Financial Statements
Factor Law Ltd
For the year ended 31 December 2023
Registered number: 11777429
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Company Information
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Bryan Alan Carson (appointed 8 November 2023)
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Chartered Accountants & & Statutory Auditors
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12 - 15 Donegall Square West
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Contents
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Independent auditor's report
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Statement of comprehensive income
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Statement of changes in equity
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Notes to the financial statements
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Strategic report
For the year ended 31 December 2023
The directors present their strategic report on Factor Law Ltd for the year ended 31 December 2023.
The principal activity of the Company is the provision of legal and consulting services in a wide range of industries and practises through two forms of engagement: Legal Managed Services and Regulatory Response/Projects. The Company provides next-generation solutions for complex legal work at scale, ranging from deadline-driven regulatory projects to long-term managed services performed primarily in Factor's delivery centres.
Annual turnover has increased in line with expectations and the directors anticipate future performance to be satisfactory also. The results of the Company for the year, as set out on page 11 , show a loss for the financial year of £207,825 (loss 2022 - £495,299). This current loss is attributed to the continued investment in our skilled workforce. The Company has made a conscious effort on behalf of the business in the prior year to invest in high quality staff, with a view to advancing the business’ growth cycle; putting the business in a position to obtain substantial client contracts whilst providing and maintaining innovative first class client service so that it may continue to solve complex legal work at scale. The business has made a strategic shift to focus on predictable, recurring revenue. This has resulted in a drop in 2023 revenues, offset with an increase in gross profit margins. This has been achieved through better workforce management as a result of the predictable recurring revenue client base. The directors have considered all relevant information and are satisfied with business performance for the year.
Key performance indicators
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The key performance indicators of the Company are the maximisation of revenue growth and profitability efficiency, as the headcount increases, and the business continues to grow. The directors are satisfied with the revenue for the period, which amounted to £19,951,296 (2022 – £25,141,307). This shows a decrease on the prior period which is mainly driven by a reduction in related party revenue as a result of UK cost savings. Gross profit margin has increased slightly to 40% (2022 – 37%). The Company will seek to minimise adverse impacts on the environment from its activities, whilst continuing to address health, safety and economic issues. The Company has complied with all applicable legislation and regulations.
Principal risks and uncertainties
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The Company is exposed to a variety of financial risks that include the effects of changes in liquidity risk, credit risks, interest rate risks and foreign exchange risk.
Liquidity risk
The Company directors prepare the financial statements on the going concern basis. They consider the Company to have sufficient working capital for operations. The Company focuses on the timely receipt of cash from customers and manages this process on a weekly basis. In the event that the Company is in need of extra funds, the Company has access to sufficient, available funding from its ultimate parent company, Factor Law Inc.
Credit risk
The Company has implemented policies that require appropriate credit checks on potential customers before new accounts are accepted. Receivable balances are then monitored on an ongoing basis and provision is made for doubtful debts where necessary.
Interest rate risk
The Company has interest bearing assets. Interest bearing assets include only cash balances that earn interest based on prevailing bank rates.
Page 1
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Strategic report (continued)
For the year ended 31 December 2023
Foreign exchange risk
The Company is exposed to fluctuations in the exchange rate of the US Dollar and Polish Zloty against Sterling. It is the Company's policy not to take out instruments to hedge exchange movements.
Situation in Ukraine/Russia
Factor Law Ltd does not have any customers or vendors in either Russia or Ukraine and, resultantly, the performance of the business has not been materially effected by the ongoing Ukraine/Russia crisis.
This report was approved by the board on 5 September 2024 and signed on its behalf.
Bryan Alan Carson
Director
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Page 2
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Directors' report
For the year ended 31 December 2023
The directors present their report and the financial statements for the year ended 31 December 2023.
Directors' responsibilities statement
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The directors are responsible for preparing the Strategic report, the Directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The principal activity of the Company is the provision of legal and consulting services in a wide range of industries and practises through two forms of engagement: Legal Managed Services and Regulatory Response/Projects. The Company provides next-generation solutions for complex legal work at scale, ranging from deadline-driven regulatory projects to long-term managed services performed primarily in Factor's delivery centres.
