Risk Analysis: COPPERMILL BUILDING CONSTRUCTION LTD

1. Risk Rating: HIGH

The company is deeply insolvent with net liabilities of £95,992 as at 30 June 2025, representing a dramatic deterioration of nearly £76,500 from the prior year. The current ratio stands at approximately 0.09:1, indicating an acute inability to meet short-term obligations. The company has been technically insolvent in 7 of the last 10 financial years, and the trajectory is worsening significantly.

2. Key Concerns

Concern 1: Severe and Deteriorating Insolvency Net assets have moved from -£19,433 (2024) to -£95,992 (2025), a near fivefold deterioration. Total liabilities (£107,176) now exceed total assets (£47,058) by more than 2:1. The company has been balance-sheet insolvent in 7 of the last 10 years, and the current position is the worst in its history. This raises the question of whether the director is complying with his duties under section 214 of the Insolvency Act 1986 (wrongful trading).

Concern 2: Acute Liquidity Crisis Current assets of just £9,592 against current liabilities of £107,176 produce a current ratio of approximately 0.09:1. Net current liabilities have worsened from -£20,271 to -£97,584. The company appears entirely reliant on creditor forbearance and/or the director's continued willingness to support the entity. With only £1 in share capital, there is no meaningful equity cushion.

Concern 3: Creditor Exposure and Potential Preferential Risk Creditors falling due within one year increased from £56,632 to £107,176 — a near doubling that warrants scrutiny. Given the director (Mr John Phelps) owns more than 75% of shares, there is a material risk that related-party transactions or director loans may be influencing the balance sheet composition. Without detailed notes (micro-entity filing), the nature of these liabilities cannot be confirmed from available data.

3. Positive Indicators

• Filing Compliance: Accounts and confirmation statements are filed on time with no overdue status, suggesting the director maintains basic administrative discipline.
• Operational Continuity: The company has been active since 2010 (15 years), demonstrating some resilience through economic cycles, and continues to file as an operating entity.
• Asset Base: Fixed assets of £37,466 remain on the balance sheet, suggesting ongoing operational capability or equipment ownership, though their realisable value is uncertain.

4. Due Diligence Notes

1. Composition of Current Liabilities: The near-doubling of short-term creditors requires urgent investigation. Determine how much relates to trade creditors, HMRC liabilities, director loans, or other related-party balances. Micro-entity accounts do not disclose this breakdown.

2. Director Loan Position: Given Mr Phelps controls over 75% of the company, ascertain whether he has lent funds to the business (and on what terms) or whether he has withdrawn funds. A director's loan account in credit might explain how the company continues to trade despite insolvency.

3. Wrongful Trading Risk: Seek legal advice on whether the director is at risk of a wrongful trading claim. The company has been balance-sheet insolvent for most of its existence, and the 2025 position is significantly worse than prior years. Directors who continue trading when there is no reasonable prospect of avoiding insolvent liquidation may become personally liable.

4. Nature of Fixed Assets: The £37,466 in fixed assets and their classification (tangible vs. intangible) should be verified for realisable value. In a forced sale scenario, these may be worth substantially less than book value.

5. Trading Viability: Request management accounts, cash flow forecasts, and a going concern assessment. The filed accounts contain no directors' report on going concern, which is standard for micro-entities but critical given the financial position.

6. Related Party Transactions: With a single director/owner, all significant transactions should be examined for potential conflicts or transactions at undervalue.

7. Creditors Due After One Year: The reduction in long-term creditors from £39,788 to £30,674 may indicate repayments or reclassification to current liabilities — determine which has occurred.