A Statement of Affairs (SOA) is a document that outlines a limited company’s assets and liabilities.
The SOA is usually put together by a liquidator or Insolvency Practitioner when the company is undergoing an insolvency procedure. The Statement of Affairs is then registered by Companies House where it eventually becomes available to view to the public.
If your company is undergoing an insolvency procedure, you will understandably want to know more about what a Statement of Affairs is and what it means for your business. To help, Clarke Bell has put together this guide.
What is a Statement of Affairs?
As we have mentioned, a Statement of Affairs is a document that outlines the assets and liabilities belonging to a company. This is usually compiled as part of an insolvency procedure, whether that is liquidation, administration or a Company Voluntary Arrangement (CVA.)
The Statement of Affairs is a legal requirement and must be verified by a statement of truth.
The Statement of Affairs outlines a detailed account of the company’s assets and liabilities. As well as details of any fixed or floating charges secured on company assets.
The SOA also provides information for interested parties which includes creditors, shareholders and the appointed Insolvency practitioner.
The Statement of Affairs provides a value that can be realised from the sale of the company assets. Therefore, it should suggest how much is left to pay back to creditors who are owed money once company assets have been sold. The document also lists how much the company owes and to who, offering a list of all creditors and shareholders.
As well as outlining the affairs of the company’s finances, the SOA also has an additional usage. At the end of the insolvency process, the SOA is further used as part of the investigation into the conduct of the directors leading up to insolvency.
Failing to provide a Statement of Affairs during the insolvency process can lead to fines and will also badly impact the Insolvency Practitioner’s view of the overall conduct of the director.
How is a Statement of Affairs used in liquidation?
When a company goes into voluntary liquidation, the Statement of Affairs must be prepared and then presented at the creditors’ or shareholders’ meeting to show the financial position of the company. It can be prepared by directors or an appointed Insolvency Practitioner.
In cases of compulsory liquidation, a Statement of Affairs is also required. However, it is usually drawn up by the liquidator or Insolvency Practitioner.
The Statement of Affairs allows the company to outline its financial position and provide an audit trail highlighting whether assets have been sold in insolvency. After all, this is an offence that will need to be investigated by the Insolvency Practitioner. Which can lead to director disqualification in cases where creditors’ interests have not been put first.
In cases where the company enters into administration rather than liquidation, the Statement of Affairs is contained within the Administrator’s Proposals.
In a Company Voluntary Arrangement, the SOA is used as a section of the proposal to creditors. Find out more about Company Voluntary Arrangement here in our handy guide.
What is included in a Statement of Affairs?
The contents of a Statement of Affairs must be completed correctly. All the information provided must be accurate and truthful.
You will need to provide details, amounts and precise dates when completing the SOA.
The document consists of the following sections that must be completed:
- Company Asset valuations
- The most up to date balance sheet and management accounts
- A list of employees and their addresses, start dates and salaries. As well as a complete list of trade creditors and suppliers
- Details of the company’s VAT and PAYE position, including any amounts owed or unpaid
- The amounts owed to the bank, which includes any director or shareholder loans
- Details of any other existing debts
As we have mentioned, all the details provided must be reliable and accurate. However, there is no requirement for evidence of the figures to be presented.
Once this is complete, the SOA is submitted to Companies House where it is made publicly available. This is often viewed by company creditors and shareholders, as well as any potential buyers of the company.
Creditors are also given the SOA and can make any changes to the amount of debt they are owed.
What happens if you fail to produce a Statement of Affairs?
In the instance that no Statement of Affairs is submitted without a reasonable explanation or excuse, the director is usually liable for a fine of up to £5000.
Clarke Bell is here to help
Whether your company is entering into voluntary liquidation, compulsory liquidation, administration or a Company Voluntary Arrangement, we highly advise that the director appoints an experienced licensed Insolvency Practitioner to prepare the Statement of Affairs.
After all, the document can be complex. Meaning it is better for an expert to deal with such matters to ensure the document is factual and correct. That’s where Clarke Bell can help.
Clarke Bell is one of the UK’s leading Insolvency Practitioners with over 28 years’ experience in dealing with all types of insolvency procedures. Whatever your situation, if your company requires a SOA Clarke Bell can help.
If you would like to find out more about Insolvency procedures and what a Statement of Affairs is, our team of experts is at hand to help. We can offer free, initial advice to help to get you on the right track.
Simply get in touch today to find out more about how we can help you.