Gibraltar: Law of Offshore
Protected Cell Company Legislation
The Gibraltar parliament, the House of Assembly, passed a bill for a Protected Cell Companies Ordinance on 3 July 2001.
The legislation, which was expected to boost sectors such as captive insurance and funds, in essence provides for a single company with individual parts, known as cells, which are kept separate from each other. Each cell is only liable for its own debts and not for the debts of any other cell within the company.
Part I - Part I of the Ordinance describes the formation and attributes of a protected cell company. A company may be either incorporated as a PCC, or converted, if so authorised by its articles, into a PCC. The new law stipulates that, for the avoidance of doubt, "a protected cell company is a single legal person," and that "the creation by a PCC of a cell does not create, in respect of that cell, a legal person separate from the company". The provisions of the Companies Ordinance apply in relation to a protected cell company (subject to the provisions of the PCC Ordinance, and unless the context requires otherwise).
Separation Of Assets - Particularly noteworthy is Section 5 of Part I, which describes the duty to keep the assets of each cell separately identifiable. "It shall be the duty of the directors of a protected cell company " (a) to keep cellular assets separate and separately identifiable from non-cellular assets; and (b) to keep cellular assets attributable to each cell separate and separately identifiable from cellular assets attributable to other cells." Directors may "cause or permit" cellular and non-cellular assets to be held by or through a nominee, or by a company whose shares and capital interests may be cellular assets, non-cellular assets, or a combination of both. Such assets may be collectively invested, or collectively managed by an investment manager, provided that the assets in question remain separately identifiable. Sections 6 and 7 make it clear that the rights of creditors are limited to the assets of the cell of which they are creditors.
Cell Shares, Cellular Capital And Cellular Dividends - Section 8 provides for a PCC to create and issue shares ('cell shares') in respect of any of its cells. The proceeds of the issue ('cell share capital') are comprised in the cellular assets attributable to the cell in respect of which the cell shares are issued. A protected cell company may pay a cellular dividend. Section 9 provides that except in the case of a PCC which is authorised by the Financial Services Commissioner as a collective investment scheme, and which is redeeming units or shares in accordance with its scheme particulars, no reduction of cell share capital may be made without an order of the Court. Section 10 provides that a protected cell company must state that it is one i.e. the name of the PCC must include 'Protected Cell', 'PCC', or any cognate expression approved in writing by the Registrar. The memorandum of a PCC shall state that it is such, and each cell shall have its own distinct name or designation.
Insurance Companies, Collective Investment Schemes And Securitisation - Section 11 states that a company which is a Gibraltar insurer as defined in Section 2 of the Insurance Companies Ordinance, or a collective investment scheme authorised under the Financial Services Ordinance 1989 must obtain the consent of the Financial Services Commissioner before becoming a PCC. In the case of securitisation companies not requiring a licence under the Financial Services Ordinances 1989 or 1998 established principally for the purposes of issuing bonds, notes or other debt securities or instruments, secured or unsecured, in respect of which the repayment of capital and interest is to be funded from the company's investments, consent must be sought from the Finance Centre Director. Sections 13 to 18 deal with the liability of cellular and non-cellular assets of the company. "The cellular assets attributable to a particular cell shall be primarily used to satisfy a liability, and the non-cellular assets shall be secondarily used, provided that the cellular assets have been exhausted. However, any liability not attributable to a particular cell of a PCC shall be the liability solely of the company's non-cellular assets."
Parts II and III deal with the effects of receivership and administration orders on each individual cell and on the company as a whole. Part IV covers offences under the Ordinance.
The passporting of insurance and reinsurance mediation from Gibraltar throughout the EEA came into effect on January 15, 2005.
Passporting rights arise under the single market directives, and grant a person in the designated jurisdiction the right to establish a branch in another EEA state or to do business there on a cross-border basis, subject to the fulfillment of the conditions in the directive in question.
This was the fourth passporting badge awarded to Gibraltar, following insurance in 1997, banking in 1999, and investment services in 2003.
According to the Rock's financial services authorities, the passporting of insurance and reinsurance mediation was enabled by the passing of an amending ordinance, the Financial Services (Insurance Mediation) (Amendment) Ordinance 2004 in the House of Assembly on December 22, 2004. The Ordinance amended the Financial Services Ordinance 1989 in order to transpose into the law of Gibraltar Directive 2002/92/EC of the European Parliament and of the Council of December 9, 2002 on insurance mediation.
The Ordinance provides for the regulation of insurance and reinsurance mediation, including such activities as:
- Introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance or reinsurance;
- Concluding contracts of insurance or reinsurance; and
- Assisting in the administration and performance of such contracts, in particular in the event of a claim.