SUNSET CLOUDS LIMITED

Executive Summary

Sunset Clouds Limited faces significant liquidity challenges as current liabilities substantially exceed current assets, placing it at high risk of solvency issues. Despite holding valuable fixed assets and maintaining regulatory compliance, the company’s minimal equity base and heavy reliance on short-term bank borrowing raise concerns about its operational sustainability. Further investigation into debt terms and cash flow generation is essential for a comprehensive risk assessment.

SUNSET CLOUDS LIMITED - Analysis Report

Company Number: 12384860

Analysis Date: 2025-07-29 14:27 UTC

1. Risk Rating: HIGH
   The company exhibits a high risk profile primarily due to its severely negative net current asset position, indicating potential liquidity problems and inability to cover short-term liabilities.

2. Key Concerns:

• Liquidity Deficit: The balance sheet shows current liabilities (£324,762) vastly exceeding current assets (£3,001), resulting in a net current liability of £321,761 as of January 2024, consistent over previous years. This suggests persistent cash flow constraints.
• High Short-Term Debt: The majority of current liabilities are bank loans and overdrafts (£259,984), signaling reliance on external borrowing with imminent repayment obligations.
• Limited Equity and Capital: Share capital is minimal (£2), and shareholders’ funds are low (£15,285), providing limited buffer against financial shocks or operational losses.

3. Positive Indicators:

• Tangible Fixed Assets: The company holds significant fixed assets in freehold property valued at £337,046, which may support borrowing capacity or be a source of future liquidity if sold.
• No Overdue Filings: Both accounts and confirmation statements are up to date, indicating regulatory compliance and good governance in terms of statutory filings.
• Stable Management: The directors have been in post since incorporation with no adverse information, suggesting stable leadership.

4. Due Diligence Notes:

• Investigate the nature and terms of the bank loans and overdrafts—repayment schedules, interest rates, and any covenants that may affect solvency.
• Assess the company's operational model and revenue streams to understand if the negative working capital is due to timing of cash flows or structural issues.
• Clarify related-party transactions or guarantees, especially given the directors' dual roles and ownership stakes.
• Review any contingent liabilities or off-balance sheet commitments not disclosed in the accounts.
• Confirm the valuation and marketability of the fixed asset property to evaluate its potential to offset liabilities if needed.