Proof and ranking of claims
One of the major purposes for winding up is the collection and realisation of company assets. Out of the proceeds of such realisation, first, the creditors are paid in a fixed order of priority and second, the rights of members are adjusted among themselves.
Payment of claims must be performed by the liquidator. The questions are, how does the liquidator defines the extent of the company’s insolvency and which claims or debts are provable in the winding up? Initially, the liquidator in a court winding up will obtain a statement of affairs obtain from a director of the company. It is mandatory for directors to hand in a statement of affairs to the liquidator under the Companies Act, 1965.
This statement, among other things, states a list of company assets (which gives an approximate amount that may be obtained from their realisation) and a list of liabilities. The liquidator obtains approximate amount of the company’s insolvency from these lists and prove the claims or debts.
In a voluntary winding up the directors prepare a full statement of the company’s affairs and the statement, and laid them before the meeting of creditors (Section 260(4)). The liquidator may then request the submission of proofs of debt from the
creditors. This request may be in the form set out below.
IN THE MATTER OF THE COMPANIES ACT, 1965 AND IN THE MATTER OF DELGADO
(In Voluntary Liquidation)
NOTICE IS HEREBY GIVEN that the creditors of the above-named company, which is being wound up voluntarily, are required on or before 28th June 2007 to send in their names and addresses and the particulars of their debts or claims, and the names and addresses of their solicitors (if any) to the undersigned, the Liquidators of the said company and if so required in writing from the said Liquidators are required either by their solicitors or personally to come in and prove the said debts or claims at such time and place as shall be specified in such notice or in default thereof they will be excluded from the benefit of any distribution made before such debts are proved.
Dated this 28th day of May 2011.
1 Jalan Telus
The liquidator in winding up by the court may fix the time within which debts and claims must be proved (Section 252(e)). In a winding up, proof of debt must be by using Form 77. The liquidator in any winding up may require a claim to be verified by affidavit (Section 234(1)). Once all debts and claims have been proved, the liquidator will then admit those proofs which he/she considers rank for payment.
In preparing the list of creditors, the liquidator is guided by the proofs of debt submitted by the creditors which are received in accordance with a notice (Form 77).
Briefly, the order of priorities of debts, under the Companies Act is as follows (Section 292):
(1) secured creditors
(2) preferential creditors as follows:
a. costs and expenses of winding up including the taxed costs of a petitioner, the remuneration of the liquidator and audit costs
b. wages and salaries up to RM1,500 per employee
c. workmen’s compensation
d. all remuneration payable to the employee in respect of accrued vacation leave
e. all contributions payable under any written law relating to employees’ superannuation or retirement benefit during the 12 months next before the winding up (the High Court of Malaya has given priority to contributions to be made to the Employees’ Provident Fund over unpaid sales tax and customs duty.
f. tax assessed before the commencement of the winding up or before the expiry of the time fixed for proof of debts.