Risk Assessment: PALACE MEDIA LIMITED (09030281)

1. Risk Rating: HIGH

Justification: The company is subject to an active proposal to strike off the register, which represents an existential threat to the corporate entity and creates significant uncertainty for creditors and counterparties. This status, combined with persistent accumulated losses of nearly £1 million and filing compliance concerns, warrants a high risk classification despite the apparent asset strength on the balance sheet.

2. Key Concerns

Concern 1: Strike-Off Proceedings

The company status is "Active - Proposal to Strike off." This is the single most critical risk factor. A strike-off can be voluntary (director-initiated via DS01) or compulsory (Registrar-initiated for non-compliance). Given the overdue accounts flag, this may be a compulsory strike-off by Companies House. If the company is dissolved, its assets (including £485k cash) become bona vacantia and vest in the Crown. Any party with claims against the company would need to seek restoration—a costly and uncertain process. The fact that a company with £610k in net assets faces strike-off is deeply concerning and suggests either administrative negligence or intentional dissolution despite material asset holdings.

Concern 2: Persistent and Deepening Accumulated Losses

The Profit and Loss reserve shows a deficit of £939,937 (2024), deteriorating from £658,599 (2023)—an additional £281,338 loss in the year. Over the company's decade-long history, the cumulative trading position has been consistently loss-making. The positive net asset figure of £610,173 is entirely dependent on the share premium account (£1,549,981) offsetting these accumulated losses. Without the significant equity injections, the company would be insolvent. The business model's ability to generate sustainable profits remains unproven.

Concern 3: Concentrated Control and Related Party Exposure

Mr Bradley Jarvis holds over 75% of shares, over 75% of voting rights, and the right to appoint and remove directors. He is the sole listed officer. The balance sheet contains significant "other debtors" (£312,447, including £43,630 due after more than one year) and "other creditors" (£113,333). These vague categories in a company with such concentrated control raise questions about related-party transactions that could prejudice minority interests or creditor positions. The nature and recoverability of these balances is unclear from the filed information.

3. Positive Indicators

Positive 1: Strengthened Cash Position

Cash at bank increased from £339,052 (2023) to £485,190 (2024), a 43% improvement. The current ratio (current assets ÷ current liabilities) is approximately 4.0x (£797,637 ÷ £197,516), indicating strong short-term liquidity. The company can meet its immediate obligations from cash reserves alone without relying on debtor recoveries.

Positive 2: Capital Injection

Share premium increased by £550,000 (from £999,987 to £1,549,981), indicating fresh equity was injected into the business during the period. This demonstrates the controller's willingness to fund operations and strengthens the balance sheet against the accumulated losses.

Positive 3: Declining Liabilities

Both current liabilities (£272,452 → £197,516) and long-term bank loans (£30,002 → £20,001) decreased year-on-year. The tax and social security liability reduced from £131,469 to £84,182, and other creditors fell from £140,982 to £113,333. This suggests the company is actively managing its obligations rather than allowing them to accumulate.

4. Due Diligence Notes

Item 1: Strike-Off Origin and Intent

Urgently establish whether the strike-off is voluntary (Form DS01 filed by the director) or compulsory (initiated by the Registrar). Check the Gazette notices for the strike-off announcement. If voluntary, understand the director's rationale for dissolving a company with £610k net assets and £485k cash. If compulsory, determine whether it was triggered by the overdue accounts or other non-compliance. A compulsory strike-off can be suspended if the company files outstanding documents or objects to the process.

Item 2: Other Debtors Composition

The "other debtors" balance of £312,447 (including £43,630 due after more than one year) represents approximately 38% of total assets. Request a breakdown of who these debtors are, their relationship to the company, the age profile, and the basis for the amounts owed. Given the concentrated ownership, there is a risk these could be related-party balances with uncertain recoverability. Assess whether adequate provision for impairment has been made.

Item 3: Share Premium Transaction Details

Investigate the £550,000 increase in share premium. Who subscribed for the shares? Was it Mr Jarvis personally, or a third party? What were the funds used for? Given that the company still generated a £281k loss despite this capital injection, understand the business case for the investment and whether further injections are anticipated.

Item 4: Development Costs Assessment

Capitalised development costs of £28,500 (net book value £6,334 after amortisation) are carried on the balance sheet. Under FRS 102 Section 1A, these should only be recognised where specific criteria are met regarding probable future economic benefits. Given the company's persistent losses, assess whether impairment testing has been properly conducted and whether these assets should be written down further.

Item 5: Accounts Filing Status

Clarify the apparent contradiction between the filed accounts (signed 30 January 2025 for year ended 31 May 2024) and the "overdue" flag. If accounts are indeed overdue, this may have triggered the strike-off action and could expose the company to civil penalties. Confirm the actual filing status with Companies House directly.

Item 6: Operational Viability

The company employs 31 staff (down from 34) and operates in "other information service activities." With nearly £1 million in accumulated losses, assess the path to profitability. Request management accounts, cash flow forecasts, and the director's assessment of going concern status. The accounts are prepared on a going concern basis, but the strike-off status directly contradicts this assumption.