Risk Analysis: KHI BMSL LIMITED

1. Risk Rating: LOW

Justification: The company demonstrates a strong and improving financial position with net assets of £946,905 as at 30 June 2025, having grown consistently from £35,398 in 2017. Liquidity appears robust with net current assets of £956,126 significantly exceeding current liabilities of £225,986. Filing obligations are being met, and there are no indications of financial distress. However, the recent corporate restructuring and limited disclosure as a micro-entity warrant some additional scrutiny.

2. Key Concerns

Concern 1: Dramatic Decline in Fixed Assets

Fixed assets fell from £151,219 (October 2024) to £982 (June 2025) – a near-total elimination. This warrants investigation to understand whether this reflects asset disposals, reclassification to current assets, impairment write-offs, or transfer to a related party. The corresponding surge in current assets (from £827,552 to £1,145,964) suggests possible reclassification, but without a profit & loss account or notes, this cannot be confirmed from available data.

Concern 2: Corporate Restructuring and Related Party Exposure

The company underwent a name change on 26 June 2025 (from BMSL Accountancy & Tax Services Ltd) and the majority PSC is Khi Partners Uk Limited (owning 50-75% of shares and voting rights, with right to appoint/remove directors). This suggests a recent acquisition or group restructuring. Related party transactions, inter-company balances, and potential extraction of value through management charges or dividends should be investigated. The PSC's own financial position could materially affect this company.

Concern 3: Shortened Accounting Period and Comparability

The accounting reference date changed from 31 October to 30 June, resulting in an 8-month reporting period (1 November 2024 to 30 June 2025). This makes meaningful year-on-year comparison difficult and could obscure trends. The motivation for this change and whether it aligns with the PSC's reporting period should be established.

3. Positive Indicators

• Consistent and Impressive Growth: Net assets have grown every year since 2017, from £35,398 to £946,905 – representing approximately a 27-fold increase over eight years. This trajectory suggests a well-managed, profitable practice.

• Strong Liquidity Position: Net current assets of £956,126 against current liabilities of £225,986 provides a current ratio of approximately 5.1:1, indicating ample capacity to meet short-term obligations.

• Low Leverage: Total liabilities (£225,986) represent only approximately 19.7% of total assets (£1,146,946). The business appears to be conservatively financed with minimal debt reliance.

• Regulatory Compliance: Accounts and confirmation statements are filed on time with no overdue filings. The company has maintained active status since 2003.

• Employee Growth: Average employee numbers increased from 5 to 6, suggesting controlled expansion.

• Established Business: Over 20 years of operation in the accounting and tax consultancy sector provides operational stability evidence.

4. Due Diligence Notes

1. Khi Partners Uk Limited: Investigate the financial standing, filing history, and ultimate beneficial owners of the majority PSC. Assess whether there are group structures that could create contagion risk or inter-company obligations not visible in these standalone accounts.

2. Fixed Asset Disposal: Request explanation for the near-total elimination of fixed assets. Determine whether cash proceeds were received at arm's length values and whether any assets were transferred to related parties.

3. Profit & Loss Account: As a micro-entity, the company has not filed its profit and loss account. Request management accounts to assess revenue trends, profit margins, and the quality of earnings supporting the net asset growth.

4. Accruals and Deferred Income: Deferred income/accruals decreased from £25,000 to £10,203. Understand whether this reflects revenue recognition timing, client deposits, or other obligations that could affect future periods.

5. Dividend Policy: With net assets heavily comprising retained profits (share capital is only £2), investigate whether significant dividends have been declared historically and what the current dividend policy is, particularly post-acquisition by Khi Partners.

6. Nature of Current Assets: Given the company is an accounting/tax practice, the £1,145,964 in current assets likely comprises significant trade debtors. Assess aged debtor reports and provision adequacy.