What is a Statement of Affairs and When is it Used?
A Statement of Affairs (SOA) is a critically important document within the insolvency process that provides an overview of the company’s assets and liabilities.
It gives gives the Insolvency Practitioner the opportunity to assess everything the company may own, as well as details of fixed or floating charges.
Once completed, the Statement of Affairs has to be filed at Companies House by the Insolvency Practitioner. It’s intended first and foremost as a source of information for company creditors and shareholders, although potential buyers of the insolvency company will also find it useful.
What Information Should be Included on the Statement of Affairs Form
The SOA is a crucial step in the insolvency procedure, so completing it correctly is a must, and all the information has to be accurate and true.
Provide full details, precise dates and amounts requested. The document should include:
- Asset valuations
- The most recent balance sheet and management accounts
- A complete list of employees (addresses, salaries, start dates etc), trade creditors, suppliers
- Details on VAT and PAYE position (amount owed/unpaid)
- Amounts owed to the bank (including any director/shareholder loans)
- Any existing debts
The Statement of Affairs may be used in the following cases of insolvency
Where is it Applicable
In case of voluntary liquidation, the company’s financial position will be outlined at a creditors/shareholders’ meeting.
If the company enters into Administration, the Administrator will require the Directors to produce a Statement of Affairs to be contained within the Administrators’ Proposals; In a CVA, the SOA will also form a section of the Proposals to creditors.
In the eventuality that the company is facing compulsory liquidation, the Official Receiver, liquidator or the appointed Insolvency Practitioner will be in charge of preparing the Statement of Affairs.
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).
What to do After You’ve Completed it?
As soon as the SOA has been completed and signed, it must be filed at Companies House by the Insolvency Practitioner, in order for it to become public record.
Key Differences Between a Statement of Affairs and a Balance Sheet?
A balance sheet is part of a financial statement, therefore it must be 100% accurate, containing no estimated figures and it has to show the company’s exact financial position.
Whilst the Statement of Affairs offers information on assets and liabilities, it doesn’t need to be correct to the penny but needs to show the best-estimated figures on the information available at the time.
The main facts you need to know about the SOA are:
- It is a document outlining a company’s financial situation, assets and liabilities;
- It is needed in various insolvency proceedings;
- It is prepared by a professional Insolvency Practitioner;
- Once completed, it is filed at Companies House to be available for public view.
Useful Resources and Related Content:
HMRC’s main Insolvency Service hub: https://www.gov.uk/government/organisations/insolvency-service
HMRC Page on the Insolvency Act 1986: http://www.legislation.gov.uk/ukpga/1986/45/contents