Annual turnover has increased in line with expectations and the directors anticipate future performance to be satisfactory also. The results of the Company for the year, as set out on page 11, show a loss for the financial year of £207,825 (loss 2022 - £495,299). This current loss is attributed to the continued investment in our skilled workforce. The Company has made a conscious effort on behalf of the business in the prior year to invest in high quality staff, with a view to advancing the business’ growth cycle; putting the business in a position to obtain substantial client contracts whilst providing & maintaining innovative first class client service so that it may continue to solve complex legal work at scale. The business has made a strategic shift to focus on predictable, recurring revenue. This has resulted in a drop in 2023 revenues, offset with an increase in gross profit margins. This has been achieved through better workforce management as a result of the predictable recurring revenue client base. The directors have considered all relevant information and are satisfied with business performance for the year.
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Directors' report (continued)
For the year ended 31 December 2023
Total turnover during the year amounted to £19,951,296 (2022 - £25,141,307) with a gross profit of £8,078,062 (2022 - £9,210,679). Net loss for the year, after administrative expenses & taxation, amounted to £207,825 (2022 - loss £495,299).
The directors do not propose a dividend for the year (2022 - £Nil).
The directors who served during the year were:
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Bryan Alan Carson (appointed 8 November 2023)
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Qualifying third party indemnity provisions
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As permitted by the Articles of Association, the Directors have the benefit of an indemnity which is a qualifying third party indemnity provision as defined by Section 234 of the Companies Act 2006. The indemnity was in force throughout the last financial period and is currently in force.
The directors are optimistic on the outlook for the Company in the coming year and believe that the Company will be well placed to service the needs of any new or existing customers. The Company aims to continue on its trajectory of investing heavily in the best and brightest industry professionals in order to continue to tackle meaningful and complex work for a wide range of global clients. This investment in the Company's infrastructure is deemed to be a huge driver for future success; enabling the Company to deliver on its ambitions of re-ordering the legal marketplace through the provision of first class service to clients by our highly technical and innovative legal experts. The Company anticipates that this will only serve to contribute to many more opportunities for the growth of current client contracts as well as obtaining larger contracts with new clients in the future; to achieve our key performance indicator of revenue growth maximisation.
After reviewing the Company’s forecasts and projections, the directors have a reasonable expectation that the Company has adequate resources to continue existence for the foreseeable future. Further, the directors of the parent undertaking have indicated that they will continue to provide financial support to the Company for a period of at least 12 months from the date the accounts are signed and to provide sufficient funds to the company where necessary. The directors have satisfied themselves through enquiry and review of the parent undertaking cash flow forecasts, that it has the means and ability to provide such support to the Company if required. The Company therefore continues to adopt the going concern basis in preparing its financial statements.
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Directors' report (continued)
For the year ended 31 December 2023
The Company systematically provides employees with information on matters of concern to them, consulting them or their representatives regularly, so that their views can be taken into account when making decisions that are likely to affect their interests. Employee involvement in the company is encouraged, as achieving a common awareness on the part of all employees of the financial and economic factors affecting the Company plays a major role in objectives.
The Company is committed to employment policies, which follow best practice based on equal opportunities for all employees, irrespective of sex, race, colour, disability or marital status. The Company gives full and fair consideration to applications for employment from disabled persons, having regard to their particular aptitudes and abilities. Appropriate arrangements are made for the continued employment and training, career development and promotion of disabled persons employed by the Company. If members of staff become disabled, where possible, the Company continues employment, either in the same or an alternative position with appropriate retraining being given if necessary.
Matters covered in the Strategic report
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Under schedule 7.1A of "Large and Medium-Sized Companies and Groups (Accounts & Reports) Regulations 2008", the Company has elected to disclose the following Directors' Report information in the Strategic Report:
−Principal risks and uncertainties have been set out in the Strategic report on pages 1 - 2; and
−Business review.
Disclosure of information to auditor
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Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
∙so far as the director is aware, there is no relevant audit information of which the Company's auditor is unaware, and
∙the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
Post balance sheet events
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There have been no significant events affecting the Company since the year end.
The auditor, Grant Thornton (NI) LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board on 5 September 2024 and signed on its behalf.
