Gibraltar: BOOK REVIEW: "Protected Cell Companies: A Guide To Their Implementation And Use", Second Edition, By Nigel Feetham And Grant Jones. Published By Spiramus.

Last Updated: 22 March 2010

Review by Robin Amos

The first edition, published in February 2008, has already established a reputation as the original book on Protected Cell Companies (PCCs) - a growing phenomena in the insurance industry in particular. The book is still the only book written on the subject despite the fact that the PCC exists in many jurisdictions including the USA, Malta, Gibraltar (in the EU) and numerous offshore domiciles. For the second edition, the authors have taken the opportunity to significantly widen the scope, particularly with USA issues.

This second edition, whilst it retains its practical emphasis, has now benefited from further analysis and research. The new Forward is by Professor Larry Ribstein, a leading authority on new forms of companies in the USA. With a subject as complex as PCCs, it is actually very helpful to the reader that the issues are placed in an organising framework, and we have the concept of the "legal laboratory" being introduced as a way to explain the success or otherwise of innovation in corporate forms.

Practitioners will find first principles explained in the fields of company law, insolvency, accounting and insurance, and all of these in an international context. In writing this new edition Feetham & Jones set out to describe important legal developments since the publication of the first book, and to demonstrate, through further study, that the concept of statutory segregation of assets and liabilities was not new.

So What Is A PCC?

It is a limited liability company with the ability to form "cells" that are segregated from each other and from the company. The basic idea is to ensure that any one cell cannot be affected by the business of another cell. Such a company form is facilitated by local statute. The cells themselves are not companies but have sufficient attributes such that they may trade under the umbrella of the PCC. In most jurisdictions, PCCs are akin to captive insurance companies, but the concept can also apply to investment funds and special purpose entities.

Where Does A PCC Come From?

In the first edition, much was made of the risks of this form, given its relative novelty. Whilst these concerns are still valid, the authors have included much more material on the genesis of the PCC, and several themes are explored in far more depth. This is not just of academic interest, since if it is demonstrated that the PCC is really a version of a much older corporate form, then challenges to the PCC will be much harder to sustain.

A stunning insight of the book is to compare Lloyd's of London to a PCC. Readers familiar with Lloyd's will know that there is a Central Fund to which all participating syndicates must contribute, and so the Fund is analogous to the "Core" of a PCC, and the syndicates are like cells. The simple point to make is that this works - Lloyd's started trading in 1688 and has been in business ever since.

Feetham & Jones remind us that banking holding companies have been used to segregate assets and liabilities from a wider corporate grouping since the time of the Medici family in renaissance Italy.

The new book describes the many examples of structures around the world that perform a similar function to the PCC and indeed a highlight of the new edition is to show that statutory segregation in the corporate form also existed in other jurisdictions before Guernsey enacted its legislation.

Feetham & Jones bring to our attention legal forms in Chile and Italy (that pre-date the PCC) that are very similar in effect to the PCC. We are also informed that Bermuda is perhaps the first significant home of the PCC (or Segregated Account Company) for captive insurance companies.

In the USA, there is a legal form known as LLC, which is really a form of limited liability for partners and was introduced in 1977. Moreover, this was developed by Delaware into the Series LLC in 1996. The Series LLC is similar to a PCC (and pre-dates the PCC) but it was not conceived as a suitable form for insurance companies - at least not until 2010 – when Delaware announced the first insurance Series LLC. This is an example of the "legal laboratory" at work such that the future prospects of a corporate form can be totally different to those imagined at the outset. The authors emphasise that the PCC structure is inherently flexible so that it may be used in surprising new areas. In fact, we may not really know the answer to this in the foreseeable future if we accept the long-term perspective as being relevant. I am reminded of a famous quotation from China - "It is too early to say" - Zhou Enlai, asked in 1971 for his assessment of the 1789 French Revolution.

Insolvency Of A PCC

The second edition retains at its core a central and critical question, namely - will other jurisdictions recognise the PCC and its cells, especially in the event of an insolvency?

The short answer is that probably yes, and almost certainly for creditors that choose to engage with the PCC, but less likely if the PCC engages in compulsory insurances (such as motor liability) and particularly where the creditors are deemed to be involuntary.

A primary issue is recognition of the domicile's laws by other jurisdictions. In this regard the authors note that Gibraltar and Malta have a distinct advantage because the EU Insurance Insolvency Directive requires mutual recognition of a local insolvency process. Clearly, the local jurisdiction will protect the concept of cell segregation of assets and liabilities.

