What is a Statement of Affairs in Insolvency?

A Statement of Affairs (SOA) is an important document within the insolvency process that provides an overview of assets and liabilities. It is prepared by the liquidator and must be verified by a statement of truth.

In UK law, it is used to provide a concise summary of the corporate situation during insolvency events for creditors, shareholders and the insolvency practitioner.

An SOA typically includes a list of assets, liabilities, and other relevant financial information, including details of any fixed or floating charges secured on corporate assets.

Once completed, the Statement of Affairs must be filed at Companies House by the Insolvency Practitioner for public view. It’s intended first and foremost as a source of information for creditors and shareholders, although potential buyers of an insolvent company will also find it useful.

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What is Included in a Statement of Affairs?

In the UK, a Statement of Affairs used in insolvency proceedings includes detailed information about the assets and liabilities of the insolvent entity, whether it’s an individual, a partnership, or a company.

Here’s what it typically includes:

1. Personal or Company Details: For individuals, this includes full name, address, occupation, and date of birth. For companies, it includes the registered name, address, company number, and the names of directors.
2. Assets: This section lists all assets owned by the individual or company. Assets are categorised as either realisable or non-realisable. Realisable assets are those that can be converted into cash (e.g., property, vehicles, inventory, machinery, patents, investments, and cash in hand or in bank accounts). Non-realisable assets might include items that cannot be easily sold or are exempt from sale.
3. Liabilities: This part details all the debts owed at the date of insolvency, including secured debts (e.g., mortgages, charges over assets), preferential debts (such as certain taxes and employee-related debts), unsecured debts (e.g., loans, credit cards, trade creditors), and contingent liabilities (potential debts that depend on a future event).
4. Security Interests: Information on any assets that are subject to security interests (e.g., collateral for loans) and the estimated value of such securities.
5. Income and Expenditure: For personal insolvency, a summary of the individual’s income and regular expenses might be included to assess their capacity to contribute towards their debts.
6. Deficiency Account: A summary that reconciles the assets and liabilities, showing the net deficit that remains after all assets have been accounted for against the liabilities.
7. Book Debts: Details of any money owed to the insolvent entity by its customers or clients, if applicable.
8. List of Creditors: A detailed list of creditors, the nature of their claims, the amount owed, and any security held by them.
9. Employees: Information on any outstanding payments due to employees, including wages, salaries, and redundancy payments.
10. Director’s Loan Account: For companies, details of any loans to or from directors.
11. Statement of Affairs Summary: A summary sheet that provides an overview of the total assets available to pay creditors, the total amount of claims, and the expected return to creditors.

Which Insolvency Events Require a Statement of Affairs?

The SOA document is used in the following insolvency events:

• Voluntary liquidation;
• Administration;
• Bankruptcy
• Individual voluntary arrangement (IVA)
• Company Voluntary Arrangements;
• Compulsory liquidation.

How is a Statement of Affairs Presented in Liquidation?

In voluntary liquidation, the Statement of Affairs is presented at the initial creditors’ or shareholders’ meeting, providing a detailed overview of the company’s financial status at the onset of liquidation.

For compulsory liquidation, it’s submitted to the liquidator or the Official Receiver early in the process, often before the first meeting of creditors.

Investigations into Directors’ Conduct

One of the key functions of the statement of affairs is to provide a clear audit trail so that insolvency practitioners can assess whether assets have been sold in the period preceding liquidation.

Where this is found to be the case, it can lead to a director’s disqualification in some instances.

Due to the nature of these complex documents, it’s always preferential to have a licenced insolvency practitioner such as ourselves put them together for you. Correct valuation of all assets by accredited third parties must be diligently investigated during any liquidation process.

>>Read our full article on the directors conduct report

What Happens if you Refuse to Produce an SOA?

In the case of failure to submit the SOA without a reasonable excuse, the nominated person is liable to a one-off fine of £5,000 and/or a daily default fine set by the court (£500).

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