The Insolvency Act, Section by Section | Part 5 | Section 210
You signed the statement of affairs. What did it leave out?
For directors completing, or who have already signed, the statement of a failed company’s affairs.
Section 210 in plain English
Somewhere near the start of every liquidation, the director is handed the most important form of the whole process: the statement of affairs. It is the sworn picture of what the company owns, what it owes and to whom. Section 210 is the criminal provision that stands behind it, and its concern is what the picture leaves out.
The section makes it an offence for a past or present officer to make a material omission in any statement relating to the company’s affairs. Two features give it a wider reach than most directors expect. The word statement extends beyond the formal statement of affairs to other accounts a director gives of the company’s position. And the section looks in both directions: an omission in a statement made during the winding up is caught, and so is an omission in a statement made before the winding up began.
Where section 210 operates
The only section in this run of Chapter X with no quiet side of the line: statements on both sides of the commencement date are caught.
Where do omissions actually happen? The same items go missing from statements of affairs again and again, and each is exactly the kind of gap a liquidator is trained to look for.
The director loan account
Sums drawn from the company and owed back, quietly absent from the liabilities the director owes and the assets the company holds.
Recently disposed property
Vehicles, plant or stock that left the company in the final months, with the disposal itself left off the picture.
Money owed to the company
Debtors the director would rather leave uncollected, including debts owed by connected companies and family.
Dealings with related companies
Intercompany balances, shared equipment and informal arrangements between entities under common control.
Contingent and disputed claims
The threatened litigation, the guarantee given, the tax assessment under appeal. Uncertain is different from omittable.
Deposits, refunds and holdbacks
Retentions on contracts, rent deposits, insurance refunds and other recoverables that the form makes easy to forget.
Who the section catches
The duty of completeness falls on past and present officers of the company, and it extends to shadow directors, so the person who directed matters from behind the scenes carries it too. In practice the exposure lands hardest on whoever signs. The statement of affairs is verified by a statement of truth, and the signature belongs to a person, never to the company. Where several directors contribute to one statement, each signatory answers for the whole of it.
What has to be proved, and by whom
Section 210 returns to the structure that runs through most of Chapter X: the prosecution establishes the omission, and the section then supplies a defence for the accused to make out.
Something material to the company’s affairs was left out of a statement, before or during the winding up.
The section provides the defence, and it is for the accused to make it out, on the balance of probabilities.
The defence is proving there was no intent to defraud.
A genuine oversight, disclosed and corrected as soon as it surfaced, with the working papers to show how the statement was prepared.
An omission that tracks the director’s own interest, discovered by the liquidator rather than volunteered, with nothing to show it was innocent.
The pattern of the omission usually decides the intent question before anyone argues it. Forgetting a small trade debtor looks like human error. Forgetting the loan account you drew on every month looks like something else, and the burden of showing otherwise belongs to the person who signed.
What a conviction costs
Section 210 is a criminal offence triable in either court, carrying a custodial maximum and an unlimited fine on indictment. Because the statement of affairs sits at the centre of every liquidation, an omission conviction contaminates everything around it.
Omissions engineered to keep assets or claims out of the estate sit at the serious end of the range.
An untrue statement of affairs is core material in disqualification proceedings, with or without a prosecution.
The loan account, the asset, the debtor: whatever was left out is still pursued by the liquidator, now with interest and hostility.
A director shown to have signed an incomplete statement starts every later negotiation from behind.
It is the single most consequential document a director of a failed company signs, and it is best reviewed before it goes in rather than defended after. Femi has spent thirty years on both sides of these documents, inside HMRC and advising clients across tax and insolvency.
Book a Free 30 Minute CallThe defence, and how to complete the statement safely
The defence is the absence of an intent to defraud, and as everywhere in this chapter, intent is read from conduct. A statement prepared methodically, with its working shown, makes an innocent explanation for any genuine gap easy to accept.
Completing the statement of affairs safely
- Work from the records, never from memory: the last accounts, the bank statements, the asset register, the aged debtor and creditor lists.
- List the director loan account, whichever direction it runs, and however uncomfortable the figure.
- Include every disposal from the final year, with dates and what was received.
- Include contingent, disputed and uncertain items with a note, rather than leaving them out while they resolve.
- Disclose connected-party balances and arrangements in full.
- Keep your working papers, so the method of preparation can be shown later.
- If something surfaces after signing, write to the liquidator and correct the statement immediately.
- Ask for advice before signing, never after the omission is found.
The HMRC angle
A statement of affairs is never read in isolation, and in an HMRC-driven liquidation it is read against the company’s own filing history. The last accounts filed at Companies House show the balance sheet the director previously signed, loan account included. VAT returns describe the trading and the stock. Payroll filings show who was employed and when. An omission is visible as the difference between the statement and the paper trail the company spent years creating.
Femi’s practice sits directly on this ground. Eight years inside HMRC, fifteen years representing clients as a tax adviser at KPMG, Deloitte and Grant Thornton, and a further fifteen years as a solicitor acting for clients in the insolvency space. The examiner’s first move with any statement of affairs is the reconciliation against what was filed before, and knowing that is the best possible discipline for preparing one.
A worked example
Take a composite scenario, drawn from common patterns rather than any client matter. Two directors of failed design agencies each complete a statement of affairs. Both companies have an overdrawn director loan account and both sold a company car in the final six months.
Trims the picture
- Leaves the loan account off the statement entirely.
- Omits the car sale, reasoning the vehicle is gone anyway.
- Signs the statement of truth and returns the form on time.
- The liquidator reconciles the statement against the last filed accounts, which show the loan account plainly.
- The vehicle registry supplies the car sale, dated and priced.
- Both omissions track his own interest, and the burden of proving no intent to defraud is now his. Section 210 exposure, and the loan account claim proceeds regardless.
Shows the whole picture
- Lists the loan account at its full figure, with a covering note on how it arose.
- Discloses the car sale, attaching the valuation and the bank credit.
- Includes a disputed supplier claim with a short explanation of the dispute.
- Keeps the spreadsheets the statement was built from.
- Writes a week later to add a rent deposit he had forgotten.
- The reconciliation matches. The loan account is negotiated on its merits, and section 210 never enters the conversation.
Related sections and where to go next
Section 210 sits between two close relatives. Section 209 deals with records that were changed, while this section deals with pictures left incomplete, and section 211, the final article in this opening run, deals with false statements made to creditors to win their agreement. Behind all three stand section 206 on concealment in the final year and section 208 on the duty to disclose and deliver up, whose disclosure obligations the statement of affairs exists to serve. Section 207 completes the set on the transactions side.
If a winding-up petition or a liquidator’s inquiry is already part of your situation, the practical guides in The Director’s Insolvency Survival Guide cover the urgent ground, including what happens when directors come under investigation.
And if the statement of affairs is sitting on your desk now, have it reviewed before it carries your signature anywhere.
A confidential 30 minute call with Femi O. Ogunshakin, Solicitor, Tax Adviser and Former HMRC Inspector, before the statement of affairs goes in.
Book a Free Call