Statement of Affairs — line by line

The Statement of Affairs serves three functions:

• ›Creditor information — creditors receive the SoA with the liquidator's notice and use it to understand the company's position.
• ›Liquidator working document — the SoA is the liquidator's starting point for asset realisation, creditor distribution, and investigation.
• ›Statutory record — the SoA is filed at Companies House and forms part of the public record of the procedure.

Section 1 — Company information

Captures basic company information: company name, registered number, registered office, trading address, principal business activity. All available from Companies House and the company's own records. The SoA must match — mismatches between SoA and Companies House create regulatory queries.

Section 2 — Assets

All assets the company owns, in categories:

• ›Cash at bank — balance on each account at the date of insolvency. Note: bank accounts may be frozen by the time the SoA is prepared.
• ›Debtors — amounts owed to the company. Itemise: trade debtors (commercial), connected party debtors, director loan account credit (where the company owes the director — rare for distressed companies).
• ›Stock and work in progress — finished goods, raw materials, work in progress. Estimated realisable value (often substantially below cost or book value).
• ›Plant and machinery — production equipment, IT equipment, vehicles. Estimated realisable value (often 10–25% of net book value for SME equipment).
• ›Property — freehold or leasehold real estate. Where applicable — market value with note of secured charges.
• ›Intangible assets — intellectual property, customer lists, goodwill. Highly variable — rarely realisable in pure liquidation.
• ›Other — prepayments, refundable deposits, insurance claims, etc.

Each line gives Estimated to Realise (ETR) — the IP's view of what the asset will actually realise in liquidation. Often substantially below book value. For example: stock with £50,000 book value may have £5,000–£15,000 ETR; equipment with £100,000 net book value may have £10,000–£30,000 ETR.

Section 3 — Secured creditors

Creditors holding security over company assets. Typically:

• ›Bank — debenture / fixed and floating charges over all company assets. Outstanding balance noted.
• ›Asset financier — HP / lease financing on specific assets. Outstanding balance and asset noted.
• ›Other secured creditors — factoring companies, invoice discounters, specialist lenders.

Each secured creditor's outstanding balance is set out, together with the value of their security. The shortfall (where security is less than the debt) becomes unsecured.

Section 4 — Preferential creditors

Creditors with statutory preferential status:

• ›Employee arrears — wages owed, holiday pay, pension contributions. Capped at £800 per employee for the wages element (statutory cap).
• ›Secondary preferential creditors (post-1 December 2020) — HMRC for VAT, PAYE, employee NICs, CIS, student loan deductions.

Employee arrears are typically modest in number for SMEs. HMRC secondary preferential amounts can be substantial — particularly VAT and PAYE arrears that accumulated in the months before insolvency. See the HMRC Crown Preference spoke for the statutory framework.

Section 5 — Unsecured creditors

All other creditors — the residual class:

• ›Trade creditors — suppliers, professional advisers, utility companies.
• ›HMRC for Corporation Tax — Corporation Tax remains unsecured (not secondary preferential).
• ›Bounce Back Loan / CBILS / other unsecured government-backed loans.
• ›Director loan accounts (where the director owes the company — the company is the creditor).
• ›Connected parties — other companies in the group, related parties.
• ›Contingent liabilities — potential litigation, warranty claims, unresolved disputes.

Each creditor's name, address, and amount owed must be listed. The SoA is sent to every creditor on this list. Missing creditors create later complications — so directors must be thorough.

Section 6 — Deficiency

The arithmetic conclusion: Total Assets ETR minus Total Liabilities equals the Deficiency. This is the shortfall to creditors — the amount that will not be paid. In most SME CVLs, the deficiency is substantial.

The Statement of Affairs is sworn or affirmed by the directors. Section 99 IA 1986 makes false declaration a criminal offence punishable by fine and/or imprisonment. The directors are declaring that the SoA gives a true picture of the company's position.

Practical implications:

• ›Be thorough — missing creditors or undervalued assets create later issues.
• ›Be honest — inflating asset values or omitting creditors is dangerous.
• ›Be timely — the SoA must be prepared within 7 days of the decision procedure (or 14 days where the procedure is by deemed consent).
• ›Take advice if uncertain — the IP can help with valuations and disclosure decisions but cannot complete the SoA for the directors.

• ›Asset over-valuation — listing assets at book value or replacement cost rather than realisable value.
• ›Missing creditors — particularly contingent or disputed liabilities, intra-group balances, director loan account overdrafts (where the director owes the company).
• ›HMRC under-disclosure — failing to capture all heads of HMRC liability (VAT, PAYE, NIC, Corporation Tax, CIS) with current up-to-date balances.
• ›Director loan account oversight — if the director owes the company, this is a company asset and must be on the SoA. Common to overlook. See the DLA s.455 spoke for the framework.