Business owners must take positive steps if their companies are to avoid insolvency during what could well be the "most trying" year of the post-recession cycle. Many company bosses are concentrating solely on sales - without taking pre-emptive action on what might be saved and secured during the continuing economic turmoil.

Meanwhile, recent high profile business failures have created concern amongst healthy companies facing an uncertain market and bad debts.

Henry Briggs, one of the region's leading advisors to owner managed businesses said: "Even businesses that do not have problems in their customer base, are susceptible. Two or three large bad debts can simply knock a company out of business - unless prevention has been put in place." 

"What business owners need to do is look at protective restructuring. In principle, a group structure in which valuable assets are held in a holding company and riskier elements in a subsidiary, should help to provide the first line of defence," said Henry Briggs, senior partner of the Birmingham office of Haines Watts - which nationally represents more owner managed businesses than any other accountancy practice.

"Subsidiaries with a problem can then be 'let loose' keeping the assets intact - rather than the other way around where the assets will be called in to support any trading problems if they are held by the trading company," said Mr Briggs.

"Action needs to be taken well in advance of problems developing - and inter-company balances need to be addressed and cross guarantees avoided or restricted. Banks and major suppliers may also require comfort and security."

Mr Briggs said that although the number of insolvencies in the region had decreased in 2010, according to the insolvency practitioners association, R3, some 10% of businesses are reliant on public sector contracts and there are significant warning signs - particularly as government spending cuts feed through the system.

"Company failures normally increase coming out of recession - simply because businesses have run out of fire power. It is anticipated that corporate insolvencies could rise by 9-10% in the coming year. This situation could continue for a further two to three years until the recovery feeds through, so acting now, and undertaking some form of restructuring, would be beneficial in the longer term - as well as highlighting issues that might impact in the short term," said Mr Briggs.

For more information on Haines Watts, please visit their website here: www.hwca.com