Watching clients between audits: Companies House signals

Most financiers audit a client once or twice a year. A great deal can change in six months, and the client is not always the first to say so. Companies House records much of it in public, often within days. Watching the register between audits costs little and catches some of the most important changes early.

Charges

A charge is security a company has given to a lender. Every new charge has to be registered, and the register shows who holds it, when it was created and what it covers.

For a financier, a new charge is the single most important entry to watch. It may mean the client has taken other borrowing, and depending on what it covers, another lender’s security can rank ahead of yours on assets you rely on. Watch for:

A new charge from another lender, particularly one over book debts, or a floating charge over everything.
A charge containing a negative pledge, which restricts the company from giving security elsewhere.
Your own charge marked satisfied when you did not release it.

Any of these is a reason to call the client the same day.

Officers and control

The register lists directors and people with significant control, and records when they are appointed or resign.

A director resigning, especially one who has been there for years or holds the finance role.
A new director with no history in the trade, or with a record of companies that went into insolvency. Each officer’s other appointments are public and worth a look.
A change in who controls the company: a new person with significant control, or a corporate owner appearing. A sale of the business can change everything about the facility’s risk.

Filings and deadlines

Every company must file accounts and a confirmation statement on time. Late filing is not proof of trouble, but it often comes with it.

Accounts overdue. A company that has stopped filing may have accounts it does not want to show, or advisers it can no longer pay.
A change of accounting reference date. Shortening or extending the year can be routine. It can also delay accounts that show a loss, or move a year end away from a difficult period.
A change of registered office, especially to an insolvency practitioner’s address.
Gazette notices. A notice of proposed strike-off, often for overdue filings, needs dealing with before the company is struck off and its assets pass to the Crown.

Insolvency

The clearest signals are the most urgent: a winding-up petition, the appointment of an administrator, or a resolution to wind up. By the time these appear you may already know, but not always, and not always in time. A notice of intention to appoint an administrator is a warning that leaves little time to act.

The latest accounts

When new accounts are filed, they are worth reading even between audits. Many small companies file abridged accounts with a balance sheet and no profit and loss account, but the balance sheet still shows a lot: net current assets, net assets, and the creditors due within one year. A fall in net assets, or net current liabilities where there were assets before, says the business is weaker than at the last audit.

Associated companies

Clients rarely operate alone. Directors often run other companies, and a client may trade with a sister company it controls. The same signals apply to them. A connected company going into administration, or a director’s other business failing, can drag on the client through shared customers, shared staff or money passed between them. Knowing who is connected also helps at audit, when a debtor or supplier turns out to share directors with your client.

Making it routine

Checking the register by hand for every client is slow, and it tends to happen only when something else has already gone wrong. It works better as a routine:

Link each client to its own company, and to any associated companies you know of.
Look at each regularly, for new charges, officer changes, filings, insolvency notices and new accounts.
Send what changed to the people who manage the client, most serious first, the day it is found.
Keep the history, so that the next audit can ask about each change.

Audits Hub does this automatically. It looks at the linked companies on the register throughout the day, records what changed, and emails the client’s managers.

At the next audit

Changes found between audits become questions at the next one. Why did the finance director leave? What is the new charge for, and who holds it? Why did the year end move? The answers belong in the audit report, so that the next reader of the file knows not only what changed but what the client said about it.