Conducting Company Check
Discussion
Following a tendering process, I am considering entering into a building contract with a local building contractor.
Out of interest I carried out a company check on both the building surveyor I have engaged, and possibly the successful building contractor with the lowest tendered price.
My checks revealed that the building contractor in the past seven years has been a sole director of six companies, of which five are now dissolved, with one company formed in 2015 still active. Four of those same companies, have almost the same company name, the difference being the addition of "Building Contractor" to "Construction Contractor" to "Construction Management" etc. etc. .
Checks on the building surveyor revealed almost the same, three sole directorship, all though still active, and with almost the same identical trading name.
I myself have been self employed for fifty plus years, and have never seen the need of trading under the umbrella of a Limited company, so what are both the legit and ulterior reasons for a sole trader adopting the above.
Lastly, my above searches were via Google, are there any better search facilities, offering trading accounts, credit ratings etc. etc.
Out of interest I carried out a company check on both the building surveyor I have engaged, and possibly the successful building contractor with the lowest tendered price.
My checks revealed that the building contractor in the past seven years has been a sole director of six companies, of which five are now dissolved, with one company formed in 2015 still active. Four of those same companies, have almost the same company name, the difference being the addition of "Building Contractor" to "Construction Contractor" to "Construction Management" etc. etc. .
Checks on the building surveyor revealed almost the same, three sole directorship, all though still active, and with almost the same identical trading name.
I myself have been self employed for fifty plus years, and have never seen the need of trading under the umbrella of a Limited company, so what are both the legit and ulterior reasons for a sole trader adopting the above.
Lastly, my above searches were via Google, are there any better search facilities, offering trading accounts, credit ratings etc. etc.
https://beta.companieshouse.gov.uk/
This will give you details around insolvencies etc, financial info wont mean a lot, it’s dated and likely minimal. google the names, business and directors and see what news pops up
This will give you details around insolvencies etc, financial info wont mean a lot, it’s dated and likely minimal. google the names, business and directors and see what news pops up
The building contractor is not the most completive priced quote for the works, although the contractor offers a large provisional amount of monies. Quotes from other contractors, are from those contractors both long established and operating within a larger group of companies.
I am conducting checks on all of the contractors, the same producing the list of five dissolved companies for the sole trading building contractor, together with a bad customer review for shoddy workmanship.
My initial post, which I thank you all for your replies, was initially to enquire whether there were legitimate and/or ulterior reasons, for a sole director to dissolve five directorships in a short space of time, and how best to obtain a more detailed trading history of that same director.
I am conducting checks on all of the contractors, the same producing the list of five dissolved companies for the sole trading building contractor, together with a bad customer review for shoddy workmanship.
My initial post, which I thank you all for your replies, was initially to enquire whether there were legitimate and/or ulterior reasons, for a sole director to dissolve five directorships in a short space of time, and how best to obtain a more detailed trading history of that same director.
Wings said:
The building contractor is not the most completive priced quote for the works, although the contractor offers a large provisional amount of monies. Quotes from other contractors, are from those contractors both long established and operating within a larger group of companies.
I am conducting checks on all of the contractors, the same producing the list of five dissolved companies for the sole trading building contractor, together with a bad customer review for shoddy workmanship.
My initial post, which I thank you all for your replies, was initially to enquire whether there were legitimate and/or ulterior reasons, for a sole director to dissolve five directorships in a short space of time, and how best to obtain a more detailed trading history of that same director.
It isn’t uncommon to create a new Ltd Co for different projects. This can happen across numerous industries.I am conducting checks on all of the contractors, the same producing the list of five dissolved companies for the sole trading building contractor, together with a bad customer review for shoddy workmanship.
My initial post, which I thank you all for your replies, was initially to enquire whether there were legitimate and/or ulterior reasons, for a sole director to dissolve five directorships in a short space of time, and how best to obtain a more detailed trading history of that same director.
I know legitimate, decent, builders who will set up a new Ltd Co just to build 4 houses to sell, then dissolve it again once everything is done.
I’m about to do the same myself for a development project. It just keep that one project financially desperate from the rest of the business, so if that one job goes wrong for whatever reason, it doesn’t bring your long-standing business down.
