How to carry out a company check

Before going into business with a new company you need to do your homework. Is the new business financially stable, is it a going concern, does it have a functioning board? The business check process shouldn’t be time-consuming but 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 saw 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 may not be based in the UK, raising questions about its right to operate there. 
• Are the business address and phone number present? Have you cross-checked these with Companies House data and Google Maps (use street-view if you need to)?
• 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.

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, it is also essential to approach a potential partner smartly. 

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.