Risk Analysis: Charles Street Solutions Limited (03321313)

1. Risk Rating: HIGH

The company is technically insolvent on a standalone basis, with shareholders' funds of -£13.7M and net current liabilities of £8.3M. It is entirely dependent on group support for continuation as a going concern, with contingent cross-guarantees of £14M relating to parent company debts. The cash position of under £20,000 against over £10M in current liabilities presents severe liquidity risk.

2. Key Concerns

Concern 1: Severe Insolvency and Worsening Balance Sheet

Shareholders' funds have deteriorated from -£12.6M (2022) to -£13.7M (2025), representing a consistent erosion of approximately £1M per year. Net assets are negative at -£4.9M, meaning liabilities exceed total assets by a substantial margin. The company cannot meet its obligations from its own resources.

Concern 2: Contingent Cross-Guarantees of £14M

The accounts disclose cross-guarantees for parent company debts totalling £14M (up from £9.8M in 2024). This represents a 42% increase year-on-year and exposes the company to significant additional liability that dwarfs its own asset base. Any default by the parent could crystallise obligations that are clearly unpayable from this company's standalone position.

Concern 3: Extreme Liquidity Vulnerability

Cash at bank stands at just £19,882 against current liabilities of £10.4M. Net current liabilities are £8.3M. The company has no operational revenue (zero employees) and minimal trade debtors (£10K). It is entirely reliant on the forbearance of group creditors (£9.98M owed to group undertakings) and the continued flow of intercompany funding to remain operational.

3. Positive Indicators

• Filing Compliance: Accounts and confirmation statements are filed and not overdue. The 2025 accounts were approved and authorised on 30 July 2026, indicating active governance.
• Unqualified Audit Opinion: The auditors (Goldwyns Limited) issued an unqualified report, suggesting no material concerns about the accounts themselves were identified.
• Group Support Evidenced: The continued willingness of group undertakings to maintain £9.98M in intercompany creditor balances suggests ongoing parent company support, which underpins the going concern basis.
• Long-Established Entity: Incorporated in 1997, the company has operated for nearly 30 years, suggesting stability within its group context.
• Investment Portfolio Maintained: The £3.44M net investment in group undertakings (after £6.3M provisions) indicates the company retains value within the group structure.

4. Due Diligence Notes

4.1 Parent Company Financial Health — Critical

The ultimate parent, Managed IT Services Group Limited, must be assessed as a priority. This company's survival depends entirely on the parent's willingness and ability to continue supporting it. The PSC register confirms the parent owns more than 75% of shares, holds more than 75% of voting rights, and has the right to appoint and remove directors. Request the parent's consolidated accounts and assess group-level solvency.

4.2 Intercompany Creditor Terms

£9.98M is owed to group undertakings with no disclosed repayment terms or security. Determine whether these are effectively subordinated, whether any demand rights exist, and what would trigger repayment. The entire liquidity position depends on these balances not being called.

4.3 Contingent Liability Exposure

The £14M cross-guarantee requires urgent investigation. What specific parent company debts does this guarantee cover? What is the likelihood of those debts being called? The 42% increase from £9.8M to £14M year-on-year is concerning and suggests the parent is increasing its leverage, potentially exposing this company further.

4.4 Investment Impairment

The investment in subsidiary undertakings is carried at £3.44M net of £6.3M in provisions (original cost £9.73M). This represents a 65% write-down. Assess whether further impairment is likely and what the underlying subsidiaries' performance looks like.

4.5 Going Concern Basis

While the audit opinion is unqualified, there is no explicit going concern statement visible in the filleted accounts (small company regime). Confirm whether the directors have assessed going concern and whether the auditors considered it adequately given the magnitude of net liabilities.

4.6 Year-End Change

The financial year end changed from 30 April to 31 December around 2021, creating a short period. The 2021 data shows a markedly different balance sheet structure (£8.66M total assets, £5.48M liabilities, £8.76M shareholders' funds). Understand what transaction or restructuring caused this dramatic shift, as it appears to have fundamentally altered the company's financial position.