By Shona Hastings, 26.01.2022
What is a Protected Cell Company (PCC)?
A Protected Cell Company (PCC) is a corporate structure in which a single legal entity consists of a core and of separate and distinct cells. The assets and liabilities of all cells are segregated and protected from those of the other cells. The central or core organization is linked to all the individual cells, but every cell is independent of each other. Under this structure, the number of cells associated with a PCC is unlimited and individual cells can be formed and launched as and when needed with each cell having its own investment objectives and share class structure, where investor rights are segregated under Protection of Investors law. A protected cell company structure has a single board of directors who are responsible for any transactions which take place within the core and each of the cells. The board is also responsible for meeting corporate governance requirements to ensure statutory and regulatory compliance.
The provision of Protected Cell Companies has led to a major development within the area of corporate finance over the last decade across the globe. Some of the largest insurance companies, insurance brokers, and banks have adopted the PCC structure. The concept of the protected cell company was first developed in Guernsey with many other domiciles now becoming a popular location for this company structure including Malta, Gibraltar, Mauritius, Ireland & United Kingdom.
Key Rules Governing a PCC under the Protected Cell Companies Act
There is a long list of rules set out under the Protected Cell Companies Act which PCC’s need to adhere to with some of the key rules outlined below.
- It is a requirement that the name of a protected cell company must include the words “Protected Cell Company” or “PCC” after its name.
- Each cell must have its own distinct name, designation, or denomination
- The Memorandum of a protected cell company must state that it is a protected cell company.
- The assets of a PCC can be comprised of cellular assets, non-cellular assets, or both. Cellular assets are the assets of the company attributable to the cells of a company whilst the non-cellular assets, also known as the core assets of a PCC are the assets which are not cellular assets.
- If any liability arises associated with a cell within a PCC, the cellular assets associated with the cell are primarily liable. The company’s non-cellular assets are secondarily liable so long as the cellular assets associated with the relevant cell only have been exhausted.
- A PCC may create and issue shares in respect of any of its cells and the proceeds of the issue of cell shares are cellular assets attributable to the cell in respect of which the cell shares were issued.
- Protected cell companies can pay dividends in respect of cell shares. Dividends paid must be in reference only to the cellular assets and liabilities, or profits associated to the cell in respect of the cell shares which were issued.
The Benefits of a Protected Cell Company (PCC)?
- The assets and liabilities of each cell within a PCC structure are legally segregated from those of the other cells.
- The minimum capital requirement of a PCC is held by the core and other cells are only responsible for holding its own solvency capital requirement (SCR) which could be lower than the minimum capital requirement.
- This structure can be a time and money saver for corporate finance institutions within the European Economic Area (EEA) with protected cell companies being a single legal entity. This means only one set of pillar 3 regulatory reports needs to be filed which is done by the core on behalf of the cells.
- Any protected cell company based in the EEA has passporting rights to underwrite insurance risks.
If you have any questions about the information in the article or if you would like more information about incorporating a protected cell company, please contact us today. The Euro Company Formations team are trusted European company registration experts.