Proofs of Debt and Insolvency
In the winding up of a company, all creditors must be given an opportunity to lodge their claim in the form of a proof of debt.
A proof of debt is a formal document used to prove that a debt exists and the amount of the debt. Creditors have the burden to prove the existence and amount of their debt. Without sufficient proof, a debt will not be admitted for the stated amount, or possibly at all.
Proofs of debt are made in a prescribed form under the Corporations Act.
Creditors can lodge proofs of debt at any stage in an administration. However, a liquidator must cause notices to be issued for calling for proofs of debt, and a creditor must be given at least 21 days to lodge a proof of debt. This is important in ensuring that dividends are expedited and not challenged while cheques are being drawn. The cut-off date for proofs of debt is final and the Corporations Act sets out a creditor’s rights if a proof of debt is not lodged in time.
If you would like assistance in preparing or lodging a proof of debt, please contact our office.
If you have any queries about this article, please contact:
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