receiver is still required to supply a proof of debt form to a creditor on request and there are also other circumstances where a proof of debt will be sent to creditors, see paragraph iii. The overall effect of the legislation is to reduce the administrative burden on the official receiver where the completion and return of a proof of debt plays no useful part in the proceedings.

 

iii) When will proofs of debt be sent to creditors?

In addition to where there is a specific request from a creditor for a proof of debt, forms will also be sent to all creditors in cases where: 

1. there is to be a meeting of creditors. The proofs will be sent out with the meeting notice and the report to creditors. 
2. a dividend is to be paid. The proofs will be sent out accompanied by the notice of intended dividend to all relevant creditors who have not proved. 
3. an application for annulment has been made on the grounds that the debts have been paid in full. 
4. the official receiver considers that the submission of formal proofs of debt would aid his/her investigation. This should be quite rare as consideration should always first be given to whether it might be better and more effective to send a specific letter to creditors requesting information. 

 

iv) Supply of forms

Where the creditor requests a proof of debt form in writing, form POD should be sent to him/her by post. If the request is by telephone it should be explained to the creditor that the completion of a proof of debt form is unnecessary (if that is the case) but if the person nevertheless wishes to do so, he/she may be directed to the supply of proof of debt forms on the Service's website (forms are accessed by clicking on 'forms' at the top of the homepage and are referred to by their statutory form numbers as forms 4.25 and 6.37). A creditor is able to download and print the form which is a quicker method than having it sent by post. If the creditor is unable or unwilling to access the internet version of the form, a proof of debt form should be sent by post. Under the new document production system it is possible to e-mail a form to a creditor if that is acceptable to him/her.

 

v) Checking proofs of debt

Proofs need to be checked carefully. A full list of what should be included in a proof can be found in the Insolvency Rules 6.98 (bankruptcy) and 4.75 (company). Claims need not be supported by evidence of the debt but the proof should specify any documents which may be used to substantiate the claim, e.g. invoices, any judgment obtained, etc and the chairman of the meeting, trustee or liquidator may ask for the evidence to be produced where it is felt necessary to validate the whole or any part of the debt claimed on the proof. (See Notes a)

It is also important to compare the amount claimed against that which was originally estimated by the bankrupt/partner/director in the statement of affairs/preliminary information questionnaire (PIQ). Both these figures should be recorded on LOIS (CA31). Any substantial differences should be brought to the examiner's attention. 

 

vi) Secured creditors 

Secured creditors can only claim for any unsecured amount of their claim. In order to claim for the full amount owed they would need to surrender their security.

 

vii) Proxies 

A proxy is the authority given by a creditor or contributory to a person to act on their behalf. There are two kinds of proxy - general and special. 

1. general proxy - this is used to nominate a person to attend and vote on behalf of the creditor or contributory but it does not specifically state how they should vote. 
2. special proxy - again, this is used to nominate a person to attend and vote on behalf of the creditor or contributory but it does specify exactly how the proxy-holder must vote, e.g. to vote for 'appointment of A N Other as trustee'. 

The official receiver can be nominated as a general or special proxy. Where the official receiver holds a general proxy, the chairman will use it to support the nomination of an insolvency practitioner with a clear majority of votes. Where there is no specific practitioner nominated at the meeting, the chairman may use any general proxies for the official receiver to make an appointment from the insolvency practitioners rota. 

For further information see Case Help Manual part: Insolvency Practitioners - Appointment by the Secretary of State 

 

viii) Signature of proofs and proxies 

All proofs of debt and proxies must be signed by the creditor or contributory or by a person stating he/she has authority to sign on their behalf. The nature of this authority should also be stated. A rubber stamp signature is acceptable as long as it shows the actual hand-written signature of the person and not just a printed name. Proofs and proxies which are signed in the name of a firm (rather than by an individual) are valid provided that the person signing on behalf of the firm states that he/she is authorised to do so. 

 

ix) Faxed proofs and proxies 

A proof or proxy faxed to the official receiver can be accepted for voting purposes at a meeting provided that it is received within the prescribed time limits. The official receiver should still obtain the original proof of debt and/or proxy at the meeting or soon thereafter. 

