Guernsey pioneered the cell company concept and the success
of this innovation is illustrated by the fact that it is now
used across the financial services world as an alternative
application for the structuring of products.
The cell company was pioneered when Guernsey introduced the
Protected Cell Company (PCC).
In a conventional company all of the assets and liabilities
are linked, risking that the failure of one part can lead to
the loss of assets related to another. A PCC is one company
made up of a core and individual cells, where the legal
segregation ensures that the assets and liabilities of one cell
are kept separate and protected from the assets and liabilities
of the other cells, as well as from the PCCs non-cellular
assets and creditors.
The fact that the PCC has since been adopted by many
jurisdictions around the world is evidence of the success of
Guernseys innovation. However, it is Guernsey which has
developed expertise in using the structure.
The Island has also adopted the innovative Incorporated Cell
Company (ICC) structure. An ICC has cells like a PCC but they
are distinct entities, with potential advantages in terms of
added protection. In addition, they offer greater flexibility
for example a cell can leave the umbrella of an ICC and convert
into an ordinary company.
The cell company was actually developed to encourage the use
of captive insurance: the structure reduces the risk in captive
sharing (which is itself more economically viable than
establishing a traditional captive); and allows the various
parts of one institutions business to be written into separate
cells. In addition, cell companies can be used as vehicles for
direct access to the reinsurance market.
Cell companies are also now established among promoters of
investment funds, where each cell can run a distinct investment
programme. In addition, in terms of economies of scale, they
are more cost effective to establish than individual funds. The
segregation of assets and liabilities means that PCCs readily
lend themselves to being used as guaranteed or protected
products and can be used to form special purpose vehicles
(SPVs) for securitisation transactions.
Cell companies are now being increasingly used in the wealth
management sphere in terms of Private Trust Companies (PTCs)
and family office solutions; family governance and succession
planning; private investment funds; real estate ownership;
intellectual property and royalty ownership; and tax
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