A Protected cell company (“PCC”) is a company which segregates the assets and liabilities of different cells of shares from each other and from the general assets of the PCC. The distinguishing features of a PCC as compared to a normal multi-class company/fund are:
- Each share class is referred to as a cell.
- There is legal segregation of cellular net assets – hence the cellular assets of a cell will only be affected by the liabilities of the company arising from transactions attributable to that cell. This legal segregation is often described as ‘ring fencing’ and is the main attraction of PCC’s.
Mauritius provides a flexible legal framework for the establishment and running of PCCs which are commonly used by promoters/investment managers with various investment portfolios, where each has its own investment strategy and risk profile. Such structure is even more attractive when investors are not common in each portfolio.
Possible activities of a PCC
- Asset holding
- Structured financed businesses
- Collective investment schemes (‘CIS’) and closed-end funds
- Specialised CIS and closed-end funds
- External insurance businesses
- External pension scheme
Uses of PCCs
As provided under the PCC Act, a PCC can be used to carry out two types of global business namely global insurance business.
- Life assurance companies can legally separate the assets of life, pension and individual policyholders.
- Composite insurers – where the assets of life insurance business need to be legally separated from those of non-life business.
- Conglomerates – where several cells are established, each holding a particular insurance exposure of the parent and segregated, for example, in relation to the various geographical locations, corporate division or types of risk of those exposures.
- Insurance and re-insurance – where insurers or reinsurers can accommodate the differing needs of clients.
- Reinsurance – where finite reinsurance contracts and securitisation issues can be placed within separate cells.
- Multi-nationals – where companies can operate their captive insurance, treasury and other functions globally in a single entity using the same core capital.
- Captive insurance companies – segregate distinct areas of risk and activity into different ‘cells’.
- Rent-a-captive – where the owners of the PCC offers capital financing to clients, who, because of their own size, would find it impractical to set up their own individual captive insurance arrangements.
This type of structure is particularly attractive for global business funds (collective investment schemes) with various classes of shares, umbrella or multi-class funds, affording each individual share class the same limited liability that would be obtained if separate corporate structures were used for each different category of investor. (NB: It is a requirement that there is pooling of investors’ funds at the level of the cell).
- Ability to create cells with different strategies, subject to overall objective of the PCC.
- Alternative to normal company structure.
- Single legal entity with ring-fencing of each cell.
- No minimum capital requirement is imposed for the PCC or the cell(s), except in specific case.
- The PCC may effect distributions in respect of cellular shares of a cell by reference only to its cellular assets and liabilities attributable to it.
- Solvency test applies to each cell and not to the PCC as a whole.
- Cost efficient solution as there is the elimination of excess cost and administration burden.
- The PCC can opt to have a single financial statement with all the cells consolidated or separate financial statements in respect of each of its cells.
ABC Global Management Services Ltd offers a comprehensive range of services and has built considerable expertise in providing tailor-made solutions to clients in respect of the most appropriate vehicle. Our services offering include:
- Setting up of the PCC
- Provision of the functionaries, namely resident directors, company secretary and administrator
- Assist in the preparation of cell appendix/business plan for each cell to be created
- Arrange for creation of cells
- Preparation of annual accounts and liaisons with auditors
- Filling of tax returns