A protected cell company (PCC) is a fairly new corporate form; the concept
originated in Guernsey in 1997. Since then, protected cell companies have become
available in a greater number of offshore jurisdictions.
What is a protected
cell company?
In simple terms, a PCC is a company which -- in addition to its main, "core"
level -- contains a number of segregated parts, or "cells". Each cell
is legally independent and separate from the others, as well as from the "core"
of the company.
The undertakings of one cell have no bearing on the other cells. Each cell
is identified by a unique name, and the assets, liabilities and activities of
each cell are ring-fenced from the others.
If one cell becomes insolvent, creditors only have recourse to the assets of
that particular cell and not to any other.
An alternative to rent-a-captive
schemes and other uses
Protected cell companies are a welcome arrival for businesses who would have
previously chosen a rent-a-captive scheme over the (more costly) formation of
an in-house captive insurance company
for the purpose of self-insurance.
In traditional rent-a-captive schemes, unrelated businesses "rent"
the same captive to insure their risks; consequently, there is no guarantee
that funds provided by one participant will not be used to cover unjustified
claims of another. In contrast, the structure of a protected cell company provides
the necessary protection for each participant's assets.
Despite being a relative newcomer to the corporate world, the flexibility of
PCC companies have caused their uses to diversify in recent years. Protected
cell companies are used to securitize insurance risk against catastrophic losses,
for example; their very structure also makes them an ideal entity for the cost-effective
operation of umbrella mutual funds.
Protected cell company:
An asset protector?
Aside from the above, the astute offshore practitioner can employ an offshore
protected cell company as an effective asset protector and privacy enhancer.
With an offshore insurance corporation, it is market practice that provides
tangible benefits; with the protected cell company, it is the structure of the
entity itself -- think of a house with a locked front door, and rooms inside,
each with a separate lock and key.
Protected Cell companies have -- in concert with other entities -- been used
to construct what has been called "an impenetrable wall" against creditors
and prying eyes. Whilst these claims can only be tested by time, this novel
use of a PCC for asset protection and financial privacy is an interesting approach
and a valuable piece of intellectual property.
Print
this document in full
Find
related documents
Top of page