PCCs and ICCs - Jersey’s cell companies

Jersey’s cell companies

This briefing considers Jersey cell companies (protected cell companies and incorporated cell companies) and states the advantages of these highly flexible types of company.  Amati Law, through it’s members, advised on the development of the PCC and ICC Law in 2008.

Executive summary 

The purpose of PCCs or ICCs are to hold and segregate assets reducing risks of cross-contamination combined with great flexibility of use.

• Two types of Jersey cell company exist:

  • protected cell companies (PCCs) are similar to other jurisdictions’ structures, while offering more flexible;

  • incorporated cell companies (ICCs) are structures where each cell has separate legal identity.

What is a cell company? 

Jersey’s cell company is a type of corporate entity with separate legal personality that permits the assets and liabilities of a company to be segregated into different 'cells'. 

This segregation of assets means that a creditor of a cell company who deals with the cell company in respect of a particular cell, only has a right of recourse to the assets of that cell and (unless the constitutional documents provide otherwise) has no right of recourse to the assets of any other cell or the cell company's other assets. 

PCCs and ICCs 

The main difference between PCCs and ICCs is that the 'protected cells' of a PCC, like PCCs in other jurisdictions, do not have a legal identity separate from the cell company of which they form part. 

In contrast, the 'incorporated cells' of an ICC are each, by law, a separate company and therefore have separate legal identity, albeit those cells also form part of the ICC. 

While an ICC clearly has similarities to an ordinary corporate group structure, it is different in the following respects: 

• each incorporated cell automatically has the same secretary and registered office as its ICC;

• an incorporated cell is expressly stated not to be a subsidiary of the ICC;

• various secretarial functions required by statute must be carried out by the ICC; and

• the shares in each incorporated cell will not generally be held by the ICC but by the intended 'owner' of the assets to be held in that incorporated cell.

As a result the ICC is not the parent of the incorporated cell. 

Although what can and cannot be done with an ICC is on the whole the same as with a PCC, the ICC may provide a more robust structure where the segregation of assets and liabilities is in question, for example, in insolvency situations in jurisdictions outside Jersey. 

Key features of a cell company 

Jersey’s Companies Law is drafted to make cell companies as flexible as possible while providing the required level of investor protection. Key features are set out below.

Incorporation 

Each cell is able to have a different type of capital eg cells are able to have par value limited or unlimited shares, no par value limited or unlimited shares or have guarantee members (or, in some cases, combinations of these). Cells are also able to own shares in other cells. 

Cells have their own constitutional documents (although these will generally be largely identical to those of the cell company), have the same secretary and registered office as the cell company and have their own register of members. 

Cells treated like companies 

For the purposes of the Companies Law, protected cells are treated as if they are companies, and incorporated cells are actually companies. This has the advantage of giving certainty in the application of the Companies Law to each cell, and consequent flexibility, in that virtually everything that can be done with or by a company is available to each individual cell. 

Accounts 

Cells must prepare their own accounts. 

Restructuring provisions 

The flexibility of the cell company is considerable.

• a company can convert into a cell company, and back again;

• a PCC can convert into an ICC, and back again;

• a company can convert into a cell of a PCC or an ICC;

• a cell can be transferred from one cell company to another; and

• subject to suitable reciprocal arrangements in the other jurisdiction, a cell company can be migrated out of Jersey, and a non Jersey cell company or company can be migrated into Jersey as a cell company.

Other general provisions 

The Companies Law provisions relating to matters such as redemptions and repurchases of shares, payment of dividends and capital reductions apply to each cell as if it were a company. 

Limits on the business of cell companies 

No limits exist on Jersey cell companies provided the sound business practice policy is followed.  Normally cell companies are required to appoint a Jersey regulated entity to administer and/or provide secretarial services to the company. 

Dealings with third parties 

To alert third parties to risk, the directors of a PCC must ensure that a third party knows or ought reasonably to know that the PCC is acting in respect of a particular cell, and if they fail to do so they will be guilty of an offence (although this will not affect the validity of the transaction with the third party). 

Creditors of a particular cell of a PCC only have a right of recourse to the assets of that cell, and non-cellular creditors of the PCC only have a right of recourse to the PCC's non-cellular assets, unless the constitution provides otherwise,

Provisions of the Companies Law protect other cells so that that if a creditor makes available other assets of a PCC that are not assets of the relevant cell to meet its claim, that creditor will be liable to pay to the PCC a sum equal to the benefit obtained. A creditor that manages to seize, attach or otherwise execute claims against such assets will hold such assets on trust for the PCC and must pay or return them 

For more information about PCCs or ICCs or the services that we provide please contact us at info@amatilaw.com