Risk Analysis: TOUCH GUARD LTD (07147951)

1. Risk Rating: HIGH

Justification: The company is balance-sheet insolvent with net liabilities of £258,842 as at 31 December 2024, and has been in a deeply negative equity position for at least a decade. Net current liabilities stand at £258,847, indicating an acute working capital deficit. The company's continued existence appears entirely dependent on the forbearance of its director-creditor, and there is no visible path to financial recovery based on the trend data.

2. Key Concerns

Concern 1: Severe Balance Sheet Insolvency

Net assets have deteriorated from approximately £-164,473 (2016) to £-258,842 (2024), representing a consistent annual erosion of equity. Shareholders' funds stand at £-258,942, with accumulated losses compounding year after year. The company has minimal share capital (£100) and no visible reserves to absorb further losses. This is not a temporary or cyclical position—it represents a sustained structural deficit spanning nearly the entire filing history available.

Concern 2: Critical Liquidity Position

Current assets of £5,218 (comprising solely of "other debtors") are dwarfed by current liabilities of £264,060, yielding a current ratio of approximately 0.02:1. There is no cash on the balance sheet (consistent with prior years where cash has been either nil or negligible). The company has virtually no capacity to meet its obligations as they fall due without director intervention or additional borrowing. Trade creditors of £51,513 remain outstanding with no visible source of repayment.

Concern 3: Operational Viability

With only 2 employees (including directors), fixed assets of just £5 net book value, and no revenue data disclosed (the company has opted not to file a Profit & Loss account under section 444(1)), there is a fundamental question about whether meaningful trading activity is occurring. The consistent accumulation of losses suggests the business is either trading at a loss or incurring holding costs without sufficient revenue generation.

3. Positive Indicators

Filing Compliance

The company is fully up to date with its statutory filings. Accounts to 31 December 2024 have been filed, and the confirmation statement was made up to 5 February 2025. No filings are overdue. This suggests the directors are maintaining basic governance and administrative discipline.

Director Financial Support

Approximately 80% of total liabilities (£210,952 out of £264,060) represent a director's loan owed to Mr S P Dugdale. This loan has been increasing incrementally (from £206,841 in 2023 to £210,952 in 2024), indicating ongoing financial support rather than withdrawal. While this creates dependency, it also demonstrates the director's willingness to fund the company's continued operation. If this loan were subordinated or converted to equity, the external creditor position would be significantly reduced to approximately £53,108.

Longevity

The company has been incorporated since February 2010 and has survived for approximately 15 years despite the negative equity position. This suggests the director-creditor relationship has been stable and that the director has a long-term commitment to the entity, however marginal its financial position.

4. Due Diligence Notes

Director's Loan Terms

The accounts do not disclose the terms of the £210,952 director's loan. It is critical to establish whether this is repayable on demand, whether there is any formal loan agreement, and whether the director has indicated any intention to call in the loan. If this loan is callable on demand, the company faces immediate insolvency risk. Conversely, if there is a documented agreement to defer repayment indefinitely, this significantly mitigates the solvency concern.

Revenue and Profitability

The company has opted not to file its Profit & Loss account, which is permitted under the small companies regime. However, understanding the top-line revenue and operating profitability is essential for assessing whether there is any viable path to recovery. The P&L reserve has worsened by approximately £2,277 between 2023 and 2024, suggesting ongoing losses, but the magnitude and source of these losses cannot be determined from the filed information alone.

Nature of "Other Debtors"

Current assets consist entirely of "other debtors" at £5,213 (up from £4,777 in 2023). The nature and recoverability of this balance should be investigated—it may represent intercompany balances, prepayments, or amounts owed by related parties rather than genuine trade receivables.

Trade Creditor Exposure

Trade creditors of £51,513 represent the company's primary external obligation. It would be prudent to assess whether these creditors are being serviced, whether any statutory demands or legal actions have been threatened, and the typical payment terms being observed.

Related Party Transactions

The accounts only disclose the director's loan to Mr S P Dugdale. There is no disclosure of any transactions with Mr Julian Dugdale, the second director and equal PSC holder. It would be appropriate to confirm whether there are any additional related party balances or transactions not requiring disclosure under the small companies regime but which may be material to understanding the company's full financial position.

Going Concern Assessment

The accounts do not include an explicit going concern statement or note. The directors' decision to prepare the accounts on a going concern basis implies they believe the company can continue to operate, likely predicated on the director's continued financial support. However, the absence of a formal assessment or letter of support from the director-creditor is a gap that should be addressed.