What is a Declaration of Solvency?

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.

This declaration is proscribed under the Insolvency Act 1986, c. 45, Part IV, Chapter II, Section 89 and must be made before a company can initiate a Members’ Voluntary Liquidation. It includes a detailed statement of the company’s assets and liabilities, providing a snapshot of its financial health at the time of declaration.

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.

You can download a template for this from Companies House directly here.

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.