 

x) Incorrectly completed proofs of debt 

When a proof has been incorrectly completed it should be returned to the creditor for amendment. If there is insufficient time to do this before a meeting, the chairman of the meeting or official receiver will decide what action to take. 

 

xi) Late proofs and proxies 

Proofs and proxies which are not lodged before the deadline cannot be admitted for voting at the meeting. However, where the outcome of the meeting would be affected, e.g. by the late receipt of a proof and proxy from a large creditor, the chairman has the discretion to adjourn the meeting. The date and time of receipt should be recorded on all late proofs and proxies. 

 

xii) Proofs without proxies 

Proofs received for a meeting which are not accompanied by a proxy must still be dealt with because, for example a creditor may attend the meeting personally and a company may send a representative who is authorised under section 375 of the Companies Act. In such situations proxies are not necessary. 

 

xiii) Proofs and proxies for meetings 

All proofs and proxies received for a meeting must be "admitted" by the chairman. Each creditor's proof of debt has to be checked to ensure that it does not include anything that he/she is not entitled to claim. The sum for which a proof is admitted will not necessarily be the same as the amount lodged. The amount for which the proof is admitted will determine the value of the vote's weight, i.e. the creditor admitted for the largest amount will have the largest vote. 

The amount claimed on the proof of debt should also be compared to that stated by the bankrupt/company as owing to that creditor in the statement of affairs/preliminary information questionnaire(PIQ). Once the proofs and proxies have been checked carefully, they should then be entered up on the list of proofs and proxies (form MAL).

 

xiv) Who can be nominated on a proxy? 

Anyone over the age of 18 can be appointed as a proxy. Proxy-holders are often representatives from a firm of insolvency practitioners who may attend a meeting and vote for the appointment of an insolvency practitioner  where the creditor has given them written authority to vote. 

 

xv) Handover to an Insolvency Practitioner 

Where an insolvency practitioner is appointed (either by the Secretary of State or as a result of a meeting) the proofs and proxies must be handed over to him/her. A list should be made of all proofs and proxies handed to the insolvency practitioner and his/her (or his/her representative’s) signature must be obtained as an acknowledgement of receipt. Any proofs received by the official receiver after the handover should be forwarded to the insolvency practitioner. 

For further information see Case Help Manual part: Insolvency Practitioners - Handover to Insolvency Practitioner

 

xvi) Inspection of proofs and proxies 

Proofs and proxies lodged with a trustee or liquidator (including the official receiver when acting as such or when receiver and manager) may be inspected by: 

1. any creditor who has proved in the estate, 
2. a contributory of the company, 
3. the bankrupt or 
4. any person acting on behalf of these people. 

If a request to inspect proofs and/or proxies is received, refer the matter to  the examiner.

 

xvii) Withdrawal of proofs of debt 

By agreement between himself/herself and the trustee/liquidator, a creditor may withdraw a proof at any time using form PRFWDL, proof of debt - withdrawal form. The whole of the proof may be withdrawn or just part of it. 

 

Notes: 

1. Claims for judgment costs should be accompanied by an office copy judgment or photocopy. 
2. Proofs which are lodged in a foreign currency should be converted to sterling at the official exchange rate as at the date of the insolvency order, if required for a meeting. 
3. Where there has been a previous bankruptcy, the original trustee may prove for the whole of the balance outstanding from that estate. Individual creditors from the earlier bankruptcy are not creditors individually in the subsequent one as the trustee’s claim would include the amounts owing to them. In these circumstances there is a special proof of debt (form PRFET-intranet form accessed from the OROS homepage under Document Production intranet Forms)
   For further information see Case Help Manual part: Second or Subsequent Bankruptcies.
4. Proofs also have to be 'admitted' separately when there is to be a distribution to creditors.  For further  information on dealing with proofs for dividend/distribution purposes see Case Help Manual part: Distributions: Bankruptcy & Company/Partnerships.

 

Where can I find out more?