Bryan Alan Carson
Director
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Independent auditor's report to the members of Factor Law Ltd
We have audited the financial statements of Factor Law Ltd, which comprise the Statement of comprehensive income, the Balance sheet, the Statement of changes in equity for the financial year ended 31 December 2023, and the related notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
In our opinion, Factor Law Ltd's financial statements:
∙give a true and fair view in accordance with United Kingdom Generally Accepted Accounting Practice of the assets, liabilities and financial position of the Company as at 31 December 2023 and of its financial performance for the financial year then ended; and
∙have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) ('ISAs (UK)') and applicable law. Our responsibilities under those standards are further described in the 'Responsibilities of the auditor for the audit of the financial statements' section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, namely the FRC's Ethical Standard and the ethical pronouncements established by Chartered Accountants Ireland, applied as determined to be appropriate in the circumstances of the entity. We have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
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In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from the date when the financial statements are authorised for issue.
Our responsibilities, and the responsibilities of the directors, with respect to going concern are described in the relevant sections of this report.
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Independent auditor's report to the members of Factor Law Ltd (continued)
Other information comprises the information included in the Annual Report, other than the financial statements and our Auditor's report thereon, including the Directors' report and the Strategic Report. The directors are responsible for the other information. Our opinion on the financial statements does not cover the information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies in the financial statements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Directors' report and the Strategic Report for the financial year for which the financial statements are prepared is consistent with the financial statements, and
∙the Directors' report and the Strategic Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
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In the light of the knowledge and understanding of the Company and its environment we have obtained in the course of the audit, we have not identified material misstatements in the Directors' report and the Strategic Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
∙adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
∙the financial statements are not in agreement with the accounting records and returns; or
∙certain disclosures of directors' remuneration specified by law are not made; or
∙we have not received all the information and explanations we require for our audit.
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Independent auditor's report to the members of Factor Law Ltd (continued)
Responsibilities of management and those charged with governance for the financial statements
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Management is responsible for the preparation of the financial statements which give a true and fair view in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS102 and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Responsibilities of the auditor for the audit of the financial statements
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The objectives of an auditor are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor's report that includes their opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of an auditor's responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatement in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with ISAs (UK).
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:
Based on our understanding of the Company and industry, we identified that the principal risks of non-compliance with laws and regulations related to compliance with Data Privacy Laws, Employment laws and Health and Safety Laws and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006 and UK tax legislation. The Audit engagement partner considered the experience and expertise of the engagement team to ensure that the team had appropriate competence and capabilities to identify or recognise non-compliance with the laws and regulation.
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Independent auditor's report to the members of Factor Law Ltd (continued)
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate financial performance and management bias through judgements and assumptions in significant accounting estimates, in particular in relation to significant one-off or unusual transactions. We apply professional scepticism through the audit to consider potential deliberate omission or concealment of significant transactions, or incomplete/inaccurate disclosures in the financial statements.
In response to these principal risks, our audit procedures included but were not limited to:
∙inquiries of management on the policies and procedures in place regarding compliance with laws and regulations, including consideration of known or suspected instances of non-compliance and whether they have knowledge of any actual, suspected or alleged fraud;
∙inspection of the Company’s regulatory and legal correspondence and review of minutes of board of director’s meetings during the year to corroborate inquiries made;
∙gaining an understanding of the entity’s current activities, the scope of authorisation and the effectiveness of its control environment to mitigate risks related to fraud;
∙discussion amongst the engagement team in relation to the identified laws and regulations and regarding the risk of fraud, and remaining alert to any indications of non-compliance or opportunities for fraudulent manipulation of financial statements throughout the audit;
∙identifying and testing journal entries to address the risk of inappropriate journals and management override of controls;
∙designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;
∙challenging assumptions and judgements made by management in their significant accounting estimates, including estimating on allowance for the impairment of debtors, estimating the useful lives of tangible fixed assets and estimating the future repairs and restoration costs of the dilapidation provision; and
∙review of the financial statement disclosures to underlying supporting documentation and inquiries of management.
The primary responsibility for the prevention and detection of irregularities including fraud rests with those charged with governance and management. As with any audit, there remains a risk of non-detection or irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or override of internal controls.
The purpose of our audit work and to whom we owe our responsibilities
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This report is made solely to the Company’s members, as a body, in accordance with chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
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Independent auditor's report to the members of Factor Law Ltd (continued)
Bronagh Bourke FCA (Senior statutory auditor)
for and on behalf of
Grant Thornton (NI) LLP
Chartered Accountants &
Statutory Auditors
Belfast
5 September 2024
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Statement of comprehensive income
For the year ended 31 December 2023
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Other operating (expense)/income
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Interest receivable and similar income
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Loss for the financial year
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All amounts relate to continuing operations.
