Proofs & Proxies (ISCIS)

Proofs & Proxies (ISCIS)

December 2008

Introduction

Proofs

1. What is a proof of debt?

A person claiming to be a creditor of a bankrupt or a company which has been wound up, and wishing to recover the debt must submit a claim in writing to the liquidator, the official receiver or the trustee. A person who lodges a claim is referred to as ‘proving’ for his/her debt. The document by which he/she seeks to establish the claim is his/her ‘proof’.  

There is no longer a requirement for the proof to be in a specific form to be  valid in most cases, although the statutory ‘proof of debt‘ forms are generally used (form 4.25 [company liquidation], form 6.37 [bankruptcy]) and any proof submitted must contain the required information in a substantially similar format (see Technical Manual Chapter 16 paragraph 16.64). For example, some government departments such as HM Revenue and Customs use their own form. Each completed proof of debt received by the official receiver must be recorded on ISCIS ‘Creditors’ tab via ‘View Schedule of Debt’ and then ‘Update Debt’ and kept on the office file. 

When producing a proof of debt form on ISCIS the document production form is POD (proof of debt). 

2. The Insolvency (Amendment) Rules 2004

The Insolvency (Amendment) Rules 2004 changed the way in which proofs of debt were dealt with. The legislation applies to all cases as from 1 April 2004 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 version of the proof of debt form. 

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 3). 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.

3. 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. 

4. 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 Insolvency Service internet site at www.insolvency.gov.uk (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. It is possible to e-mail a form to a creditor if that is acceptable to him/her.  

5. 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, Rule 6.98 (bankruptcy) and Rule 4.75 (companies winding up) and at Technical Manual Chapter 16 paragraph 16.64. 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 ISCIS ‘Creditors’ tab. Any substantial differences should be brought to the examiner's attention. 

6. 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.  Secured creditors details can only be added onto ISCIS through the ‘Assets’ tab under the entry for the asset to which they relate.

Proxies 

7. 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 gives directions 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.

8. Authentication of proofs and proxies (Amended February 2012)

All proofs of debt and proxies must be authenticated by the creditor or contributory or by a person stating he/she is authorised in that regard. The Insolvency (Amendment) Rules 2010 introduced the concept of ‘authentication’ of documents to facilitate the use of electronic delivery. A paper document is sufficiently authenticated if it is signed by the person sending or supplying the information. A document which is in an electronic format is sufficiently authenticated if the identity of the sender is confirmed in a way specified by the recipient. If the recipient has not specified how the sender’s identity should be confirmed, the communication is sufficiently authenticated if it is accompanied by a statement of the identity of the sender and the recipient has no reason to doubt the truth of the statement.

The authentication may be that of an insolvency practitioner given authority by the creditor to act in relation to a specific case.  The nature of this authority should also be stated. A rubber stamp signature on a paper document 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.

Where an IP holds an authority to act on behalf of creditors in relation to insolvent estates it is important that the scope of the authority is clear.  The official receiver should satisfy himself/herself that the relevant authority is acceptable.  Offices should maintain their own records of authorities submitted locally.  In all cases authorities received by a local office should be forwarded to the RTLU.  Central Activities Directorate maintain a database of blanket authorities that apply nationally, the database can be accessed via the ORBS homepage under Case Guidance – Blanket Authorities. For further details of what should be included in blanket authorities see TM Chapter 16 paragraphs 16.106a to d and Annex C.

9. 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. Scanned proofs of debt and proxies may be submitted by email (see paragraph 10 below).

10. Electronic submission of proofs and proxies

(July 2010)

The Insolvency (Amendment) Rules 2010 introduced provisions enabling the submission of information and documents to the official receiver by electronic means from 6 April 2010 where he/she has given consent for this and provided an email address. These provisions apply to the submission of proofs and proxies providing that certain conditions are met and the documents are received within the set time limits. These provisions are outlined in the TM chapter 16 paragraphs 16.71A (proofs) and 16.108A (proxies).

11. 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.  

12. Late proofs and proxies 

(Amended July 2010)

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.

For cases where the petition is presented on or after 6 April 2010 the chairman has the discretion to allow a creditor to vote if they have failed to submit a proof on time and the chairman is satisfied that the failure was due to circumstances beyond the creditor’s control.

13. 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 the Companies Act. In such situations proxies are not necessary.  

14. 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 PAL). 

15. 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.  

16. 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.  

17. Inspection of proofs and proxies 

(Amended July 2010)

Proofs lodged with the official receiver as trustee or liquidator may be inspected at any reasonable time on any business day by: 

  1. any creditor who has proved in the estate (unless the proof has been wholly rejected ), 
  2. a contributory of the company, 
  3. the bankrupt or 
  4. any person acting on behalf of these people. 

Proxies lodged with the official receiver may be inspected at any reasonable time on any business day by:

  1. The creditors, in the case of proxies used at a creditors’ meeting,
  2. The contributories, in the case of proxies used at a contributories’ meeting,
  3. The bankrupt, or
  4. The directors of the insolvent company

In addition any person attending a meeting in insolvency proceedings is entitled to inspect the proofs and proxies either immediately before, or in the course of the meeting at which they are being used.

In accordance with the Insolvency (Amendment) Rules 2010 the official receiver may decline to allow the inspection of any document if he/she believes its disclosure may lead to violence against any person or may prejudice the administration. For further information please see TM chapter 16 paragraph 100

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

18. 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: 

a Claims for judgment costs should be accompanied by an office copy judgment or photocopy. 

b 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. 

c Where there has been a previous bankruptcy from which the bankrupt has not been discharged, 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 Case Guidance - Document Production Forms). For further information see Case Help Manual part: Second or Subsequent Bankruptcies.

d 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 and 2010, 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 Manual 

Chapter 16 Meetings - part 5 – Proofs of debt (paragraphs 16.62 to 16.102)

Chapter 16 Meetings - part 6 - Proxies (paragraphs 16.103 to 16.121)

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

Case Guidance

ORBS guidance on Blanket authorities

 

Forms

POD -  Proof of debt - general form

PRFET - Trustee, Proof in earlier bankruptcy 

PROXY - proxy form (bankruptcy and company)

PAL -  Proof Admission List

PRFWDL Proof of debt - withdrawal form 



 

Proof of Debt Flowchart 

Proof and Proxy Flowchart 

 

Procedure

ISCIS tabs that must be used to record/view information are given in brackets, e.g. (‘Cases’ tab).

1. Receive written request for proof of debt form from creditor. Send proof of debt (form POD (‘Docs’ tab) 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 www.insolvency.gsi.gov.uk.  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. The proof of debt may be e-mailed from document production.

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 ISCIS (‘Creditors’ tab) and place papers on the office file. Where there is a substantial difference in the amount owed, make a note for the examiner.

2. Where the creditor has not been included in the list, add their details onto ISCIS (‘Creditors’ tab). 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 authenticated and correctly completed. Enter details of the proof on ISCIS (‘Creditors’ tab):

  1. Name of creditor in full;
  2. Full address and any reference quoted;
  3. Date proof lodged;
  4. Amount of proof lodged.

4. Enter the creditor’s details included in 3a - d above, onto ISCIS (‘Creditors’ tab). 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 authenticated 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 ISCIS (‘Creditors’ tab).

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 form PAL (‘Docs’ tab) 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 procedures.

6. Any proofs received after the case has been handed over to the trustee/liquidator, should be forwarded to the relevant insolvency practitioner.