Proof of Debt: A Guide for Creditors

rudicheulaw
5 days ago
7 min read

Key takeaways

A proof of debt is a formal legal document used to claim money owed during a company’s liquidation.
It must include supporting evidence such as invoices, contracts, and statements, and be affirmed before a Commissioner for Oaths.
Creditors generally have three months to file after a winding-up order, with notices issued by the liquidator.
Claims are reviewed by the liquidator, who may accept, reject, or request further clarification.
Creditors can appeal a rejection within 21 days through the court.
Filing a proof of debt does not guarantee payment — priority depends on whether the creditor is secured, preferential, or unsecured.
Late submissions may still be considered but risk exclusion if distributions have begun.

Introduction

Corporate insolvency can be a challenging time — not just for the company, but also for its creditors. When a business enters liquidation, creditors must act swiftly and correctly to protect their financial interests.

One of the most critical steps in this process is submitting a proof of debt. This formal document ensures your claim is recognised during the liquidation and allows you to be considered for any potential repayment from the company’s remaining assets.

In this article, we explain everything you need to know about filing a valid proof of debt in Malaysia.

What is Proof of Debt?

A proof of debt is a formal legal document used by a creditor to establish that money is owed to them by a company undergoing liquidation or bankruptcy. It is a mandatory step in order to participate in the distribution of a debtor’s remaining assets.

This document must be supported by relevant evidence — such as contracts, invoices, statements, or court judgments — and must be verified through a statutory declaration by the creditor or an authorised representative.

There are two primary reasons for filing a proof of debt:

To officially register your claim with the liquidator or Official Receiver.
To ensure that, if assets are available, you are included in the distribution of repayments according to the legal order of priority.

Submitting a complete and properly structured proof of debt enhances your chances of recovery and ensures your claim is treated with legitimacy under Malaysian insolvency law.

Examples of common Proof of Debt documents in Malaysia

To support your claim, you’ll need to provide documentation that clearly shows how the debt arose and how much is owed. Some typical forms of supporting evidence in Malaysia include:

Loan agreements and promissory notes for credit facilities such as mortgages, personal loans, or vehicle financing
Credit card statements detailing balances, interest, and transaction history
Invoices, purchase orders, and delivery receipts showing goods or services rendered
Medical bills or utility statements for unpaid services
Formal demand letters or collection notices already issued to the debtor
A completed Proof of Debt Form as outlined under the Companies Act 2016

These documents serve to validate your claim, confirm the contractual relationship, and ensure your position is recognised during the liquidation process.

When should you file for a Proof of Debt?

You must file a proof of debt once a company enters the liquidation stage and a liquidator or official receiver has been appointed by the court.

Creditors are generally given a window of up to three months from the court’s winding-up order to submit their claims. During this period, the liquidator will issue a Notice to File Proof of Debt, which may be communicated through:

Written notices (Form 57/58) sent directly to known creditors
Public advertisements in national newspapers and the Government Gazette (Form 94)

By law, the notice must be published or sent at least 14 days before the deadline to ensure all creditors are given reasonable time to prepare their submissions.

Missing this deadline may affect your eligibility for repayment — particularly if distributions have already begun.

At Rule & Co., we help clients act within these critical timelines to ensure their claims are not left out.

Procedure for submitting Proof of Debt

Filing a valid proof of debt involves more than just stating what you’re owed. It requires detailed documentation, statutory verification, and submission to the appropriate party — typically the liquidator or Official Receiver.

Here’s a simplified breakdown of the process:

Step 1: Complete the Proof of Debt form

Download the official Proof of Debt form (as per the Companies Act 2016) or obtain it from the liquidator. Fill in:

Name and contact details of the creditor.
Company name and registration number of the debtor
Total debt amount (including SST, if applicable).
Date and nature of the debt.
Details of any security or collateral (if applicable).
Any interest claimed (usually capped at 6% per annum).

Step 2: Prepare supporting documents

Attach relevant documentation to support your claim, such as:

Invoices or contracts.
Credit and debit notes.
Payment records or acknowledgements.
Vouchers or statements of account.

Each claim must be self-verified — the burden of proof lies with the creditor.

Step 3: Affirm the Affidavit

The form must be signed and affirmed before a Commissioner for Oaths, either by the creditor or someone authorised on their behalf. If an authorised person is signing, they must state their authority and how they know the facts.

Step 4: Submit to the Liquidator

Send the complete and affirmed form, along with all attachments, to the appointed liquidator or Official Receiver before the deadline stated in the notice.

