Protected cell companies in Guernsey
This briefing note describes the key features of a protected cell company (PCC) and summarises the formation, structure and the liquidation procedures particular to this type of company. Essentially, a PCC consists of a core and of separate and distinct cells. The assets and liabilities of one cell are segregated and protected from those of the other cells. Similarly, the assets and liabilities of the core are segregated and protected from those of the cells. For investment funds, the attraction of a PCC is the avoidance of any cross-class contagion if a class or portfolio within an umbrella fund becomes insolvent and if the creditors attempt to enforce judgments against assets within other classes. Insurance companies have found the PCC structure attractive for use by rent-a-captives, transformers and a range of other ART solutions. There has also been a number of CAT bond issues and the securitisation of life business within individual cells of a PCC.
The principle is that where any liability arises that is attributable to a particular cell or to the core, the cellular assets attributable to that cell or the core assets attributable to the core should be used in satisfaction of the liability. Thus, when considering a liability attributable to a cell, the core assets and the assets attributable to any cell other than the cell to which the relevant liability is attributable are ‘protected assets’.
A PCC must inform any person with whom it transacts that it is a PCC and must identify or specify the cell in respect of which such person is transacting. In this way, creditors are notified of the limited recourse they have to the assets of a PCC…
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ESMA has concluded that ‘no obstacles exist to the extension of the passport to Guernsey and Jersey’.