UK Company Due Diligence: A Practical Checklist for Founders, Lawyers and Investors

Due diligence isn't optional. It's how you avoid bad deals, bad customers, and counterparties who leave you holding the bag when things go wrong. Whether you're signing a supplier contract, onboarding a client, writing a cheque as an investor, or acquiring a business outright, you need to know who you're dealing with before you commit.

The good news: for any UK company, most of what you need is free and public. Companies House publishes the registered data on every active and dissolved company in the country — directors, owners, accounts, charges, filings. The hard part is knowing what to look at, in what order, and what patterns should make you walk away.

This guide shows you exactly what to check and how to spot red flags using freely available Companies House data. You can work through it manually the first few times, then automate it once you know what you're looking for.

1. What is company due diligence?

Company due diligence is the process of verifying that a company is real, trading, solvent, and run by people whose track record stands up to scrutiny. It answers four questions: does this company exist, who controls it, can it pay its bills, and is there anything in its history that should stop you signing.

When you need to run checks

• Before signing a contract with a new supplier, customer, or commercial partner — the larger the contract value, the deeper the check should go.
• Before investing — angels, VCs, and private equity run due diligence as part of deal screening, both on target companies and on their directors.
• Before acquiring a business — M&A and asset purchases require a full legal and financial review.
• Client onboarding — law firms, accountants, and other regulated businesses have KYC and AML obligations and need a documented check on every corporate client.

What you're trying to find out

• Is this company real and actively trading, or dormant, dissolved, or in liquidation?
• Who legally owns and controls it — both the named directors and the ultimate beneficial owners?
• Is it financially healthy, or does the last set of accounts show distress?
• Are there red flags in its history — late filings, director churn, phoenix patterns, unsatisfied charges, regulatory mismatches?

2. The UK company due diligence checklist

Work through these six steps in order. The earlier steps are fast and often enough to rule a company in or out; the later steps only matter if you're still interested after the quick checks.

Step 1: Confirm identity and status

Start with the basics. Every UK company has a unique company number — eight digits, or six digits plus two letters for Scottish and Northern Irish companies. Confirm the number matches the entity you think you're dealing with, not a similarly named one.

• Registered name vs trading names: the legal name on contracts may differ from the brand. Check both.
• Company status: Active, Dormant, In Liquidation, In Administration, or Dissolved. Only Active companies can meaningfully contract.
• Incorporation date: a company formed last week trying to sign a seven-figure contract deserves scrutiny. Long trading history isn't proof of quality, but a very short one raises questions.
• Registered office address: is it a real office, a residential address, or a formation agent address shared with hundreds of other companies?

Step 2: Directors and persons with significant control

Who is actually running the company, and who benefits if it does well?

• Current directors: these are the people legally responsible for the company's decisions. Verify they match the names on the contract or pitch deck you've been given.
• Director history: frequent changes in the last 12–24 months are a warning sign, especially if multiple directors resign in a short window.
• Persons with significant control (PSCs): the people who ultimately own or control more than 25% of shares or voting rights. If the PSC is another company, follow the chain until you reach a human.
• Cross-directorships: check whether the directors sit on many other boards. A director with 50 active appointments is either a professional non-exec or a concern, depending on what those companies are.

Step 3: Filing history

A company's filing history is a timeline of its administrative behaviour. It tells you whether the directors are on top of their statutory duties or chronically late.

• Accounts filed on time: late filings suggest cash pressure, disorganisation, or both. One late filing might be a genuine mistake; a pattern is not.
• Confirmation statements up to date: these are cheap and easy to file. A company that can't manage them is unlikely to manage harder obligations.
• Patterns to look for: frequent name changes, registered office changes, director turnover, or long gaps between filings. Each is a question worth asking.

Step 4: Accounts and financial health

The last two or three sets of accounts tell you whether the numbers support the story you've been told.

• Type of accounts filed: micro-entity, small, or full. Small companies and above file more detail; micro-entity accounts hide a lot.
• What micro-entity accounts hide: there's no profit and loss statement, no detailed notes, no disclosure of director remuneration. You see a minimal balance sheet and little else.
• Key balance sheet items: total assets, total liabilities, net assets (equity). Compare year-on-year to see the direction of travel.
• Year-on-year trends: growing net assets and shrinking liabilities is the healthy picture. The opposite should trigger questions.
• Negative equity: if total liabilities exceed total assets, the company is technically insolvent on a balance sheet basis. This is a major red flag and requires an explanation before you proceed.

Step 5: Charges and mortgages

A charge is a form of security granted by a company over its assets — typically to a lender in exchange for debt. Companies House publishes every charge registered against a company.

