LLP's and the FSCS

Following the recent credit crisis and uncertainty within the insurance markets, questions had been raised by various LLP status clients about compensation available from the Financial Services Compensation Scheme (FSCS).

The FSA have clarified the position as follows:-

The FSCS is a fund of last resort, which deals with claims for compensation against authorised financial services firms that have gone out of business or been declared insolvent.

In respect of a claim that falls within our general insurance sub-scheme, a business would be treated as having a claim, and hence protection in its own right, if it fell within the definition of a "small business". A small business is defined as a partnership, body corporate (such as a Limited Liability Partnership (LLP)), unincorporated association or mutual association with an annual turnover of less than £1 million (or its equivalent in any other currency at the relevant time).

In other words, as long as the LLP is a small business, i.e. less than £1M turnover then they have the same protection as a non-limited partnership of any other business with less than £1M turnover.

Over £1M turnover would put an LLP in the same position as other businesses of the same size, i.e. 100% compensation for compulsory covers but nothing for other covers such as Professional Indemnity Insurance.

If you have any questions or require any further information, please call your usual contact at SBJ.