Insolvency (Amendment) Rules 2004, Insolvency Rules 1986 

Company

4.75 Contents of a proof  
4.79 Liquidator to allow inspection of proofs 
4.80 Transmission of proofs to liquidator 
4.84 Withdrawal or variation of proof  
4.88 Secured creditors  
4.91 Debt in foreign currency  

Bankruptcy

6.98 Contents of a proof  
6.101 Trustee to allow inspection of proofs
6.103 Transmission of proofs to trustee
6.106 Withdrawal or variation of proof
6.109 Secured creditors
6.111 Debt in  foreign currency

Technical Notice

T4-04: Changes to the procedures for proving a debt and notifying creditors of application for release

Technical Manual 

Chapter 16 Meetings -part 7 - Proofs of debt (paragraphs16.42 - 16.53) 

Chapter 16 Meetings - part 8 - Proxies, etc (paragraphs16.54 - 16.60)

Chapter 21 Second or subsequent bankruptcies - part 2 - Relationship between bankruptcy estates (paragraph 21.14)

Case Help Manual 

Distributions: Bankruptcy & Company

Distributions: Partnerships

Insolvency Practitioners - Handover to Insolvency Practitioner

Insolvency Practitioners - Appointment by the Secretary of State

Second or Subsequent Bankruptcies

Forms

POD -  Proof of debt - general form

PRFET - Trustee, Proof in earlier bankruptcy 

PROXY - proxy form (bankruptcy and company)

MAL - meeting attendance list

PRFWDL Proof of debt - withdrawal form 

PRFFU - this form replaces separate LOIS forms and covers both bankruptcy and company cases. LOIS/DOC1 will  require you to choose the appropriate implementation for the particular circumstances of the case regarding proofs in general not covered by any of the forms listed above.

 

Click HERE to view the flowchart for Dealing with Proofs and Proxies

 

Procedure

NOTE: LOIS screen references are given in parentheses e.g. (D073).

1. Receive written request for proof of debt form from creditor. Send proof of debt (form POD) as appropriate to the creditor by post.
2. Receive telephone call or e-mail from creditor requesting a proof of debt. Check to see whether there is a meeting of creditors, dividend payable or an application for annulment for the case concerned. If not, explain to the person that lodging a proof of debt form is no longer necessary in each case. Inform them of the availability of the forms from the Service's website http://www.insolvency.gsi.gov.uk/. The proof of debt may be e-mailed from the new document production system. Where the creditor is insistent on receiving a proof of debt form and is unable or unwilling to access the website, send the appropriate form by post.

General procedure for checking details in proofs.

1. Receive notification of a creditor's claim. Check to see whether the creditor has been included in the statement of affairs/preliminary information questionnaire (PIQ)'s list of creditors. If so, confirm that the creditor's details (i.e. address, amount of debt, etc) are correct on LOIS (CA31) and place papers on the office file. Where there is a substantial difference in the amount owed, make a note for the examiner of your findings.
2. Where the creditor has not been included in the list, add their details onto LOIS (CA31). Where the amount outstanding is significant, refer this to the examiner.
3. Where proof of debt received check that the proof of debt form has been signed and correctly completed.   Enter details of the proof on LOIS(CA31)
     a. Name of creditor in full;
     b. Full address and any reference quoted;
     c. Date proof lodged;
     d. Amount of proof lodged.
   
4. Enter the creditors details included in 5a - d above, onto LOIS (CA31). Where there is any substantial difference in the amount claimed to that which was originally estimated, refer this to the examiner for their attention. 

Meeting to be held

1. After checking all details on the proof are correct check to see if there is a proxy form attached.
2. Check that the proxy has been signed and completed with :
   1. name of creditor and name of proxy holder.
   2. resolution - if any.
3. Enter full details of proofs and proxies received on LOIS (CA31).
4. When the deadline for lodging proofs and proxies has passed, check thoroughly to ensure that all proofs and proxies received in time are listed. Prepare for MAL(DO73)and pass to chairman.
5. After the meeting receive admitted proofs from the chairman and refer to the Case Help Manual parts: Meetings and Insolvency Practitioners - Handover to Insolvency Practitioner for further information procedures.
6. Any proofs received after the case has been handed over to the trustee/liquidator, should be forwarded to the relevant insolvency practitioner.