Investment Risk Analysis: MAKEUP CANDY LTD (09794817)

1. Risk Rating: HIGH

The company is balance-sheet insolvent with net liabilities of £195,406 as at 31 October 2024, a position that has deteriorated persistently over seven consecutive years. With total assets of just £2,145 against current liabilities of £197,551, the company lacks both the asset base and the cash generation capacity to service its obligations. This represents a clear and material solvency risk.

2. Key Concerns

a) Chronic and Deepening Insolvency The company has carried negative net assets since 2017, with the deficit compounding year-on-year from £16,604 to £195,406. The trajectory shows no meaningful recovery at any point. Net liabilities have grown approximately 12-fold over this period, indicating a structural rather than cyclical problem. The company is technically insolvent on both a balance sheet basis and likely on a cash flow basis.

b) Extreme Liquidity Distress Net current liabilities stand at £196,070, with current assets of just £1,481 in cash against £197,551 in current liabilities. There are no trade debtors or other current assets to provide a buffer. The company has no visible means of meeting its near-term obligations. The 2023 year-end showed zero cash, and while the 2024 position improved marginally to £1,481, this is immaterial relative to the liability stack.

c) Sustained Loss-Making with No Visible Turnaround The accumulated P&L deficit has grown from £16,606 (2017) to £195,410 (2024), representing consistent annual losses averaging approximately £25,500 per year. The filed accounts provide no strategic commentary, no going concern assessment, and no indication of how or when the company intends to return to profitability. The filleted accounts format (opting not to file the P&L) limits external visibility, but the balance sheet deterioration tells an unambiguous story.

3. Positive Indicators

a) Ongoing Filing Compliance Accounts are filed and up to date (last made up to 31 October 2024, not overdue). The company has maintained its registration and continues to file, suggesting the director has not abandoned the entity.

b) Marginal Cash Improvement Cash increased from £0 (2023) to £1,481 (2024), indicating some minimal level of trading or cash inflow, though this is negligible in context.

c) Low Operational Overhead With a single employee (the director) and minimal fixed assets (NBV £664), the cash burn from operations appears constrained. This may suggest the business is being run at a minimal level rather than actively expanding losses through trading.

4. Due Diligence Notes

a) Creditor Composition The £197,551 in current liabilities is the dominant concern. Investigation is required to determine whether these are related-party balances (director loans, group obligations) or arms-length trade creditors. If the liabilities are primarily owed to the director, the insolvency risk may be less acute in practice, as the director may have no intention of calling the debt. If they are trade creditors, HMRC liabilities, or other third-party obligations, the risk of formal action is significantly higher.

b) Going Concern Basis The accounts contain no explicit going concern statement or note. Given the severity of the balance sheet position, the director should have disclosed the basis upon which the accounts are prepared on a going concern basis, typically supported by a written commitment to provide financial support for at least 12 months. The absence of such disclosure is a concern, though it may be present in the profit and loss account which has not been filed per section 444(1) of the Companies Act 2006.

c) Confirmation Statement Overdue The confirmation statement was due by 1 February 2026 and is marked as overdue. While this is a compliance rather than financial issue, it may signal administrative strain or reduced attention to statutory obligations, which is an additional governance concern for an already-stressed entity.

d) Director's Position Miss Twaila Kakubo is the sole director, PSC (owning >75% of shares), and likely the sole employee. Investigation into whether the director has provided personal guarantees, has other income sources, or has any director disqualification history would be prudent. The director's ability and willingness to continue funding the company's losses is the single most important factor in determining whether this entity can continue.

e) Business Activity Discrepancy The two SIC codes (47910 - internet retail, and 70229 - management consultancy) suggest either dual activities or a pivot in business model. Understanding which activity is generating revenue (if any) and which is consuming costs would inform the viability assessment.

f) Tangible Assets The plant and machinery (cost £7,475, NBV £664) appears inconsistent with a business that has negligible revenue. Clarification of what this asset represents and whether it is operational or obsolete would be valuable.