Insolvency Statement of Affairs — 2026 Drafting Guide

The Statement of Affairs is the document every insolvency process pivots on. Creditors read it. Liquidators investigate from it. The Insolvency Service reviews it for misconduct. Wrongly drafted, it is the first exhibit in a disqualification or misfeasance claim. Drafted properly, it anchors the entire proceeding.

What goes in

Assets section

• Cash at bank — current balances
• Trade debtors — estimated collectible (not gross)
• Stock — estimated realisable on liquidation basis
• Plant and equipment — forced-sale value
• Land and property — market valuation less sale costs
• Intellectual property — realistically saleable only
• Investments, inter-company debts, goodwill — usually nil or nominal on liquidation

Liabilities section

• Secured creditors — amount owed, security held
• Preferential creditors — employees (wages to £800 per employee), pension contributions, certain HMRC debts
• Floating charge
• Unsecured creditors — trade, HMRC general, loans
• Connected unsecured creditors — directors’ loan accounts
• Shareholders — capital

The deficiency/surplus

Total realisable assets minus total claims = deficiency to unsecured creditors (or surplus to shareholders in MVL).

The sworn element

In bankruptcy and most corporate procedures, the SoA requires a statutory declaration or statement of truth. Directors swear personally that the information is true to the best of their knowledge and belief. False statements are an offence.

Common errors

• Over-valuing assets (wishful thinking) — creates later reconciliation problems
• Under-listing creditors — omitted creditor later claims; raises concealment suspicion
• Connected-party loans misclassified — all director/shareholder loans must be separately disclosed
• Missing hidden assets — directors’ personal guarantees, cross-charges, indemnities
• Disclosures on transactions at undervalue / preferences — must be disclosed proactively

Realisation basis — the crucial point

Going-concern valuations are not the basis. Forced-sale / liquidation valuations are. A £100,000 book-value stock may be worth £15,000 on forced sale. The SoA must reflect that — not the historical cost.

Creditor list discipline

Every creditor: name, address, date debt incurred, consideration (what the debt is for), amount, any security, any set-off, whether connected. Incomplete creditor lists are the single most common source of liquidator queries.

What Chris drafts

• Statement of Affairs on the prescribed IR 2016 form
• Supporting schedules for assets and liabilities
• Connected-party disclosure schedule
• Transactions-at-undervalue / preferences disclosure
• Statutory declaration or statement of truth
• Narrative explanation of unusual items

Pro £88 for the whole SoA pack. Hybrid £1,000 where connected-party transactions are complex and reviewer sign-off protects directors.

Prepare to win. Plan not to fail.

The SoA is the document that frames everything the liquidator does next. Draft it so nothing that follows is a surprise.