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Proof of debt
Practical Law ANZ Glossary w-026-8509 (Approx. 3 pages)
Glossary
Proof of debt
Proving is the process by which a creditor of a company or an individual seeks to establish its claim against the insolvent estate. A proof of debt is the document on which a creditor submits details of its claim.
The prescribed form to be used for lodging a proof of debt is either:
- For the purposes of liquidation, Form 535 (found in regulation 5.6.49(2), Corporations Regulations 2001 (Cth)).
- For the purposes of bankruptcy, Australian Financial Security Authority Form 8.
A provable debt is a debt that is admissible to proof in either:
- The winding up of a company, in which case it must be a debt payable by, or claim against, the company (present or future, certain or contingent, ascertained or sounding only in damages), the circumstances giving rise to which occurred before the relevant date (section 553(1), Corporations Act 2001 (Cth) (CA 2001)). The relevant date is the date on which the winding up is taken to have begun (section 9 and Division 1A, Part 5.6, CA 2001), which will differ depending on whether the winding up is a compulsory winding up or a voluntary winding up. However, in the case of a:
- compulsory winding up, the relevant date will usually be the date of the winding up order (section 513A(e), CA 2001); and
- voluntary winding up, the relevant date will usually be the date of the company's passing of a special resolution to wind up (section 513B(e), CA 2001).
- The bankruptcy of an individual, in which case it must be a debt or liability, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which they may become subject before their discharge by reason of an obligation incurred before the date of the bankruptcy (section 82, Bankruptcy Act 1966 (Cth)).
Once a proof of debt is lodged, it will be considered by the liquidator or trustee in bankruptcy (as relevant).
If the proof of debt is accepted, the creditor is said to have been "admitted to proof" in either the liquidation or bankruptcy.
A proof of debt may be submitted for two purposes:
- To enable the creditor to vote on matters relating to the insolvency process.
- To entitle the creditor to receive a dividend distribution from the insolvent estate.
For further relevant information in relation to proofs of debt for the purposes of liquidation, see Practice notes: