What Is A Statement of Affairs

What Is A ‘Statement of Affairs’? Author: John A Waller, Consultant. Reviewed July 22nd, 2024.

Rule 7.41 “Statement of Affairs” (company winding-up).Insolvency (England and Wales) Rules 2016.

A “statement of affairs” (SOA) provides an overview of the company’s assets and liabilities at a given time.

Once produced, it allows the “insolvency practitioner” to assess the company’s assets and view details of fixed or floating fees.

The “statement of affairs” then requires the “insolvency practitioner” to file an insolvency statement at the “Companies House.”

Its primary use is for creditors and shareholders. However, interested parties who want to buy the company can also use it.

Information required for Statement of Affairs.

The information must be ACCURATE AND HONEST.

The “Statement of Affairs” must therefore include:

  1. Independent valuations of assets;
  2. Up-to-date balance sheet and management accounts;
  3. List of employees;
  4. Trade creditors, with balances owed;
  5. VAT Liability or repayment;
  6. PAYE owed;
  7. Corporation Tax owed;
  8. Overdrafts;
  9. Bank Deposits;
  10. Bank Loans;
  11. Loans owed to Shareholders;
  12. Loans owed to or owed by Directors;
  13. Mortgages;
  14. Asset Finance;
  15. Any existing debts.

Creditors Agreeing with Balances.

Creditors of the company that proposes an insolvency process receive a copy of the S of A document. Then, they can change the amount of debt owed. Subject to the operation of insolvency, the debtor proposes. The licensed insolvency practitioner and the court will determine which assets are sold and then distributed to creditors.

“Statement of Affairs” is used in: –

In “Compulsory liquidation“, the “Official Receiver”, “liquidator”, or the appointed “Insolvency Practitioner” will, however, prepare the “Statement of Affair“.

When the company enters into “Administration,” the Directors produce the “Statement of Affairs,” which forms part of the AdministratorsStatement of Affairs.

When a “Voluntary Liquidation“. Therefore, the company’s financial position is discussed at the creditors/shareholders’ meeting.

In a “CVA“, the “SofA” forms a section of the Proposals to creditors.

Refusing to Produce an S of A?

Failing to submit the “S of A” without a plausible explanation, the nominated person is then liable to a fine of £5,000 and a daily default fine set by the court (£500).

Directors trading while insolvent

Directors trading while insolvent with intent may be subject to a ban of up to fifteen years, a fine, and potentially liable for the company’s debts.

Once you have completed it?

Once completed and signed, the Insolvency Practitioner files it at Companies Houses to become a public record.

Differences Between a “Balance Sheet” and a “Statement of Affairs”?

While the “Statement of Affairs” provides information on assets and liabilities. It need not be precisely accurate. But reflect the best-estimated figures available at the time.

A “balance sheet” then forms part of a financial statement. It contains no estimated figures, which must show the company’s financial position.

Summary.

Therefore: –

  • A Qualified “Licensed Insolvency Practitioner” prepares it;
  • It describes a company’s financial situation, assets and liabilities;
  • Filed at “Companies House”;
  • Various insolvency proceedings use it.

HMRC’s central Insolvency Service hub: https://www.gov.uk/government/organisations/insolvency-service.

HMRC Page on the Insolvency Act 1986: https://www.legislation.gov.uk/ukpga/1986/45/contents

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