CODE SOFTWARE UK LIMITED

Risk Rating: HIGH
The company’s balance sheet is technically insolvent with net liabilities of £75,008, and current liabilities exceed current assets by £76,327. While the position improved materially from 2023, the combination of negative working capital, a large and growing director loan receivable, and increased reliance on group and trade creditors justifies a high-risk assessment.

1. Key Concerns

1. Negative Net Assets and Working Capital Deficit
   At 31 December 2024, the company reported net liabilities of £75,008, compared with net liabilities of £289,809 in 2023. Current liabilities of £1,419,195 exceeded current assets of £1,342,868, leaving a net current liability position of £76,327. This indicates reliance on short-term funding and creditor forbearance.

2. Material and Growing Director Loan Account
   The director’s loan balance outstanding increased from £234,115 in 2023 to £418,755 in 2024. No repayments were made during the year, and further advances of £184,455 were drawn. This is a significant concentration within “other debtors” and raises questions about recoverability, governance, and potential tax implications.

3. Increased Creditor Pressure and Intercompany Liabilities
   Trade creditors increased sharply from £17,088 to £146,224, and amounts owed to group undertakings rose from £82,160 to £227,556. Corporation tax liabilities also increased to £81,656. These obligations are due within one year and place further strain on liquidity, particularly if group or trade creditor support is withdrawn.

2. Positive Indicators

• Cash Position Strengthened
  Cash at bank increased from £215,154 to £309,863, a 44% improvement year-on-year.

• Improving Balance Sheet Trajectory
  Net liabilities improved significantly from £289,809 to £75,008, suggesting either improved profitability, capital contributions, or reclassification of liabilities.

• Active and Compliant Filing Status
  The company is active, accounts are up to date, and there are no signs of formal insolvency proceedings. The average employee count remained stable at 11, indicating operational continuity.

3. Due Diligence Notes

• Going Concern Assessment
  Given the negative net asset position, the absence of an explicit going concern note in the extracted accounts is notable. The board should be asked to provide a formal going concern assessment and cash flow forecast for at least the next 12 months.

• Director Loan Terms and Recoverability
  Request the full terms of the director’s loan agreement, including interest, repayment schedule, and any security. Consider the impact on distributable reserves and whether the loan is recoverable in full.

• Intercompany and Creditor Support
  Clarify the nature of amounts owed to group undertakings. Obtain written confirmation of whether these balances are subordinated or repayable on demand, and whether the group has provided financial support letters.

• Debtor Quality and Collectability
  Trade debtors stood at £315,847 and other debtors at £717,158. The composition and ageing of these balances should be reviewed, particularly the recoverability of the director loan included within other debtors.

• Tax and Regulatory Exposure
  Corporation tax liabilities increased to £81,656. Confirm all tax filings are up to date and whether any provisions or penalties are outstanding.

• Limitations of the Available Data
  These are filleted, unaudited accounts prepared under the small companies regime. No profit and loss account or detailed cash flow statement has been filed, so profitability and cash generation cannot be fully assessed from this data alone.