Statement Of Affairs In A Voluntary Liquidation

What Is The Statement Of Affairs In Voluntary Liquidation?

The Statement of Affairs in a Creditors Voluntary Liquidation or a Members Voluntary Liquidation is an up to date financial position of a company.

A Statement of Affairs is like an up to date balance sheet prepared on a break up basis but there is more information required.

What Information Is Included In The Statement Of Affairs In A Voluntary Liquidation?

The information that needs to be included within the Statement of Affairs is a document that typically sets out the following information as set out in Section 99 of the Insolvency Act 1986 for a Creditors Voluntary Liquidation:

• assets (includes both physical and non-physical assets eg goodwill, book debts, databases, computer source code, intellectual property etc.)
• liabilities
• list of creditors with names and addresses and the amount of their debt
• details of secured creditors and show which assets their debt holds security over

From the information in the statement of affairs subject to the costs and expenses of the Liquidation which are not included, the creditors should have an idea of what will be recovered as a consequence of the Liquidation. The break up and book value of the assets should be information provided to enable the same.

In the case of a Members Voluntary Liquidation, the requirement is confined to contain a statement of the company’s assets and liabilities.

Additional Requirements Of The Statement Of Affairs

Under Rule 6.4 of the Insolvency (England And Wales) Rules 2016 there are additional requirements to the Statement of Affairs.

This information is typically supplied in the document and its supplemental schedules relating to details of the:

• shareholders
• further particulars of each creditor
• employees
• consumers

However, the Liquidator under Rule 6.2(4) of the Insolvency (England and Wales) Rules 2016 must not deliver to Companies House the schedules of creditors of employees and or consumer creditors. However, Rule 6.2(1)(a) of the Insolvency (England and Wales) Rules 2016 requires the name and postal address of each shareholder to be detailed on the Statement of Affairs.

Is it An Estimate?

A Statement of Affairs is not a document that is provided in round sums so it is not intended to be full of estimates.

Necessarily, the estimated to realise values of the assets disclosed in the Statement of Affairs will be estimated. However, those values should be backed up by some reliable valuations that are capable of being justified. As such it makes sense for some of the more material assets for the same to be professionally valued.

The requirement is that the numbers it contains will be accurate because it is supported by a Statement of Truth in a Creditors Voluntary Liquidation. In the case of a Members Voluntary Liquidation, it is in effect supported by a a sworn Statutory Declaration of Solvency.

Penalty For Failing To Prepare A Statement Of Affairs In A Voluntary Liquidation

In the case of a Creditors Voluntary Liquidation, the penalty for a Director who fails to prepare a Statement of Affairs is potentially serious. It is an offence and a Director is liable to a fine. The statement of affairs must be filed at companies house once the liquidator is appointed and it will contain the name and addresses of the creditors and shareholders of the company.

Employee Claims In The Statement Of Affairs

It is the duty of the Directors to enable all employees of a company to claim and have regard to the following points:

• Liquidation gives every creditor the right to claim in the Liquidation.
• All employees have the right to claim even if they are no longer employed.
• Even if an employee has not claimed for any aspect of their employment (eg. redundancy, arrears of pay, notice, expenses, pension, etc) does not mean they cannot claim.
• The liability of the company to an employee rests on what is in the employment contract (or arising from the employment). If in doubt provision needs to be made for such liabilities in the Statement of Affairs.
• If a Director is aware of any employee claims they MUST make provision for them in the Statement of Affairs.

Frequently asked questions