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There was no other comprehensive income for 2023 (2022:£NIL).
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The notes on pages 14 to 33 form part of these financial statements.
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Page 11
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Factor Law Ltd
Registered number:11777429
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Balance sheet
As at 31 December 2023
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Debtors: amounts falling due after more than one year
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Creditors: amounts falling due after more than one year
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Provisions for liabilities
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The financial statements were approved and authorised for issue by the board and were signed on its behalf on 5 September 2024.
The notes on pages 14 to 33 form part of these financial statements.
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Statement of changes in equity
For the year ended 31 December 2023
Statement of changes in equity
For the year ended 31 December 2022
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The notes on pages 14 to 33 form part of these financial statements.
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Page 13
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Notes to the financial statements
For the year ended 31 December 2023
Factor Law Ltd is a private company limited by shares. The Company has been incorporated in England and the address of the registered office is Suite 1, 7th Floor, 50 Broadway, London, United Kingdom, SW1H 0BL.
The Company's principal activity is the provision of legal consulting services in a wide range of industries and practices through legal managed services and regulatory response projects. The Legal Managed Services business provides end to end management and delivery of complex legal processes performed primarily in Factor's delivery centres. The Regulatory Response/Contracts Projects business brings client contracts into compliance with new regulatory requirements.
The Company continues to operate the legal managed services and projects businesses in the UK.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).
The financial statements are prepared in Sterling (£).
The following principal accounting policies have been applied:
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Exemption from preparing consolidated financial statements
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The Company is a parent company that is also a subsidiary included in the consolidated financial statements of a larger group by a parent undertaking established in the United Kingdom and is therefore exempt from the requirement to prepare consolidated financial statements under section 400 of the Companies Act 2006.
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Exemptions for qualifying entities under FRS 102
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FRS 102 allows a qualifying entity certain exemptions, subject to certain conditions, which have been complied with, including notification of, and no objection to, the use of exemptions by the Company’s shareholders. The Company has taken advantage of the following exemptions:
∙The preparation of a statement of cash flows under FRS 102 paragraph 1.12(b), on the basis that it is a qualifying entity and its immediate parent company, Factor Law Holdings Ltd, includes the company’s cash flows in its own consolidated financial statements;
∙Disclosure of financial instruments, required under FRS 102 paragraphs 11.39 to 11.48A and paragraphs 12.26 to 12.29, as the information is provided in the consolidated financial statement of its ultimate parent; and
∙Disclosure of the Company key management personnel compensation, as required by FRS 102 paragraph 33.7, as this information is provided in the consolidated financial statements of its ultimate parent.
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Notes to the financial statements
For the year ended 31 December 2023
2.Accounting policies (continued)
After reviewing the Company’s forecasts and projections, the directors have a reasonable expectation that the Company has adequate resources to continue existence for the foreseeable future. Further, the directors of the parent undertaking have indicated that they will continue to provide financial support to the Company for a period of at least 12 months from the date the accounts are signed and to provide sufficient funds to the company where necessary. The directors have satisfied themselves through enquiry and review of the parent undertaking cash flow forecasts, that it has the means and ability to provide such support to the Company if required. The Company therefore continues to adopt the going concern basis in preparing its financial statements.
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Foreign currency translation
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Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Rendering of services
Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
∙the amount of revenue can be measured reliably;
∙it is probable that the Company will receive the consideration due under the contract;
∙the stage of completion of the contract at the end of the reporting period can be measured reliably; and
∙the costs incurred and the costs to complete the contract can be measured reliably.
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Notes to the financial statements
For the year ended 31 December 2023
2.Accounting policies (continued)
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Operating leases: the Company as lessee
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Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.
Grants are accounted under the accruals model as permitted by FRS 102. Grants relating to expenditure on tangible fixed assets are credited to profit or loss at the same rate as the depreciation on the assets to which the grant relates. The deferred element of grants is included in creditors as deferred income.
Grants of a revenue nature are recognised in the Statement of comprehensive income in the same period as the related expenditure.
Interest income is recognised in profit or loss using the effective interest method.
