Understanding the information required for a statement of affairs
The following information is included within the statement of affairs as standard:
- A list of assets and liabilities.
- A list of creditors names, addresses and outstanding balances.
- Details of any security granted and the date it was granted.
- The value of any security granted.
The statement of affairs previously had to be sworn before a solicitor or notary. However, it is now supported by a statement of truth. Whilst not as binding as a sworn statement, a statement of truth must still be taken seriously. Providing a statement without belief that the facts are true can result in director disqualification and other financial penalties later down the line.
Whilst the statement of affairs will often be prepared by an insolvency practitioner, whom you have instructed to assist with voluntary liquidation or another insolvency process, the content of the statement of affairs is the responsibility of the director signing the statement of truth. The insolvency practitioner can only prepare a statement of affairs based on the information you have provided to them. Therefore, it is important to be as thorough as possible with the information you provide.
Publication of the Statement of Affairs
A statement of affairs is a necessary part of all formal insolvency procedures including:
- Creditors voluntary liquidation
- Individual voluntary arrangement (IVA)
- Company voluntary arrangement (CVA)
- Winding up order
In creditors voluntary liquidation, IVA and CVA, the statement of affairs will be provided to creditors before the process commences. This is to assist them in making their decisions when voting on the process. In bankruptcy, administration or when a winding up order is made, the formal insolvency procedure will commence before creditors are provided with further information.
Whereas in personal insolvency procedures, the statement of affairs will only be provided to creditors and relevant stakeholders, in corporate insolvency the statement of affairs will also be published at Companies House. In order to provide protection to their personal data, employee and consumer creditor information will be suppressed in this publication. This was introduced from April 2017, viewed as a change in favour of GDPR to prevent unnecessary publication of personal data.
How is the statement of affairs presented?
Following the initial page with the statement of truth, the first page will set out details of any assets held. These are categorised as to whether they are:
- Subject to a fixed charge
- Subject to a floating charge
More information of the various levels of security can be found here. Alongside the details of the assets will be two values, one being the book value as per the company accounting records and the other, an estimated to realise value, being the amount agents believe the assets could be sold for in the event of formal insolvency.
The second page summarises the company’s liabilities, moving down the order of payment from preferential creditors, floating charge creditors, unsecured creditors to shareholders at the bottom. An accumulated deficit will appear at the bottom of the statement of affairs setting out the overall amount that the assets are exceeded by the company’s liabilities. Following this will be a listing of all of the creditors of the company, giving an idea of the voting rights ahead of the creditors decision.
What can be learned from the Statement of Affairs?
When considering whether your business is at risk of trading whilst insolvent, preparing a statement of affairs can be a useful tool to obtain an overall picture of the state of your business. Consulting with a licensed insolvency practitioner at an early stage, when your business is suffering from financial difficulties, can be the key to successfully rescuing your business. Our business rescue experts can help with the preparation of a statement of affairs and provide advice on the next steps for your business.