Chris is an Insolvency Practitioner regulated by the ICAEW since 2014,.
He is experienced in contentious insolvency with excellent analytical skills and strong knowledge of both general and technical insolvency matters.
A Declaration of Solvency is a formal statement by a company’s directors confirming that they have conducted a thorough assessment of the company’s financial situation and believe the company can pay all its debts in full within a specified period, usually no more than 12 months.
The declaration must be sworn in the presence of a solicitor or a notary public to affirm its veracity. Making a false Declaration of Solvency can lead to severe penalties, including criminal charges.
Example Declaration of Solvency in a Members’ Voluntary Liquidation
“We, the undersigned directors of XYZ Limited, hereby declare that we have made a full inquiry into the affairs of this company and, having done so, have formed the opinion that this company will be able to pay its debts (and interest) in full within a period of twelve months from the date of commencement of winding up.“
A document attached to the declaration details the company’s assets and liabilities at a specific date.
Who Needs to Sign a Declaration of Solvency?
Every director listed on the company’s official register of directors at Companies House must sign the declaration, including both executive and non-executive directors.
FAQs
What happens if a company is found insolvent after the Declaration of Solvency is filed?
If the company cannot pay its debts, the liquidation may be converted from a Members’ Voluntary Liquidation (MVL) to a Creditors’ Voluntary Liquidation (CVL), and the directors may face legal consequences for making a false declaration.
What happens if the Declaration of Solvency is incorrect?
Directors can face serious legal consequences, including personal liability for company debts and potential disqualification from acting as directors for making a false declaration.
References
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
You can learn more about our standards for producing accurate, unbiased content in our editorial policy here.
