The directors of a company undergoing a Creditors’ Voluntary Liquidation need to prepare a report called the Statement of Affairs to present at the shareholders’ and creditors’ meetings.
Who Prepares the Statement of Affairs?
The company’s directors must prepare the Statement of Affairs or provide the liquidator with all the information they need to prepare the report. Whether the document is prepared by the directors or the liquidator, the directors will need to swear that it is an accurate representation of the company’s affairs before they present it to the company’s creditors and shareholders.
What Must the Statement of Affairs Include?
The Statement of Affairs must be prepared in a prescribed form. Its purpose is to enable the shareholders and creditors to have an understanding of the current financial position of the company. As such it must contain certain information, including (but not restricted to):
- Details of the assets and liabilities of the company;
- Details of the company’s creditors and their contact details; and
- Any security held over the company’s assets by its creditors and details of such securities.
It will also normally include a professional opinion about the amounts that could be realised from the sale of the company’s assets.
As the Statement of Affairs should also report on the company’s debts and liabilities, the company’s creditors should be able to get a good idea of the amounts that will be left to be distributed to them during the liquidation process. It should be noted that the costs of the liquidation itself are not reflected in the Statement of Affairs and these will be deducted before any distributions are made to creditors.
When Must the Directors Prepare the Statement of Affairs?
The Statement of Affairs must be completed no less than 14 days before the shareholders’ meeting at which the directors will propose the Creditors’ Voluntary Liquidation. The directors will also need to report on any material transactions that have taken place since the Statement of Affairs was prepared at the shareholders’ meeting.
Why is it Important that the Statement of Affairs Contains the Right Information?
It’s very important that the Statement of Affairs is prepared properly with the right information for several reasons. The first is that the purpose of the report is to give creditors and shareholders a clear representation of the company’s affairs, and this will not be achieved if it doesn’t contain all of the relevant information.
The second reason is that the Statement of Affairs is a sworn document. The directors have to swear to its accuracy, so if there’s material omissions, inaccuracies, or it’s misleading, the directors can be held liable with serious consequences.
After the creditors’ meeting, the liquidator needs to file the Statement of Affairs with Companies House.
What Happens if the Directors don’t Prepare a Statement of Affairs?
If directors fail to prepare a Statement of Affairs they will be guilty of an offence and will be liable to a fine. It will also be considered negatively when the liquidator prepares their report on the conduct of the directors and may lead to the directors being disqualified from acting in the role of a director for a period of up to 15 years.
Considering a Voluntary Liquidation?
If you’re considering a Creditors’ Voluntary Liquidation for your company and need more advice, please feel free to contact us for a no-obligation consultation. Call us on 08000 746 757 or use the live chat function below.
Written by: Simon Renshaw