Risk Analysis: MEDINA BAKERY LIMITED (05824783)

1. Risk Rating: HIGH

Justification: The most critical factor is the company's liquidation status. Despite showing improving financial trends over multiple years, the in_liquidation = True flag indicates formal insolvency proceedings have commenced. This fundamentally changes the risk profile regardless of the balance sheet improvements observed. Additionally, the company carries net current liabilities and has an asset base heavily reliant on unamortised goodwill, creating significant solvency concerns if realisation values differ from book values.

2. Key Concerns

Concern 1: Active Liquidation Proceedings

The company is flagged as being in liquidation. This is the paramount risk factor. Liquidation means a licensed insolvency practitioner has been appointed to realise assets and distribute proceeds to creditors. The company is no longer operating for the benefit of shareholders, and the directors' powers cease. Any apparent financial improvement in the accounts is secondary to this overriding status. The type of liquidation (compulsory vs. creditors' voluntary) should be confirmed to understand whether this was director-initiated or creditor-forced.

Concern 2: Net Current Liabilities and Liquidity Strain

The balance sheet as at 30 June 2025 shows net current liabilities of £(2,082), meaning current liabilities exceed current assets. Cash stands at only £4,323 against current liabilities of £52,952. Furthermore, current assets are dominated by inventory (£43,195 of £50,870 total current assets — approximately 85%). Inventory is the least liquid current asset category, and in a liquidation scenario typically realises significantly below book value. The VAT debtor of £3,352 may also be uncertain depending on the liquidation circumstances. Trade creditors of £45,750 represent substantial short-term obligations that cannot be met from cash resources.

Concern 3: Goodwill Inflating Net Asset Position

Intangible fixed assets of £75,000 (goodwill) represent approximately 97% of net assets (£77,090). This goodwill is not being amortised — the accounts state it is held at cost with no impairment review evident in the filed information. In a liquidation scenario, goodwill typically has minimal or no realisable value as it represents the premium paid for future earnings potential, not a separable asset. If goodwill were written off, net assets would fall to approximately £2,090, and shareholders' funds would be nearly extinguished. Tangible fixed assets are also nearly fully depreciated (£4,172 net book value on £112,769 cost), suggesting limited residual realisable value for plant and equipment.

3. Positive Indicators

Positive 1: Consistent Long-Term Improvement in Net Assets

Over the 10-year period reviewed, shareholders' funds have grown from £18,136 (2016) to £77,090 (2025). This represents a sustained trajectory of retained profits being accumulated. The P&L reserve has grown from early years of minimal equity to a substantial balance, suggesting the business was historically profitable and retaining earnings.

Positive 2: Reducing Total Liabilities

Total liabilities have decreased from £106,918 (2017) to £52,952 (2025), a reduction of approximately 50%. This indicates the company was actively deleveraging over an extended period, which would typically be viewed positively in a going concern scenario.

Positive 3: Filing Compliance

Accounts and confirmation statements are not overdue, suggesting the directors have maintained regulatory filing obligations. The accounts are prepared under FRS 102 Section 1A (small entities) and appear to be consistently filed, which provides some level of transparency despite the audit exemption.

4. Due Diligence Notes

Item 1: Confirm Liquidation Status and Type

The in_liquidation = True flag requires urgent verification. Specifically: - Is this a compulsory liquidation (court-ordered, typically creditor-initiated) or a creditors' voluntary liquidation (director-initiated)? - Who is the appointed liquidator? - When was the liquidation commenced relative to the 30 June 2025 year-end accounts? - The fact that accounts were prepared and signed on 28 July 2025 for a company in liquidation is unusual and requires explanation — liquidators typically take control of accounting processes.

Item 2: PSC Ownership Percentages Appear Contradictory

The PSC register shows: - Hava Esakjee: 25-50% shares, 25-50% voting rights - Mohammed Esakjee: 50-75% shares, 50-75% voting rights, right to appoint/remove directors - Rashid Ahmed Esakjee: >75% shares

The cumulative ownership exceeds 100%, which is impossible. This may indicate overlapping declarations, a data error, or that the PSC register is not properly maintained. This should be investigated with Companies House filings to understand the actual ownership structure, particularly as Rashid Ahmed Esakjee also serves as both director and secretary.

Item 3: Goodwill Origins and Recoverability

The £75,000 goodwill has been carried at cost since at least 2024 (and likely earlier, though prior year detailed breakdowns are not available). Investigate: - When was the goodwill acquired and from whom? - Was it an arm's length transaction or a related party acquisition? - Given the company's small size and the family connections among directors/PSCs, there is a risk this goodwill arose from a related-party transaction at an unsupported valuation. - In liquidation, what is the estimated realisable value?

Item 4: Inventory Realisation Value

With inventory comprising 85% of current assets, the liquidation recovery rate on this stock is critical. Bakery products (SIC 10720 — rusks, biscuits, preserved pastry goods, cakes) may include perishable items with limited resale value. The age, condition, and marketability of this inventory should be assessed.

Item 5: Related Party Transactions

Three members of the Esakjee family serve as directors, with one also serving as secretary. Rashid Ahmed Esakjee is listed as both director and secretary, and holds >75% shareholding. This concentration of control in a family group increases related-party transaction risk. The accounts provide no disclosure on related-party balances or transactions, which is a typical exemption taken by small companies but limits transparency.

Item 6: Accounting Reference Date Discrepancy

The accounts information shows last_made_up as 2026-06-30, yet the latest filed accounts are for year ending 2025-06-30. This may indicate a change in accounting reference date or a data inconsistency that should be clarified with Companies House records.