Protected Cell Companies

Introduction

The Protected Cell Companies Act 2001 (“PCC Act”) allows funds to be set up so that there is a segregation of assets and liabilities in different cells in an umbrella structure with a number of sub-funds. Whilst a protected cell company (“PCC”) remains a single legal entity, the liability of the company in respect of each cell is limited to the assets attributable to the relevant cell, not for the debts of any other cell.

Many Experienced Investor Funds (“EIFs”) are set up as PCCs as they can, for example, allow sub-funds to pursue different investment strategies and allow sub funds to be created for different clients.

Single Legal Entity

The PCC Act states that a protected cell company is a single legal person and that the creation by a PCC of a cell does not create, in respect of that cell, a legal person separate from the company.

Separation of assets

It is the duty of the directors of a PCC to keep the assets of each cell separately identifiable. Specifically, they must (a) keep cellular assets separate and separately identifiable from non-cellular assets and (b) keep cellular assets attributable to each cell separate and separately identifiable from cellular assets attributable to other cells.

Cell shares, cellular capital and cellular dividends

A PCC may create and issue cell shares in respect of any of its cells. The proceeds of the issue (“cell share capital”) are comprised in the cellular assets attributable to the cell in respect of which the cell shares are issued. A PCC may pay a cellular dividend.

Provisions in relation to winding-up

The rights of creditors are limited to the assets of the cell of which they are creditors.

In the winding up of a PCC, the assets forming part of the estate shall only be the non-cellular assets. The winding up shall not terminate any agency, or in any way whatsoever affect the authority or power of any officer, receiver, administrator, servant or agent of the PCC in respect of the cellular assets.

Any liquidator of a PCC has a duty to keep cellular assets separate and separately identifiable from non-cellular assets. The liquidator must also keep cellular assets attributable to each cell separate and separately identifiable from those assets attributable to other cells.