The information provided must be accurate, consistent, and fully documented. A poorly prepared or incomplete claim can result in delays or outright rejection.

At Rule & Co., we assist clients in preparing, reviewing, and filing proofs of debt to ensure their claims stand up to scrutiny and maximise recovery opportunities.

What happens after the Proof of Debt is filed?

Once your proof of debt is submitted, the liquidator will assess your claim based on the details and evidence provided. This review process typically takes place within 14 days after the submission deadline.

Here’s what can happen next:

Accepted in full: If your documentation is complete and the claim is clear, the liquidator will accept it as valid.
Partially accepted or rejected: If some details are unclear or unsupported, your claim may be reduced or declined. You’ll receive written notice of this decision.
Request for clarification: The liquidator may ask for additional documents or an explanation before making a final decision.

If your claim is improperly filed or lacks necessary evidence, the liquidator may even apply to the court to exclude or reduce your debt from the distribution list.

What if the Proof of Debt is rejected?

If your proof of debt is rejected — whether in part or in full — you will be informed in writing by the liquidator.

However, this decision is not final. Creditors have the right to challenge the rejection by filing an appeal in court within 21 days from the date the rejection notice was received.

During the appeal, the court will review the liquidator’s decision and may choose to uphold, amend, or overturn it based on the merits and supporting evidence.

What if I fail to file the proof within the deadline?

Missing the submission deadline for a proof of debt can put your claim at risk — especially if the liquidator has already begun distributing the company’s assets.

However, not all is lost.

If your claim was excluded due to a late submission, you may still apply to the court to have your debt considered. But success depends on several factors, including:

Whether the liquidator has already made distributions
The reason for the delay
Whether accepting your late claim would prejudice other creditors

To avoid complications, it is always best to act promptly.

Does the Proof of Debt guarantee payment?

Submitting a valid proof of debt is essential — but it does not guarantee repayment. Whether or not you receive payment depends on three key factors:

Availability of assets: The company must have sufficient assets left after liquidation expenses and higher-priority debts are paid.
Your creditor status: Secured creditors (e.g., those with a charge over property or assets) are paid first.
- Preferential creditors, such as employees or tax authorities, come next.
- Unsecured creditors are last in line and may receive only a fraction — or none — of what they are owed.
Order of priority: Malaysian insolvency law follows a strict hierarchy of payments, which the liquidator is legally bound to observe.

Even if you're a secured creditor, your security must be properly registered and enforceable. If it's insufficient to cover the debt, the shortfall will fall under your unsecured claim.

Who gets paid first in a liquidation?

Under Malaysian law, when a company is liquidated, creditors are repaid according to a strict legal hierarchy:

Secured creditors: These creditors hold collateral (e.g. property, goods, or registered charges) that secures the debt. They are paid first, from the proceeds of the secured assets. If the value of the security is insufficient, the remaining balance becomes an unsecured claim.
Preferential creditors: Ranked just below secured creditors, this category includes employees (for unpaid wages and benefits), the Inland Revenue Board (IRB), the Employees Provident Fund (EPF)
Unsecured creditors: These are creditors without collateral. They are paid last, and only if funds remain after satisfying higher-priority claims. Unsecured creditors face the highest risk of non-recovery.

Tips to strengthen your Proof of Debt submission

Submitting a proof of debt is more than a formality — it’s a legal claim that must stand up to scrutiny. Here’s how to make yours stronger:

Be clear and specific: Avoid vague language. Clearly state how the debt arose, the amount claimed, and key dates.
Include all supporting documents: Attach contracts, invoices, payment records, and correspondence to validate your claim.
Ensure consistency: All figures, dates, and parties mentioned in your proof must match your supporting documents.
Affirm before a Commissioner for Oaths: Don’t skip the statutory declaration — it is essential for the proof to be considered valid.
Act promptly: Delays can weaken your position or cause your claim to be excluded entirely.

A well-prepared submission reduces the likelihood of rejection and strengthens your position in any disputes that follow.

Conclusion: Be proactive, be prepared

When a debtor company enters liquidation, time is of the essence. Filing a proof of debt is not just a procedural step — it’s your chance to assert your legal right to repayment. But without the right strategy, documentation, or timing, your claim could be delayed, reduced, or even dismissed.

Whether you’re a secured, preferential, or unsecured creditor, understanding your rights and submitting a well-prepared claim can make all the difference.

At Rule & Co., we help creditors cut through complexity, avoid costly mistakes, and position themselves effectively during the liquidation process. If you need assistance preparing a proof of debt or evaluating your options during insolvency, our team is here to guide you — every step of the way.