I even know people who work as project consultants who will set up a new Ltd Co just to project manage a (really big) job.
I’m not talking about people do some kind of dodge or building something or doing a big job then ‘going bust’ before the tax man comes asking for the corporation tax, I’m talking about legitimate honest businesses who are just controlling and boxing off risk.
As for being a Ltd Co instead of sole trader or self employed, most people find it much more tax efficient to be a Ltd Co even if they are just a one man band business. So that’s not a red flag if any kind. The other advantage is being personally distanced from any disasters that may occur in business.
Lastly, the shoddy work: if you are looking for a builder, developer or contractor that doesn’t have a bad review for ‘shoddy work’ you won’t find one. This is because the general public are sometimes unreasonable OCD psychopaths. I know real quality builders to take pride in their work and make sure everything is right and do a super job, yet they still get the odd customer that has totally unrealistic and quite mental expectations about what something will look like after being built by hand (a house) rather than in a sterile factory (an iPhone).
Edited by anonymous-user on Saturday 8th August 11:42
Wings said:
The building contractor is not the most completive priced quote for the works, although the contractor offers a large provisional amount of monies. Quotes from other contractors, are from those contractors both long established and operating within a larger group of companies.
I am conducting checks on all of the contractors, the same producing the list of five dissolved companies for the sole trading building contractor, together with a bad customer review for shoddy workmanship.
My initial post, which I thank you all for your replies, was initially to enquire whether there were legitimate and/or ulterior reasons, for a sole director to dissolve five directorships in a short space of time, and how best to obtain a more detailed trading history of that same director.
You should ask the prospective contractors. Specifically who / what the contract that you let will be with and what the relationship of that person / entitiy is to the person you are in touch with. Also tell them that they are being seriously considered for the job, but that your due diligence has thrown up a string of dissolved companies and that you are curious to know why.I am conducting checks on all of the contractors, the same producing the list of five dissolved companies for the sole trading building contractor, together with a bad customer review for shoddy workmanship.
My initial post, which I thank you all for your replies, was initially to enquire whether there were legitimate and/or ulterior reasons, for a sole director to dissolve five directorships in a short space of time, and how best to obtain a more detailed trading history of that same director.
The answer to those questions will inform you better than any conjecture here.
But the answer to your first post is yes, there are many legitimate reasons for the Director to dissolve a Ltd company (many times) and also many less legitimate ones. From publicly available records it isn't always easy to accurately judge why. If any of the closures are liquidations, more information is sometimes available publicly.
It is more difficult to find out much of the trading history of a sole trader with publicly available information than it is for ltd companies. In cases where the trader operates as a sole trader and as Director of ltd companies (which is perfectly legitimate), a full picture is difficult to assemble.
If he has opened new companies with similar names, it would be one of two scenarios
Customer chasing due to shoddy workmanship.
or
He has poor money skills in chasing debt from people and then is chased by his distributors so ends up closing due to cashflow.
My 2p is on no.1, having worked in the electrical industry I have only ever seen a handful of companies go down due to bad payers, most smaller one man band types go on number 1, they see it as a game.
The other one to go for is someone just starting out by themselves as they will want to do a good job to get money in and use you as a reference.
Customer chasing due to shoddy workmanship.
or
He has poor money skills in chasing debt from people and then is chased by his distributors so ends up closing due to cashflow.
My 2p is on no.1, having worked in the electrical industry I have only ever seen a handful of companies go down due to bad payers, most smaller one man band types go on number 1, they see it as a game.
The other one to go for is someone just starting out by themselves as they will want to do a good job to get money in and use you as a reference.
