DST MCGEE PROPERTIES LTD

1. Risk Rating: HIGH

Justification: The company exhibits persistent and worsening balance sheet insolvency, with net liabilities growing from £-46.5k in 2023 to £-101.8k in 2025. This is compounded by severe liquidity constraints, evidenced by net current liabilities of £112k, meaning the company cannot cover its short-term debts from liquid assets. While common in leveraged property holdings, the magnitude of the deficit and the ongoing cash extractions via the director's loan account present significant solvency and going concern risks.

2. Key Concerns

• Balance Sheet Insolvency: The company has reported negative net assets for three consecutive years, deteriorating from £-46.5k (2023) to £-61.5k (2024) and £-101.8k (2025). Total liabilities (£245k) significantly exceed total assets (£161k net of current liabilities), indicating that the company is technically insolvent on a balance sheet basis and reliant on creditor forbearance, particularly long-term creditors, to continue as a going concern.
• Severe Liquidity Shortfall: Current assets stand at £86.8k against current liabilities of £198.8k, resulting in net current liabilities of £112k and a current ratio of approximately 0.43. The company lacks the liquid resources to meet its short-term obligations without refinancing, asset disposals, or continued creditor support.
• Director Loan Account Volatility & Asset Reclassification: The director's loan account shows significant activity, with £111.6k advanced to the director and £103k repaid during the year. Notably, £60k of this "repayment" was a reclassification to a long-term asset rather than a cash inflow. Stripping cash out of an insolvent company to this degree, even if partially reclassified, raises concerns about financial stability and potential preferential treatment of the director over other creditors.

3. Positive Indicators

• Regulatory Compliance: The company is fully up to date with its statutory filing requirements. Accounts for the period ending March 2025 have been filed, and the confirmation statement is current. This suggests the directors are maintaining basic administrative and compliance standards.
• Asset Backing: The company holds £275k in fixed assets (likely property, given the SIC codes). While the carrying value has decreased from £340k, these assets provide underlying collateral that could potentially cover the outstanding liabilities if realized at market value, which may differ from book value.
• Longevity: Incorporated in 2000, the company has over two decades of operational history, suggesting resilience and an established presence in its market.

4. Due Diligence Notes

• Creditor Composition: It is critical to determine the nature of the £245k in long-term creditors and £198k in current creditors. If a substantial portion is comprised of director loans that are subordinated or interest-free, the insolvency risk is mitigated by the director's willingness to support the business. If it is third-party debt or HMRC liabilities, the risk is significantly elevated.
• Property Valuation: As a real estate company, the true financial position hinges on the market value of the fixed assets. The accounts are prepared under micro-entity provisions, meaning property is likely held at historic cost less depreciation. An independent valuation is necessary to ascertain if the realizable value of the property exceeds the book value and covers the liabilities.
• Long-Term Asset Reclassification: Investigate the nature of the £60k asset transferred from the director to the company. Clarify whether this is a tangible asset, a separate loan note, or an equity instrument, and assess its true liquidity and recoverable value.
• PSC vs. Director Discrepancy: Clarify the relationship between PSC Ms. Mary Teresa Corner (who owns 25-50% of shares) and Director Ms. Sophie Theresa McGee. Ms. Corner holds significant control but is not listed as an officer, which is legally permissible but warrants understanding of the broader control dynamics.