Creditors have to formally establish their right and intention to participate in a liquidation. In order to do so they must submit a proof of claim form or “claim form”. A creditor that submits a claim in a liquidation is “proving” his or her claim for debt owed. The purpose of proving a claim is for two reasons. Firstly, it allows the creditor’s right to vote at a meeting of creditors and secondly, it establishes the creditor’s right to a dividend, should one be payable in the liquidation (or in the event a contribution is payable the requirement by the creditor to contribute to the costs of administration).

In a winding up by the court (also known as a compulsory liquidation), the creditor must complete a proof of claim form, which includes an affidavit. The required claim form will be sent to every creditor by the liquidator. In a winding up by the court the Master proves the creditors’ claims at the meeting of creditors.

After the meeting, the liquidator will review the proven claims, compare them to the company records, and may reject some or all of a proven claim. The liquidator will notify a creditor if all or part of their claim has been rejected. If a proof of claim is rejected it may be amended.

Ordinarily, in compulsory liquidation a creditor has two opportunities to submit a proof of claim form – at the first and second meetings of creditors. It is a requirement for there to be two meetings and ordinarily only in complex matters will there be more. However, a creditor does have a right to request a meeting of creditors be convened and can request the liquidator convene a meeting for that purpose but the costs of that meeting will be borne by the creditor. 

A creditor must submit a claim form at least 24 hours in advance of a meeting of creditors to the Master of the High Court. The liquidator will normally request a copy be sent to his or her as well. If a claim is submitted less than 24 hours prior to a meeting cannot be considered at that meeting.

A creditor may submit a claim for:

• any debt or liability owed to it by the company as of the date of liquidation.
• Any debt or liability that becomes owed to it by the company after the date of liquidation if the obligation arose before that date.

It is important that creditors complete the proof of claim form correctly and attach all documentation that supports the claim. This includes having the claim form properly certified and including the necessary documentation to support the right to submit the claim at all (so for a company this includes a board resolution). The claim form sent to creditors should include a proforma of all the documentation necessary.

Often claims are rejected because the form is not completed correctly as opposed to the validity of the claim itself.

Creditors should pay special attention when completing the claim form and ensure that all supporting documentation (such as copies of agreements, invoices, and a statement) are attached. Making sure the invoices are in the same order as they appear on a statement will help the person assessing the claim as will the inclusion of a detailed reconciliation or detailed calculation of the claimed amount. A complete, fully supported claim form stands a far greater chance of being proven.

In a voluntary liquidation, there is no set form that a creditor must use and it is the liquidator that proves the claims.