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Current and deferred taxation
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Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits;
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and
∙Where they relate to timing differences in respect of interests in subsidiaries, associates, branches and joint ventures and the Company can control the reversal of the timing differences and such reversal is not considered probable in the foreseeable future.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
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Notes to the financial statements
For the year ended 31 December 2023
2.Accounting policies (continued)
Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
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33.3% straight line basis
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Construction in progress is not amortised until complete.
The Company reviews intangible fixed assets for impairment whenever events or changes in circumstances indicate that the useful life is shorter than was originally estimated or if there is an indication of a significant change since the last reporting date.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
The Company adds to the carrying amount of an item of fixed assets the cost of replacing part of such an item when that cost is incurred, if the replacement part is expected to provide incremental future benefits to the Company. The carrying amount of the replaced part is derecognised. Repairs and maintenance are charged to profit or loss during the period in which they are incurred.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
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Long-term leasehold property
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14-20% straight line basis
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20-33% straight line basis
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The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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Impairment of non-financial fixed assets
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At each balance sheet date non-financial assets not carried at fair value are assessed to determine whether there is an indication that the asset (or asset's cash generating unit) may be impaired. If there is such an indication, the recoverable amount if the asset (or asset's cash generating unit) is compared to the carrying amount of the asset (or asset's cash generating unit).
Page 17
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Notes to the financial statements
For the year ended 31 December 2023
2.Accounting policies (continued)
The recoverable amount of the asset (or asset's cash generating unit) is the higher of the fair value less cost use. Value in use is defined as the present value of future cashflows before interest and tax obtainable a a result of the asset's (or asset's cash generating unit) continued use. These cashflows are discounted using a pre-tax discount rate that represents the current market risk-free rate and the risks inherent in the asset.
If the recoverable amount of the asset (or asset's cash generating unit) is estimated to be lower than the carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognised in the Statement of comprehensive income, unless the asset has been revalued when the amount is recognised in other comprehensive income to the extent of any previously recognised revaluation. Thereafter any excess is recognised in the Statement of comprehensive income.
If an impairment loss is subsequently reversed, the carrying amount of the asset (or asset's cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the revised carrying amount does not exceed the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised in prior periods. A reversal of an impairment loss is recognised in the Statement of comprehensive income. Goodwill is allocated on acquisition to the cash generating unit expected to benefit from the synergies of the combination. Goodwill is included in the carrying value of cash generating units for impairment testing.
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
Investments in subsidiaries are measured at cost less accumulated impairment.
Page 18
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Notes to the financial statements
For the year ended 31 December 2023
2.Accounting policies (continued)
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Provisions for liabilities
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Provisions are recognised when an event has taken place that gives rise to a legal or constructive obligation, a transfer of economic benefits is probable and a reliable estimate can be made.
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
Increases in provisions are generally charged as an expense to profit or loss.
The Company only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other accounts receivable and payable, loans to related parties and investments in non-puttable ordinary shares.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade payables or receivables, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration, expected to be paid or received. However if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in case of an outright short-term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate.
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate, which is an approximation of the amount that the Company would receive for the asset if it were to be sold at the balance sheet date.
Financial assets and liabilities are offset and the net amount reported in the Balance sheet when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Company operates a defined contribution scheme for specific directors and employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the group has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are shown in accruals in the Balance sheet. The assets of the plan are held separately from the Company in independently administered funds.
Page 19
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Notes to the financial statements
For the year ended 31 December 2023
2.Accounting policies (continued)
The ultimate parent company issues equity-settled share option appreciation rights to certain employees of the Company for their services to the Company. Equity-settled share-based payments are measured at fair value and are recognised as an expense in the profit and loss account with a corresponding increase in equity. The fair values of these payments are measured at each reporting date using option-pricing models, taking into account the terms and conditions upon which the awards are granted. The fair value is recognised over the period during which employees become unconditionally entitled to the awards, subject to the parent company’s estimate of the number of awards which will lapse, either due to employees leaving the Company prior to vesting or due to non-market based performance conditions not being met.
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Judgements in applying accounting policies and key sources of estimation uncertainty
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Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are as follows.
3.1 Dilapidations provision
The Company is required to perform dilapidation repairs and in certain instances restore leased property to agreed specifications prior to the property being vacated at the end of their lease term. These amounts are based on estimates from an external third party of repair and restoration costs at a future date and therefore, a degree of uncertainty exists.
3.2 Estimating useful lives of depreciable and amortised assets
The annual depreciation and amortisation charge depends primarily on the estimated lives of each type of asset and, in certain circumstances, estimates of fair values and residual values. The directors annually review these asset lives and adjust them as necessary to reflect current thinking on remaining lives in light of technological change, prospective economic utilisation and physical condition of the assets concerned. Changes in asset lives can have significant impact on depreciation and amortisation charges for the period. It is not practical to quantify the impact of changes in asset lives on an overall basis, as asset lives are individually determined, and there are a significant number of asset lives in use. The impact of any change would vary significantly depending on the individual changes in assets and .the classes of assets impacted.
3.3 Estimating allowance for impairment of debtors
The Company maintains provisions for impaired accounts at a level considered adequate to provide for probable uncollectible receivables. The level of this provision is regularly evaluated and normally consists of past due accounts that are neither subject of ongoing negotiations with management to revise payment schedules nor secured with any collateral. The provision includes amounts for impaired trade and group debtors.
Page 20
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Notes to the financial statements
For the year ended 31 December 2023
3.Judgments in applying accounting policies (continued)
3.4 Assessing for indicators of impairment
At each reporting date, fixed assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in Statement of comprehensive income. If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but not in excess of the amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in Statement of comprehensive income.
All turnover is related to the Company's principal activities.
Analysis of turnover by country of destination:
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The operating loss is stated after charging:
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Fees payable to the Company's auditor for the audit of the Company's annual accounts
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Amortisation of intangible fixed assets
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Depreciation of tangible fixed assets
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Page 21
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Notes to the financial statements
For the year ended 31 December 2023
Staff costs, including directors' remuneration, were as follows:
The average monthly number of employees, including the directors, during the year was as follows:
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Management and administration
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Client service professionals
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Key management compensation
Key management included the directors and members of senior management. The compensation paid or payable to key management for employee services is shown below:
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Key management compensation
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The directors received £15,332 emoluments during the year (2022: £Nil).
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Page 22
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Notes to the financial statements
For the year ended 31 December 2023
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Other interest receivable
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Adjustments in respect of previous periods
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Origination and reversal of timing differences
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Tax on loss on ordinary activities
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Page 23
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Notes to the financial statements
For the year ended 31 December 2023
9.Taxation (continued)
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Factors affecting tax charge for the year
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The tax assessed for the year is higher than (2022 - higher than) the standard rate of corporation tax in the UK of 23.52% (2022 - 19%). The differences are explained below:
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Loss on ordinary activities before tax
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Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 23.52% (2022 - 19%)
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Fixed asset timing differences
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Net expenses not deductible/(deductible) for tax purposes
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Movement in deferred tax not recognised
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Utilisation of tax losses
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Adjustments to tax charge in respect of prior periods
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Total tax credit for the year
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Factors that may affect future tax charges
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The standard rate of UK Corporation Tax increased from 19% to 25% from 1 April 2023. The previous 19% tax rate will continue to apply to 'small' companies with profits less than £50,000, with a 'taper relief rate' for those companies with profits between the new thresholds. Deferred tax assets and liabilities have been recognised using the tax rates applicable for the date the assets and liabilities are expected to reverse.
A net deferred tax asset of £87,805 (2022: £52,826) has not been recognised as, in the opinion of the directors, there is sufficient uncertainty that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Page 24
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Notes to the financial statements
For the year ended 31 December 2023
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Construction-in-progress
This fixed asset class relates to the ongoing development of capitalised software at the year-end date. It is anticipated that this capitalised software will be put into use in the following financial year.
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Page 25
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Notes to the financial statements
For the year ended 31 December 2023
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Long-term leasehold property
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Charge for the year on owned assets
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Page 26
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Notes to the financial statements
For the year ended 31 December 2023
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Investments in subsidiary companies
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The following was a subsidiary undertaking of the Company:
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Kazimierza Wielkiego, 3 50-077, Wroclaw, Poland
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Provision of legal and consulting services
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The Company is exempt from the requirement to present consolidated group accounts in line with section 400 of the Companies Act 2006, as it is a wholly owned subsidiary of Factor Law Holdings Ltd, a UK registered company for which group accounts are prepared and publicly available.
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Page 27
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Notes to the financial statements
For the year ended 31 December 2023
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Due after more than one year
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Amounts owed by group undertakings
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Prepayments and accrued income
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The impairment loss recognised in the Company profit and loss in respect of bad and doubtful trade debtors for the year was £Nil (2022: £Nil).
