Red Funnel, which was due to file its annual accounts with Companies House today (September 30) has used an obscure accounting trick which means it can avoid having to do so.

A form filed with Companies House yesterday (Sunday) says: “The accounting reference period ending 30/12/2023 is shortened so as at to end on 29/12/2023.”

Filing company accounts late is a criminal offence and in recent years Companies House has been taking action against more and more directors who do so. Instead of filing its accounts late, in this last-minute manoeuvre, Red Funnel changed its year end by a single day, giving the company more time to try to sort out its troubled finances.

The company’s most recent accounts show it owes more than £40 million to financial institutions, which was due for repayment in July. It has apparently been given an extension by its lenders as it tries to sort out a deal with a buyer.

Negotiations for the sale of the ferry operator have been ongoing since February this year, when eight of its directors resigned en masse. When the IW Observer reported this at the time, it was denied by the company. However, it was finally confirmed last month in an email sent by prospective purchaser, Arcus Infrastructure Partners (AIP), to some of the Island’s elected representatives. It is believed that AIP are still involved in negotiations, along with Irish Ferries whose representatives have also been seen at the Southampton HQ recently.

Interestingly, it is not the first time the company has used this accounting hack to file its accounts later, indicating that the company has been in trouble for some considerable time. When the accounts were due to be filed at the end of September 2022, Red Funnel clearly did not have the funding in place which would allow the company’s auditors to sign the business off as a going concern. For them to be able to do that sufficient funding must be in place for at least 12 months at the date of signing.

A deal was finally put pulled together in October 2022. The shareholders provided £20m of additional loan guarantees which were recorded on October 14, 2022 at The International Stock Exchange based in Jersey.

Fran Collins, Red Funnel’s CEO then signed off the 2021 accounts on November 1, 2022 but the company still held back filing them (they were due at the end of December). Companies House recorded the date they were filed as January 3, 2023. This clearly indicates that as far back as late 2022 Red Funnel already had challenges with its funding arrangements.

Companies House says that this accounting device can be done “as many times as you (the directors) like”, however it cannot be done if the accounts are overdue – which explains why the financial experts at Red Funnel were busy working over this weekend.

West Wight MP Richard Quigley said: “Whilst this may be allowed under accounting practice, this won’t ease Islanders’ fears that Red Funnel aren’t capable of running the service we need.

“I am in continued conversations with the Department for Transport to keep them updated and explore all options.”

The company’s senior management and its shareholders have been approached for a comment.