Negative net assets: what the check means

What this test checks

Reads the net asset figure from the company's most recent accounts filed at Companies House. Net assets are everything the company owns minus everything it owes. A negative figure means its liabilities exceed its assets: on its balance sheet, it owes more than it owns.

This is a balance-sheet view. A company with negative net assets can still pay its bills as they fall due if it has cash and continued support from its lenders or owners, so the test is a reason to look further rather than proof of insolvency.

What a fail looks like

The latest accounts show liabilities greater than assets. It is more serious when the deficit is getting bigger year on year, when the company also files late, or when the money is owed to third parties rather than to its owners.

Harmless explanations

• Start-ups often run with negative net assets for several years while they invest and build up revenue.
• Subsidiaries funded by loans from their parent company often show negative net assets while the group as a whole is sound.
• Owner-managed companies where the director has lent money to the business can show negative net assets while the owner continues to support it.

What to do

• Compare with previous years: an improving deficit is very different from a growing one.
• Check who the company owes money to, and whether there are outstanding charges over its assets.
• For an important supplier or a customer buying on credit, ask for current figures or a parent company guarantee.

Background: Understanding company accounts.

Related tests

• XFN-003Accounts Overdue with Financial Deterioration
• FIN-003Accounts Overdue Check
• LEG-006Floating Charge Covers All Assets
• FIN-006Dormant Company Indicator

Part of the test catalogue. Every check Senserity runs, with its severity and the plan it is available on.

Last reviewed 3 October 2026.