21st January 2021
A Statement of Affairs – often abbreviated to SOA – is an important document which lays out the company’s financial position. A SOA differs from the annual set of accounts which a director is responsible for filing with Companies House each year.
When prepared for the purpose of an insolvent liquidation, the SOA is designed to give creditors an indication of how much money may be available in the company to be distributed at the end of the liquidation process. A company’s assets and liabilities will be set out, with any creditors holding a secured charge over a company asset being noted.
In the case of a liquidation procedure, the SOA will be prepared by the liquidator dealing with the closure of your business who will then submit this to Companies House. At this stage the SOA will form part of your company’s public record meaning it will be visible to anyone searching for it. If the company is to enter into administration, then the directors of the company will be expected to produce this document. If you are asked to produce such a report then it is vitally important that you do this. Failure to complete the SOA could see you landed with a fine of up to £5,000, or alternatively a daily penalty charge which will continue to increase until you file the statement.
Before filing the SOA, the directors of the company must attest to its truthfulness by signing a declaration which swears that the document is a true, full, and accurate picture of the company’s financial position. Providing incorrect information, omitting relevant data, or including anything which is likely to mislead or misinform is a serious offence which can come with severe consequences for you on a personal level. Often this would involve a fine, however, failing to comply with producing a SOA will reflect badly upon you when your conduct as a director is scrutinised; in extreme cases this could lead to you facing disqualification from acting as a company director for a period of up to 15 years.
A SOA is designed to offer an overview of a company’s current financial position, outlining its assets and its liabilities. While there are some similarities between a SOA and a balance sheet, they are in fact two completely different documents serving different purposes. While a balance sheet looks at pure figures, the SOA goes one step further. Assets will be listed with details given as to their book value and also estimated realisable value. This is an important distinction; what something is listed as being worth (book value) is not necessarily the same as what could be expected to be raised should the item be auctioned off or otherwise disposed for a quick sale. This difference is what the realisable value takes into account.
As well as physical items such as property, machinery, vehicles, and stock, assets could also include cash in hand, cash at bank, as well as any book debts owing to the company. Again these assets will be appraised and a realistic achievable figure will be decided upon.
When compared to the information given on a balance sheet, the SOA also goes into more depth regarding who the creditors are and the amount they are owed. Also detailed is the contact information for each creditor and information regarding any security they hold over company assets. Details of employees and shareholders must also be recorded.
If your limited company is facing financial difficulties and you are considering placing it into liquidation or exploring the possibility of administration, Real Business Rescue can help. We have a team of experienced and knowledgeable licensed insolvency practitioners spanning the length and breadth of the UK ready to help you and your company navigate the most difficult of times. Contact us today to arrange a completely free no-obligation consultation with your nearest office. Our extensive office network comprises 100 offices across the UK with a partner-led service offering immediate director advice and support.