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How to carry out a company check in three simple steps
How to carry out a company check in three easy steps: A guide to an essential process that matters a great deal in corporate governance, specifically when exploring potential mergers, acquisitions, and even potential suppliers and customers.
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In good corporate governance, directors and C-suite leaders will always check up on companies with which they might do business. It’s especially important if you notice any red flags from the outset; any professional will tell you that proper due diligence is essential before making any decisions in these cases.
Why are company checks important?
Company checks (sometimes called corporate or entity screening) are essential because of their importance to risk management, which is a direct corporate governance responsibility.
Any company you do business with could add to your risk profile without proper screening. Deloitte notes that in modern business, this is becoming a lot harder as global business networks expand.
Ultimately, companies could fall into one or more of several risk categories:
- They’re simply fake companies, designed for illicit purposes. Recent data suggests that AI is creating vast new avenues for criminals in this area.
- Their finances are dire.
- Their compliance record is bad.
- Their reputation is lousy.
- Their values and/or mission statement don’t align with yours.
- They’re subject to national/international sanctions.
- Someone high up in the company is a politically-exposed person (PEP) – meaning any individual with strong political influence; they are seen as more likely to be connected to bribery, corruption or money laundering.
1: Check out the company’s website
A straightforward way to check out the authenticity of a company is to do a quick online search and see how legitimate their website looks. If they don’t have one, this should ring the alarm bells. You can tell whether a company is authentic by certain things on their website. If you see poor grammar or spelling, consider it a red flag.
Find out if the business has a landline and an address. Call the company and search google maps to confirm it is an office and not a fake address.
On the site, check out the privacy policy and company history – these may explain how long the company has been in business, their ethics, and their mission statements.
You can often find their registered business address and company name in the privacy policy, enabling you to perform an official company credit search through a reputable credit agency.
2: Look for a company number
Often, this is part of a company’s privacy policy or its terms and conditions. Websites of limited companies need to display the registered company number and the place of registration.
Check official sources like Companies House in the UK or your local registration office. Companies House, for example, can provide you with information on the registered office address, the company status, and the company type. You can also see things such as a company’s incorporation date or its previous name.
Additionally, you can view the individual director’s profile to see all their prior appointments. It is vital to check out the directors and other individuals with significant control.
3: Run a credit check
When in doubt about the solvency of a business or you want to know if they have the funds to pay your fees, you might want to run a credit check.
A company credit report can show you:
- Company verification – the company name, address, number, and shareholder information are registered.
- Director details – company credit reports will give you director and shareholder details; you can then view individual director reports.
- The company’s credit score – the higher the credit score, the more stable the company.
- The company’s group structure. This will enable you to verify the company you are thinking of dealing with and any companies within its group structure.
In summary
You can check the legitimacy of a company in many ways, but if something doesn’t feel right, you should always trust your instincts. Don’t do business with a company if you don’t feel comfortable doing so. The more vigilant a business and its directors are, the better they will protect themselves from fraud.
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