Negative Balance Sheet

amysmum

This is my first post on this forum and I hope I am in the correct area for this post. Apologies if I'm not.

Does anyone know what happens to a company that has a negative balance sheet?

Last year the Sahreholders Funds on the Balance Sheet was at £2600 but after another year of loss the BS is now showing a negative of around £5000.

When these accounts are submitted to Companies House, will the company be forced to cease trading? I have never come across this before any ideas on what the advice to the Directors should be?

Thanks in advance

PaulPSB

No need for the company to cease trading as a matter of course. Is the Balance sheet negative as a result of amounts owed to directors? If yes than don't worry too much but make sure that the accounts carry a going concern note.

You don't mention the composition of the BS so its difficult to be specific but if there are significant creditors you need to remind the directors of their duties with regard to creditors and the risk of ongoing trading with a negative BS.

If there are significant creditors and serious doubts about the company's ability to continue trading then consider recommending that Insolvency advice is sought.

amysmum

Thank you for the reply. Yes the Balance Sheet is negative due to large loans from directors and Shareholders.

Creditors are minimal, total risk lies with the directors and shareholders.

As I have never done this before does anyone have any advice as to the wording of a "going concern note".


Thanks