• Outstanding vs satisfied: outstanding charges mean the security is still in place. Satisfied charges have been released.
• Heavy secured lending: multiple large charges can indicate financial stress, but also normal operations for asset-heavy businesses like property or equipment hire. Context matters.
• Floating vs fixed charges: a fixed charge attaches to a specific asset; a floating charge covers a class of assets that changes over time (stock, receivables). A debenture with a floating charge over the whole business means the lender ranks ahead of unsecured creditors if things go wrong — including you.

Step 6: SIC codes and trading reality

Every company picks one or more Standard Industrial Classification (SIC) codes to describe what it does. The codes are self-reported, but mismatches are informative.

• Does the SIC code match what they claim to do? A company selling financial services but registered as "other business support activities" is worth a second look.
• Mismatches can be benign — the codes are clunky and people tick the closest option. But they can also signal regulatory avoidance or straightforward admin neglect.

3. Red flags that should stop you signing

Some findings aren't just questions to investigate — they're signals strong enough to walk away or demand significant mitigation before proceeding.

Director churn and phoenix patterns

Multiple directors resigning in quick succession usually means something — a boardroom dispute, a business in trouble, or a regulatory problem. Check what their other companies look like.

Watch for phoenix patterns: the same directors, the same trading style, but a new company registered after the old one was dissolved or liquidated with debts. Phoenixing isn't automatically illegal, but a director with two or three failed companies behind them and a shiny new vehicle in front of them is not a low-risk counterparty.

"Active" but missing accounts

If a company shows as Active but its accounts are months overdue, something is wrong. Companies House will eventually strike off companies that persistently fail to file, but there's a long window where a company can appear live while effectively being dormant or distressed. Overdue accounts for more than a few months is serious and should be raised directly with the counterparty.

Mass-registration addresses

Some addresses are home to hundreds or thousands of registered companies — formation agent offices, virtual address providers, serviced office suites. Not necessarily bad on its own; plenty of legitimate small businesses use these. But combined with other weak signals (short history, sole director, minimal accounts), a mass-registration address warrants extra scrutiny.

SIC code mismatch

If a company is registered as "software development" but selling regulated financial services, that's either a regulatory problem, a data entry problem, or a deliberate attempt to stay below the radar. All three are worth understanding before signing.

Recent charges or heavy secured debt

Multiple charges registered in a short window — especially from non-bank lenders or invoice finance providers — suggests the company is borrowing heavily against its assets to fund operations. Not always fatal, but it changes where you stand if you're an unsecured creditor. Read the charge documents where you can.

4. How founders, lawyers and investors use this checklist differently

The checklist is the same for everyone. What changes is the depth of the check and the point at which you escalate.

For founders: the 5-minute pre-contract screen

You don't have time to run a deep dive on every supplier, freelancer, or customer. Focus the first pass on three things: status, filing health, and obvious red flags. If the company is Active, accounts are current, and the director list looks stable, you can move on. If anything looks off — overdue accounts, very recent formation for a supposedly established business, director churn — either dig deeper or walk away. A five-minute check will catch most of what matters.

For lawyers: audit trail and sign-off

If you're running due diligence on behalf of a client, you need a documented audit trail. What did you check, when, and what did you find? Save the filing history and most recent accounts to the matter file. Red flags need to be escalated to the client in writing, with a clear recommendation. "We flagged the overdue accounts and advised the client to obtain written confirmation from the counterparty's auditor before completion" is the kind of record that protects both you and them.

For investors: pipeline triage at scale

If you're screening dozens of companies a month, you need a repeatable process. The same checks, in the same order, applied to every deal. Red flags should filter companies out early — before you've spent hours on a call or drafted a term sheet. A standardised first-pass check that takes ten minutes per company will save you weeks across a quarter, and it means your partners are all looking at the same signals.

5. Automating due diligence with AI

The problem with manual checks

A thorough manual check takes 60 to 120 minutes per company. You have to read the filing history, download and interpret accounts, chase PSC chains, cross-reference directors across multiple other companies. Different people check different things, so consistency across a team is hard. And subtle red flags — a director who quietly resigned from two dissolved companies last year — are easy to miss when you're scanning through a filing history by eye.

What automation looks like

Paste a company number, get a structured report in minutes. AI interprets the filings, extracts the numbers from accounts (including scanned PDFs where needed), and flags the patterns that would take a human analyst an hour to spot. Every company gets the same methodology, so your team is looking at comparable output across the whole pipeline.

Conclusion

Due diligence protects you from bad deals and bad actors. Companies House gives you the raw data for free, and the checklist above covers what to look at and what to look for. Whether you run these checks manually or automate them, the important thing is to run them consistently, every time. The contracts and deals that go wrong are almost always the ones where nobody did the check — or did a partial one and talked themselves into ignoring what they found.