Guernsey: Segregated Asset Companies - Guernsey Looks To The Future

Last Updated: 27 March 2007
Article by Karen Winter

Reproduced with kind permission of Offshore Investment

We are now standing on the threshold of an exciting new future for the use of Guernsey segregated asset companies (sacs).This is because in September 2005 the Guernsey authorities varied the rules restricting the use of the Protected Cell Company (PCC) and this was closely followed in May 2006 by the introduction of the Guernsey Incorporated Cell Company (ICC), an innovative extension of the PCC.

Together, these changes have unblocked restrictions and released the full potential of sacs and there are now limitless new opportunities to utilise their strength and flexibility in all areas of both corporate and personal asset structuring and tax planning.

That Guernsey should still be leading the way is not surprising.The sac concept was first introduced in Guernsey as the Protected Cell Company in 1997 and since then nearly 300 have been incorporated.Throughout almost a decade, the skills, expertise, systems and know how of their application have been tested, applied and developed extensively within the captive insurance, fund and securitisation industries. Further testimony to the success of the PCC comes from the fact that the Guernsey concept has now been copied in more than 30 other jurisdictions.

However, despite this success and the imitations, the finance industry in Guernsey has always been acutely aware of – and very keen to pursue – the potential for sacs in other areas of financial planning.The variation of the rules now makes this possible and the years of knowledge and experienced gained will be expertly applied in carrying the sac forward into a greater diversity of tax planning areas.

The basic concept – what is a sac?

The fundamental structure of the sac will be familiar to financial planners through the basic tools of the PCC and, since May 2006, the ICC. It is worth briefly recapping on the key points and traditional uses of both before considering them in the light of potential future applications.

Essentially, a sac is exactly what it says – it is a company that holds an asset (which may or may not have the potential to become a liability), within a corporate "cellular" environment and under specific legislation that allows the assets of one cellular company to be legally segregated from those of all other companies within the structure.

The Protected Cell Company

A PCC is a single legal corporate entity consisting of a core vehicle which has the power to create individual cells into which separate assets and liabilities can be placed and thereby segregated. Subject to consents, any Guernsey company can be incorporated as a PCC or, if required, an existing Guernsey company can convert to a PCC. The PCC must be administered by a Guernsey licensed entity.

The strength and attraction of a PCC lies in the ring-fencing of assets and liabilities within separate cells because the legislation expressly provides that the assets of any one particular cell are only available to the shareholders and creditors of that cell – creditors of another cell having no recourse against them. Similarly, and following a recent change to the legislation, the core assets may not be used to satisfy cellular insolvency either, except in cases where there is a specific "recourse" agreement in place.

Additional benefits of a PCC

As well as the ability to ring-fence assets and liabilities there are practical and administrative benefits to establishing and using a PCC which also have the benefit of minimising costs when compared to a traditional corporate structure:

  • There is only one corporate entity, so, unlike a group company structure, there is only one Board and only one annual return to be filed.
  • Regulatory consents will have been obtained in advance for the PCC meaning that as new cells are required, the level of regulatory scrutiny and time will be reduced.
  • Distinct shares can be issued by each cell so that the profits and dividends associated with the investment or business of each cell are kept separate rather than being pooled as in a conventional company.
  • Individual cells can quickly be created to act in specific roles – for example, if a fund manager wanted to create a new fund to take advantage of investing in a booming sector or country.
  • A commercial advantage is that a cell, successful or otherwise,may be detached from the PCC (subject to court order) and transferred to another company, in another jurisdiction, irrespective of whether that company is itself a PCC, thus providing protection against "collateral" liquidation.

The Incorporated Cell Company

The ICC, which has been available since May 2006, does no more than extend certain of the features of the PCC, but these extensions do increase the power and flexibility of the use of sacs in certain situations.

An ICC has the same basic structure and advantages as outlined for the PCC above. But, from that point on, the concept has been extended, which in turn has resulted in added benefits:

  • Although an ICC has cells like a PCC, each cell is a separately incorporated, separately registered, legal entity in its own right.This identifiable, separate legal identity brings the benefit of giving each cell the ability to legitimately enter into binding, legal contractual obligations not only with third parties, but also with one another.Within such a structure, an example may be the need for inter-cellular loans, guarantees or credit agreements.
  • This legal separation brings the benefits of facilitating commercial transactions (such as borrowing from a bank) because the bank is dealing with an individually, accountable entity and not the cellular structure as a whole, which in turn means that the legal complexity in creating commercial relationships is simplified. In essence, the third party is dealing with a stand alone company.
  • Administrative benefits – and thereby cost savings – come from several aspects including the cell company and the individual cells having the same directors and registered offices; sole responsibility for maintaining the registers of shareholders for each cell lying with the "principal cell company"; the submission of a combined annual return for all cells; and, the principal cell company being the only cell within the structure that is required to create separate accounts.
  • The overall structure is very similar to a traditional group corporate structure. It is also believed to be less susceptible to challenge and to inter-cellular contamination in the event of creditors’ claims.
  • An existing ordinary Guernsey company will be able to become a cell within an ICC (and vice versa) which provides great flexibility.