Feetham & Jones argue that aside from international treaty or quasi-treaty requirements, the concept of ring-fencing liabilities should not conflict with accepted business practice. The problem, as the authors acknowledge, is that public policy concerns could intervene when the creditor is deemed involuntary as they would not have chosen to rank (amongst other creditors) only in respect of the assets of the cell.

The counter argument is that courts have always recognised that insurance policies can contain limitation of liability clauses. So long as the cell limitation concept is seen in this light – i.e substantive, rather than being seen as some form of (antecedent) blocking remedy contrary to the principle of treating creditors equally (pari passu), then the PCC concept may well survive such a test.

Suffice to say, there is as yet no specific case law on the subject; however the authors have rightly brought to the second edition an important Lords judgment in connection with the HIH insurance insolvency. In this judgment, the principle of respecting the insolvency proceedings of another jurisdiction (and also indirectly a weakening of pari passu) is very helpful for the future prospects of a PCC in the context of an insolvency. This is important, since a PCC is designed to provide a preference to creditors with respect to cells – this is the whole point of the PCC.

I have no doubt that in the event of future litigation or insolvency involving a PCC anywhere in the World that this book will be quoted extensively by practitioners and judges alike. Whether it will be cited with approval remains the open question. There is still no case-law on the subject which makes this book the legal reference point of choice.

Keep It Local

In order to maximize the chances of the home law and jurisdiction of the PCC prevailing in the event of a dispute, the mantra of the book is that all aspects of a PCC (as far as possible) should be kept in the home jurisdiction. Some helpful points are made:

  • The PCC should be located in a territory whose laws are recognised internationally or trans-nationally. Gibraltar and Malta, being in the EU, have this advantage.
  • The PCC should be managed to the highest standards such that all parties understand they are contracting with a PCC.
  • The management of a PCC should be kept local as far as possible. Assets should be held locally (including reinsurance assets if possible). Also, all the contracts should be subject to the law and jurisdiction of the local courts (as far as possible).
  • The PCC's manager should adopt a "belt and braces" approach and complement statutory segregation of assets/liabilities with contractual means as far as possible.

New Chapter On Taxation

Aside from insolvency, the sponsors of a PCC will want to ensure there are no unpredictable tax liabilities from foreign jurisdictions, and hence another reason to "keep things local". This new chapter on taxation is invaluable, referencing IRS publications on the matter, and Controlled Foreign Company (CFS) rules amongst other points. Whilst it would be ambitious to attempt a summary here, it is noteworthy that the prospects of a challenge to the cellular structure from tax authorities is a clear risk which needs to be planned for in the structure, set-up and ongoing management of a PCC.

Comparison Of Domiciles

A very useful addition to the second edition is the comparison of PCC domiciles, now including those USA states with Series LLC legislation. The authors continue to approach this from a first principles basis which greatly helps understanding. For example, each domicile (or set of domiciles) will have varying approaches to inter-cellular liability and liability between the core and cells.

EU Developments

The authors have clearly looked widely for new material, and an exciting insight in this part of the second edition is the potential for the PCC to become mainstream in the wider context of the Solvency II regime. This is the new regulation for insurance companies that will significantly increase capital requirements for insurers throughout the EU in 2012. It would be surprising if insurance companies make no significant effort to find out all the possibilities for mitigating these new requirements (which will be severe for many). One answer is the PCC. Since it is a company, the solvency requirement applies to the PCC, not the cells. Moreover, the Solvency II regime expressly provides capital relief for diversification, so the more cells (i.e more diversification) there is a potential for a substantially lower solvency requirement - on average per cell.

This finding links to the authors' insight that a PCC is (or can be) analogous to Lloyd's of London. The established PCCs – such as those that exist in Gibraltar and Malta – can benefit from this for sure, but the real potential is possibly even more significant for the PCC. Going back to the legal laboratory concept, the originators of the PCC may not have imagined the extent to which the PCC may thrive, and a second Lloyd's of London is not so far-fetched if the Solvency II regime is ultimately as onerous as is now feared in the insurance industry.

* * * * * * * * * *

There are many more additions and improvements in this second edition which I have not had space to cover here. I would expect this book to stand for some considerable time as the standard and authoritative text on the subject worldwide. Local lawyer Nigel Feetham should be commended for his accomplishment. In short, this book, particularly in its new edition, is an excellent tour de force by very knowledgeable authors.

Robin Amos is Assistant Director at Aon Insurance Managers (Gibraltar) Limited.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions