Risk Assessment: COLLABORATIVE SOFTWARE LIMITED (04040744)

1. Risk Rating: HIGH

Justification: The company has been in a position of deep insolvency since at least 2019, with net liabilities of £680,767 as at 30 December 2024. Current liabilities exceed current assets by approximately £765,611, creating a severe liquidity deficit. The company is technically unable to pay its debts as they fall due from its balance sheet position, which constitutes the statutory definition of insolvency under UK law. While recent trajectory shows marginal improvement, the fundamental solvency position remains critically impaired.

2. Key Concerns

Concern 1: Chronic Insolvency

The company has carried negative net assets for six consecutive years, deteriorating from a positive position of £76,587 in 2018 to negative £680,767 in 2024. Total liabilities (£1,102,972) exceed total assets (£450,433) by a factor of 2.4x. This is not a temporary imbalance but a sustained structural deficit, suggesting the company relies entirely on creditor forbearance or related-party support to continue trading.

Concern 2: Severe Liquidity Shortfall

Current liabilities of £1,102,972 dwarf current assets of £337,361, leaving a working capital deficit of £765,611. Cash of £79,246, while improved from the critically low £20,126 in 2023, remains wholly inadequate relative to obligations falling due within one year. The company would be unable to satisfy even a fraction of its short-term debts if creditors demanded payment.

Concern 3: Conflicting PSC Declarations

The PSC register presents an internally inconsistent ownership structure. Three separate corporate entities—Signal Asset Purchasing Limited, Image Limited (listed twice), and Lexi Limited—each claim ownership of more than 75% of shares, which is arithmetically impossible. This raises concerns about the accuracy of the PSC register, potential errors in filing, or an opaque ownership structure that obscures true control.

3. Positive Indicators

• Improving Trajectory: Net liabilities reduced from £829,359 (2023) to £680,767 (2024), an improvement of approximately £148,600. This suggests the business may be generating revenue and retaining earnings, though the P&L account is not filed.

• Cash Position Strengthening: Cash increased nearly fourfold from £20,126 to £79,246 year-on-year, indicating improved cash generation or capital injection.

• Debtors Growth: Trade debtors rose from £188,497 to £251,304, potentially indicating increased revenue activity or a growing client base.

• Regulatory Compliance: Accounts and confirmation statements are filed on time with no overdue items. The company has maintained active status since incorporation in 2000.

• Experienced Board: The director roster includes individuals with professional accounting designations (William David Spicer, Chartered Accountant; Karl Vincent Anderson, Accountant), which may support financial governance.

• Operational Continuity: The company employs 23 staff (up from 22), suggesting ongoing business operations and a commitment to maintaining workforce.

4. Due Diligence Notes

Critical Items to Investigate:

a) Going Concern Basis: The accounts contain no visible going concern qualification or note, yet the balance sheet clearly demonstrates insolvency. It is essential to determine whether directors have assessed going concern status and what assumptions underpin their assessment. Specifically, investigate whether creditor repayment terms have been renegotiated or whether related parties have committed to ongoing financial support.

b) Related-Party Creditors: The vast majority of liabilities appear to be current creditors. It is imperative to establish what proportion of the £1,102,972 due within one year is owed to related parties (the PSC entities, directors, or group companies) versus third-party trade creditors. Related-party debts may be more patient and could explain the company's survival despite insolvency.

c) PSC Register Discrepancies: The PSC register requires urgent clarification. Contact Companies House or the company directly to resolve the conflicting >75% ownership declarations. Determine the true ultimate beneficial owners and whether there have been recent share transfers that created the duplication.

d) Revenue and Profitability: Turnover data is absent for 2022-2024, and no P&L account is filed (the company exercises its statutory right not to file). Obtain management accounts or request disclosure from the company to assess whether the business is operationally profitable despite its balance sheet position.

e) Long-term Creditors: Only £15,000 of liabilities fall due after one year (down from £25,000), suggesting the vast majority of debt is short-term. Investigate the nature and terms of these obligations—particularly whether any represent loans from directors or group entities.

f) Year-End Change: The company changed its accounting reference date from 31 July to 30 December between 2018 and 2019. Understand the rationale for this change and whether it was associated with a restructuring, change of ownership, or other significant event.

g) Director Duplication: Justin Charles Ribbons and Peter Stanley Morton each appear twice in the officer list. Verify whether these are genuine duplicate filings or represent different appointment periods.

h) Parent Entity Financials: Signal Asset Purchasing Limited, Image Limited, and Lexi Limited should be investigated as potential sources of financial support. Obtain their filed accounts to assess whether they have the resources to continue supporting Collaborative Software Limited.