On the 1st February, 1997, Guernsey introduced a new concept in corporate law, the Protected Cell Company.

Protected Cell Companies are corporate structures in which the assets of different share classes are free from contagion from the liabilities of other share classes. It is anticipated that this type of structure will be particularly attractive for offshore funds 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.

In addition, the structure will be particularly useful to offshore captive insurance companies which would like to segregate distinct areas of risk and activity into different 'cells'. It is also envisaged that protected cell companies will be attractive to businesses which previously did not warrant the establishment of their own captive insurance company. These businesses will now be able to participate in a captive with other businesses without exposing themselves to the risks of the other participants.

The legislation, The Protected Cell Companies Ordinance, 1997, has already attracted considerable international interest as it is believed that Guernsey is the first offshore domicile to introduce this legislation.

This article provides a general outline on the subject at the time of writing. It is not intended to be exhaustive nor to provide legal advice in relation to any particular situation and should not be acted on or relied upon without taking specific advice.