I always presumed it was fairly common
Developers (good ones) I know have a separate LTD for each development, im guessing in case it goes tits up, then it doesn't sink the whole ship
If it was me I would be looking at how to stagger payments when a series of set stages are completed, with a set of key milestones
Developers (good ones) I know have a separate LTD for each development, im guessing in case it goes tits up, then it doesn't sink the whole ship
If it was me I would be looking at how to stagger payments when a series of set stages are completed, with a set of key milestones
TwistingMyMelon said:
I always presumed it was fairly common
Developers (good ones) I know have a separate LTD for each development, im guessing in case it goes tits up, then it doesn't sink the whole ship
You could look at it as protecting themselves to the detriment of their clients if anything goes wrong?Developers (good ones) I know have a separate LTD for each development, im guessing in case it goes tits up, then it doesn't sink the whole ship
TwistingMyMelon said:
If it was me I would be looking at how to stagger payments when a series of set stages are completed, with a set of key milestones
Good solution.KevinCamaroSS said:
TwistingMyMelon said:
I always presumed it was fairly common
Developers (good ones) I know have a separate LTD for each development, im guessing in case it goes tits up, then it doesn't sink the whole ship
You could look at it as protecting themselves to the detriment of their clients if anything goes wrong?Developers (good ones) I know have a separate LTD for each development, im guessing in case it goes tits up, then it doesn't sink the whole ship
singlecoil said:
KevinCamaroSS said:
TwistingMyMelon said:
I always presumed it was fairly common
Developers (good ones) I know have a separate LTD for each development, im guessing in case it goes tits up, then it doesn't sink the whole ship
You could look at it as protecting themselves to the detriment of their clients if anything goes wrong?Developers (good ones) I know have a separate LTD for each development, im guessing in case it goes tits up, then it doesn't sink the whole ship
But no sensible person is going to risk their whole company over one (large) project, however rock solid their financials are.
All it takes is for them to get shafted in some way by the customer (for example) and it can eventually bring down the rest of the business, I've seen it happen.
To clarify, I would be a little surprised if a builder set up a new Ltd Co every time they built an extension for someone, but certainly when you get into bigger projects or building 4 or 5 houses or more in one go etc, it's quite common to seek to structure some protection into things.
A number of posts above have talked about structuring so that one large project doesn’t bring down the company, that’s legitimate. However, if I saw a series of companies with similar names, the same directors and shareholders, that run for a while and then are dissolved it would be a red flag to me. This avoids liabilities on old jobs whilst keeping the name.
As has been mentioned, stage payments help, as does a decent amount of retention (A percentage of stage payments held back to cover defects etc). Those are both standard features of usual construction contracts (JCT being the most common type). You can also look to parent company guarantees, or personal guarantees, or even performance bonds to provide additional protection. Whether any of that is realistic depends on the project value. If it is significant decide whether your architect or Qs Have advised you on this sufficiently or whether you need specific help.
What’s the approx value? Is it residential? Do you have an architect or qs?
As has been mentioned, stage payments help, as does a decent amount of retention (A percentage of stage payments held back to cover defects etc). Those are both standard features of usual construction contracts (JCT being the most common type). You can also look to parent company guarantees, or personal guarantees, or even performance bonds to provide additional protection. Whether any of that is realistic depends on the project value. If it is significant decide whether your architect or Qs Have advised you on this sufficiently or whether you need specific help.
What’s the approx value? Is it residential? Do you have an architect or qs?
The value of the works is approximately £150k, My intended searches on the building contractor, was not just financial, trading history etc., but also on his connections with other person, directors of other companies etc. The same searches has reviewed that the contractor was once employed by the project manager, now my concerns are whether there is, or could be in the future a conflict of interest.
Two companies quoted for the works, one being a much larger building contractor, with obvious higher overheads, yet the sole trader building contractor, quoted more or less the same price.
Two companies quoted for the works, one being a much larger building contractor, with obvious higher overheads, yet the sole trader building contractor, quoted more or less the same price.
Wings said:
The value of the works is approximately £150k, My intended searches on the building contractor, was not just financial, trading history etc., but also on his connections with other person, directors of other companies etc. The same searches has reviewed that the contractor was once employed by the project manager, now my concerns are whether there is, or could be in the future a conflict of interest.
Two companies quoted for the works, one being a much larger building contractor, with obvious higher overheads, yet the sole trader building contractor, quoted more or less the same price.
Are the works for you personally, for example an extension or works to your house, or are they for a company/business?Two companies quoted for the works, one being a much larger building contractor, with obvious higher overheads, yet the sole trader building contractor, quoted more or less the same price.
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