Patterns
Twelve ways it goes wrong.
Across the cases, the same failures repeat. Each one leaves a trace in the records. Each entry gives how often it appears, the tell (the sign you can see in the records) and where to look.
271 cases · 56%Governance failure
The people who should have stopped it did not, or left.
The tell
Auditor or director resignations; late filings; boards that are family and nobody else.
Where to look
Read resignations, filing dates and who signs what.
Appears in 271 of 483 cases (56%). A case can show several patterns. See the cases
176 cases · 36%Regulatory breach
A rule was broken, and the regulator noticed.
The tell
Show-cause notices, licence conditions, prior orders against promoters.
Where to look
Search regulator orders against the company, its directors and its past firms.
Appears in 176 of 483 cases (36%). A case can show several patterns. See the cases
133 cases · 28%Concealed debt
Debt the accounts do not show.
The tell
Charges on the register that the balance sheet omits; guarantees in notes; lender notices.
Where to look
Compare the charge register and court filings with the stated borrowings.
Appears in 133 of 483 cases (28%). A case can show several patterns. See the cases
131 cases · 27%Misuse of raised funds
Money raised for one purpose goes to another.
The tell
Use-of-proceeds statements that never tie to bank outflows; payees nobody can describe.
Where to look
Match each tranche of raised money to the account it left and the party it reached.
Appears in 131 of 483 cases (27%). A case can show several patterns. See the cases
123 cases · 25%Revenue inflation
Sales booked that no customer paid for.
The tell
Receivables growing faster than sales; revenue with no matching bank credit.
Where to look
Set monthly bank credits against booked revenue.
Appears in 123 of 483 cases (25%). A case can show several patterns. See the cases
97 cases · 20%Forged documents
Papers that were made, or altered after the event.
The tell
Bank statements, certificates or confirmations that do not match what the bank or registry holds.
Where to look
Get the document from the issuer, not from the company.
Appears in 97 of 483 cases (20%). A case can show several patterns. See the cases
96 cases · 20%Related-party diversion
Cash or value moves to people connected to the owners.
The tell
Loans and advances to group entities that grow every year; payees sharing an address or director with the promoter.
Where to look
Read the related-party note, then check every large payee against the register of directors.
Appears in 96 of 483 cases (20%). A case can show several patterns. See the cases
77 cases · 16%Funding shock
A fall in funding or demand exposes a model that only worked while money was cheap.
The tell
Burn that depends on the next round; no cash cover for six months.
Where to look
Stress the cash runway against a missed round.
Appears in 77 of 483 cases (16%). A case can show several patterns. See the cases
70 cases · 14%Fake customers or vendors
Counterparties that exist on paper only.
The tell
Top customers with no filings, no tax history, or a registered office that is a flat or a shop.
Where to look
Test the top ten customers and suppliers: do they exist, file returns and pay?
Appears in 70 of 483 cases (14%). A case can show several patterns. See the cases
42 cases · 9%Unit economics
Each sale loses money and growth hides it.
The tell
Growth paid for by discounts; thin margins that shrink as volume grows.
Where to look
Rebuild margin per order from invoices, not from the deck.
Appears in 42 of 483 cases (9%). A case can show several patterns. See the cases
25 cases · 5%Double pledge
The same asset pledged to more than one lender.
The tell
Several charges on one asset; satisfied charges still in use.
Where to look
Check each charge by asset and date, and read the security registries.
Appears in 25 of 483 cases (5%). A case can show several patterns. See the cases
24 cases · 5%Round-tripping
Money leaves and returns as investment or revenue.
The tell
The same sums moving between related accounts around reporting dates.
Where to look
Follow large inflows back to their source, and see whether it was your own counterparty.
Appears in 24 of 483 cases (5%). A case can show several patterns. See the cases
Counts come from the public cases we have collected. They show how often a pattern appears in documented failures, not how often it occurs in all companies.