Given all of this flexibility and the relaxation of the rules surrounding their use, it is no surprise that Guernsey practitioners are busy unlocking the potential of sacs and turning them into one of the most powerful, invaluable and innovative tools in the financial planner’s armoury.

Sacs will, of course, still have a key role to play in what may now be considered to be their traditional uses and, before considering some of their future potential, it is worth reiterating the uses and reasons why they have become so firmly established.

Captive insurance

The use of PCCs in the captive insurance industry represents their traditional and most enduring use.They continue to enable the efficient segregation of insurance risks, coupled with the benefit of cost savings. Historically, this opened up the first cost effective insurance route to the small company and is an option which still remains available today. Rather than have the expense of setting up a stand alone captive, the company can now approach an insurance manager who, having established a PCC, can insure any number of businesses in separate cells, yet within that single vehicle.This not only reduces the formation costs but, also, the capital requirements of the individual companies.

Funds and Hedge Funds

The ability to segregate assets and liabilities within the fund industry make sacs a powerful and well used tool.A typical umbrella fund structure represents a straightforward example because it is possible for a major liability that attaches to the assets of one share class to have a detrimental effect on the other share classes in the umbrella.This risk of "crosslosses" or "cross-contamination" across share classes can be obviated by the segregation of the potential liabilities within different cells of a sac.

In the same way, highly volatile instruments such as options, futures, forwards and derivative assets, or focused investment in a risk associated sector, can be isolated within individual cells.

Structured finance

The sac remains ideally suited for structured finance transactions in that it can issue bonds and notes where the repayment will be funded from the proceeds of specific investments within individual cells.

In a similar way, a sac can also be used for guaranteed or protected products where the guaranteed element may be placed on deposit while the remainder is invested to generate the return. In this way, passive and active cells are created and any under-performance in the active cell will not erode the guaranteed element, whilst any over-performance in the active cell can always be added to the passive cell.

Looking forward – using sacs in the Future

The traditional uses of the sac as outlined above have been within the corporate sector.Although these will remain, future uses of the sac will focus more on personal and family asset structuring and tax planning.

For example, subject to consents, an individual private client with a mixed property portfolio of retail, commercial and developmental property and land, should now consider structuring the entire business though a sac, thereby isolating the risks from one another and from his other assets.

Outlined below are some further areas of private asset structuring where, over the course of the next year, the Guernsey sac will undoubtedly be applied. Perhaps this is best illustrated in the context of the use of sacs as a useful structure for the Family Office.

The Family Office and the sac

The Family Office is, in itself, becoming an important co-ordinating factor in the long-term generational planning of family assets.When considering the uses of a sac, the two seem tailor-made for one another simply because, within the context of the Family Office, a sac provides the ideal framework for an underlying corporate structure that could hold the family assets. This can reduce the administration for the Family Office normally managed through a complex mix of corporate and trust structures.Trusts can still hold the shares of the sac if required. Corporate governance of the sac can be closely aligned to the governance aims of the family as a whole.

Each cell can provide a separate holding vehicle for one or more assets and, therefore, is ideal for separating family assets within sub groups of the family, such as shares in the family company; investment portfolios (perhaps based on risk or need to generate income); property,maybe based on residential versus commercial; or accessories, wasting assets such as yachts or planes, while at the same time providing the overall structured framework through which the Family Office can operate.

Add to this the option for variable voting rights, differing fees and expenses, a range of investment policies, the option of appointing multiple investment managers, perhaps with each having a specific mandate over different cells and, lastly, varying distribution policies and the flexibility and power of sacs in a private client context is clearly demonstrated.

Holding intellectual property

The Guernsey legislature has also been busy updating the legislation relating to all intellectual property (discussed in detail elsewhere in this feature).This has made Guernsey an attractive centre to register such rights.Tying this in with the sac changes enables any corporation or individual wanting to place their intellectual property portfolios in Guernsey to do so through a PCC or ICC.

This will allow the income flows from royalties, franchising and other rights to flow into a tax efficient environment while, at the same time if, for example, there were elements of research and development, these risks could be isolated. Ultimately, if something of high value were developed, the onward sale of the cell of value could be carried out in isolation.

Countless applications

Now the rules surrounding the use of sacs have been relaxed the opportunities to use them in private client asset structuring and tax planning appear limitless. Multimanager funds, REITs, the inward migration of companies to Guernsey and their conversion to a sac will all provide still further opportunities.

One thing is clear – the continued forward thinking of the Guernsey authorities working in co-operation with Guernsey Financial Practitioners has enabled client advisors to step over the threshold, continue to be creative and innovative with sacs and ensure that Guernsey remains a leader for yet another decade.

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.

In association with
Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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