How to carry out a company check in the UK

Before going into business with a new company, you need to do your homework. This also applies if you’re thinking of joining the board of that company. Remember, once you’re on the board, you have a fiduciary duty to its owners/shareholders. That duty becomes impossible if the company’s structures are rotten on the inside. A company check is a crucial tool that helps you determine this before you make any decisions. 

Is the new business financially stable? Is it a going concern? Does its board function properly (or at all)? The business check process shouldn’t be time-consuming, but it shouldn’t miss red flags. Fortunately, you can take a simple set of steps to ensure your partnership won’t result in problems.

Your first step should always be to ensure the company has the right to operate in the United Kingdom. Fortunately, you can find most of this information online at no cost to your business. 

Every company in the UK has a company number, which they usually list on their website or terms and conditions. Cross-check this with Companies House, an agency of the UK government. Companies House’s database records every company number alongside mandatory reporting documents, which are free to view. 

British law says that the following must be supplied for free by every company: 

• Registered address
• Date of incorporation
• A list of officers, both current and resigned
• Copies of annual financial statements, as well as company returns (in most cases, some unlimited liability companies are exempt)
• Mortgage charge data
• Previous company names
• Insolvency information

A website says a lot about a company’s operations. Illegitimate (or, in some cases, poorly run) companies can give themselves away on their website with red flags they never even thought to hide. 

During this part of the company check, look for the following:

• Are the spelling and grammar perfect or near perfect? If not, the company is either not serious about external presentation or not based in an English-speaking country. This raises many questions, chief among them whether the company even has the legal right to operate in the UK.
• Are the business address and phone number present? Have you cross-checked these with Companies House data and online maps? Street-view platforms are excellent tools here. Looking at images of a company’s registered address tells you a lot about their physical presence (just be sure you’re looking at an up-to-date image; businesses often move into new builds that map apps haven’t gotten around to updating their images for). 
• Is there a privacy policy?
• Is there a mission statement? Does it align with your company’s strategy and core values?

Have you checked www.who.is? This is a service showing details of a website’s domain name. If, for example, you see a website that was set up long after the company it represents, ask why.

If at all possible, and if you think it’s necessary, you can also go down the “forensic” route that some investors use in their due diligence on companies. Forensic analysis means looking beyond the main numbers in financial statements and checking the finer details for signs of “creative accounting” painting a better picture than reality. You can look at these tips to fuel your thinking in this area.

We carry out credit checks to determine whether a company can pay its debts. 

Debt is a daily occurrence. Many companies are effectively in short-term debt whenever they receive an invoice, which can take a month to process on average. Credit checks can filter out companies that may not pay in these instances. 

They will give you peace of mind as a result. 

Important things to remember:

• When can I do the credit check? It’s up to you. You can check any company at any time.

• Can my company perform the check? Usually, no – it would be a waste of resources. Specialised agencies exist to perform credit checks. The UK’s top agencies are Equifax, Experian, Dun Bradstreet, Credit Passport and Creditsafe.

• What does a company credit check involve? It depends, as there are so many factors to consider. But, in general:

• • The size of the company
  • The size of its current debt
  • The company’s income
  • Any mortgages or other fixed liabilities
  • Any risk posed to the company’s industry (for example, a local tourism company would face a stricter credit check during the pandemic’s peak). 

You can directly check if a company is insolvent through Companies House. Some publications (like London Gazette) specialise in naming companies that have failed to pay debts in the past. 

Lastly, aside from the housekeeping measures above, one of the key elements of how to carry out a company check is simply to be smart about it.

It doesn’t matter what value you think the partnership can bring; if it lands you in trouble, you don’t want to pursue it. 

So, check up on any red flags that you spot. After due diligence, ask yourself if you feel comfortable with the arrangements. Does everything add up? Are the people in charge trustworthy? 

Your employees, colleagues and investors will thank you for asking these questions.

• Companies house
• Incorporation and names
• WHOIS – Domain Name Information Lookup
• Forensic Investing: Red Flags