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What is a Statement of AFfairs (SOA)

It is a legal requirement for a Statement of Affairs to be produced in certain insolvency procedures.  The Statement of Affairs is then, in the case of companies, filed at Companies House and becomes a matter of public record.

A Statement of Affairs is a financial summary of the position of a business at a particular point in time.  A SOA is effectively a balance sheet of the business, normally prepared on a different basis to ‘standard’ accounts – i.e. typically on a break up rather than going concern (ongoing trade) basis.

The purpose of the SOA is to provide information to various parties with an interest in the business principally its creditors, shareholders, government agencies and the Insolvency Practitioner involved (but could also be of interest to employees, customers, competitors and parties interested in buying the business).

The SOA outlines the book value of the business’s assets as would be shown in a standard set of accounts.  It also shows the value that the person completing it considers they can be sold for or how much can be recovered.  It also outlines the obligations of the business in terms of payments due and lists its creditors and shareholders.  As a result it shows how much money (if any) will be available to meet the creditor and shareholders claims once the relevant procedure is completed.  Normally the SOA does not take account of costs of disposing of the assets and dealing with claims from the various parties.

The directors of the business are usually required to complete a Statement of Affairs either before or after a relevant insolvency event has occurred.  It is used for the investigation into the affairs of the business by the Insolvency Practitioner and for monitoring of actual performance in terms of value recovered from assets.

A connected document is the Statement of Concurrence.

The contents of a SOA are the responsibility of the person signing the document and therefore it is important that it is completed correctly.

Failure to produce a Statement of Affairs when required to do so may result in a one off fine (5,000 on summary conviction) and/or a ‘daily default fine’ of 500.  Failure to provide could also be a factor considered by the DTI when considering whether a person is fit to act as a director (i.e. in disqualification proceedings).

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