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What Is A ‘Statement of Affairs’?

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.

At your first official meeting with a lice

Once produced, it allows the “insolvency practitioner” to assess what the company owns, and then see 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 then want to buy the company can also use it.

Information required for Statement of Affairs.

The information then 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 process of insolvency, the debtor proposes. The licensed insolvency practitioner and the court will determine which assets are sold, and then the distribution 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 then forms part of the Administrators‘ “Statement of Affairs“.

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

In a “CVA“, the “SofA” then 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

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, as it must then show the company’s exact 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


Bounce Back Loan advice for Directors
Directors should seek professional advice if they have Bounce Back Loan worries regarding repayments. The UK government introduced the COVID-19 support scheme to support businesses through the pandemic. However, repaying the loans has been difficult. So ensure you seek advice sooner than later.
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