Prepayments and accrued income contains a total of £129,996 unbilled receivables in the year (2022: £466,023).
Amounts owed by group undertakings which are trading in nature are unsecured, interest free and repayable on demand.
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Cash and cash equivalents
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Page 28
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Notes to the financial statements
For the year ended 31 December 2023
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Creditors: Amounts falling due within one year
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Amounts owed to group undertakings
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Other taxation and social security
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Accruals and deferred income
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Amounts owed to group undertakings are unsecured, interest free have no fixed date of repayment and are repayable on demand.
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Creditors: Amounts falling due after more than one year
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Charged/(credited) to profit or loss
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The dilapidation provision relates to the Company's expected cost of returning their leasehold property to the condition that existed at the inception of the lease; the associated lease expires in April 2027.
The other provision relates to the Company's expected reimbursement for grants received upon non compliance with the grants terms and conditions.
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Page 29
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Notes to the financial statements
For the year ended 31 December 2023
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Allotted, called up and fully paid
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2 (2022 - 2) Ordinary shares of £1.00 each
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The Company has one class of Ordinary shares which carry no right to fixed income.
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Share capital
Called up share capital represents the nominal value of shares that have been issued.
Other reserves
Other reserves relates to the contribution received from the ultimate parent company in relation to issued equity-settled share option appreciation rights.
Profit and loss account
Profit and loss account includes all current and prior period losses.
Page 30
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Notes to the financial statements
For the year ended 31 December 2023
During the year ended 31 December 2023, the ultimate parent company issued equity-settled share options appreciation rights to certain employees of the Company for their services to the Company, this arrangement is described below.
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Weighted average exercise price (pence)
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Weighted average exercise
price
(pence)
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Outstanding at the beginning of the year
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Forfeited during the year
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Exercised during the year
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Outstanding at the end of the year
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Exercisable at the end of the year
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The options outstanding at 31 December 2023 had exercise prices ranging from £0.12 to £0.53 (2022: £0.12 to £0.53) and the weighted average remaining contractual life of 6.0 years (2022: 7.5 years).
The expense in the year ended 32 December 2023 arising from share-based payment transactions is £Nil (2022: £Nil).
The contractual life of all share options is 10 years.
The vesting conditions for all share based payments are that at all times since the grant date, the option holder is an employee, officer or director of, or consultant or advisor to, Factor Law Inc, Axiom Global Inc., or any parent or subsidiary of Factor Law Inc. or Axiom Global Inc.
Page 31
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Notes to the financial statements
For the year ended 31 December 2023
20.Share-based payments (continued)
The estimated fair value was calculated by applying the Black-Scholes option pricing model with the following weighted-average assumptions:
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Weighted average share price (pence)
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The Company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £343,440 (2022: £501,042); at the balance sheet date £61,548 was unpaid (2022: £198,746).
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Commitments under operating leases
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At 31 December 2023 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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Related party transactions
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The company has taken advantage of the exemption under paragraph 33.1A from the provisions of FRS 102 “Related Party Disclosures” from disclosing related party transactions with related parties that are part of the Factor Law Inc. group. The directors and shareholders are related parties of the company as defined under paragraph 33.2 of FRS 102 Related Party Disclosures.
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Comparative information has been reclassified where necessary to conform to current financial year presentation.
Page 32
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Notes to the financial statements
For the year ended 31 December 2023
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Post balance sheet events
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There have been no significant events affecting the Company since the year end that have not been disclosed in the financial statements.
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Ultimate parent undertaking and controlling party
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The Company is a subsidiary undertaking of Factor Law Holdings Ltd, which is the immediate parent company incorporated in England and Wales. The ultimate parent undertaking is Factor Law Inc, a company incorporated in the USA.
The parent of the smallest and largest group of undertakings which prepares consolidated financial statements that are publicly available, is Factor Law Holdings Ltd, a company incorporated in England and Wales. Group financial statements for this company are available from the Registrar of Companies, Companies House, Crown Way, Cardiff, CF14 3UZ. The largest group of undertakings which prepares consolidated financial statements is Factor Law Inc., a company incorporated in the USA. These financial statements are not publicly available.
The Directors do not consider there to be one ultimate controlling party.
Page 33
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