The Financial Services Compensation Scheme (FSCS) protects the bank deposits of small businesses. A small business is one which meets two out of the following criteria:
- It has less than 50 employees
- It has a turnover of less than £6.5 million a year
- It has less than £3.26 million on its balance sheet
The FSCS will also protect other types of business including unincorporated organisations, partnerships and sole traders. In the case of sole traders however, personal accounts will also be included when considering the protection limit.
Deposit protection rules
The FSCS details the deposit protection rules on its website.
Since January 2016, the maximum compensation if a bank fails is £75,000.
If different banks are owned by one parent company, one issue which may be of concern to businesses is whether these will be separately protected. The FSCS would offer compensation per bank as long as each institution is authorised by the Financial Conduct Authority separately, if not they would only pay compensation once.
For customers who have both loans and deposits at the same bank, whereas individuals can have these offset when it comes to compensation, this does not apply to businesses as in law a company and its directors are separate.
How Nelsons can help
For further advice in relation to the topics discuss in this article, please contact our corporate services team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.