Einführung

Entscheidend mit zu den Faktoren, die einen wirtschaftlichen Aufschwung ausmachen, gehört die Vereinfachung bei der Realisierung von Projekten Among the different factors that contribute to economic growth are the roles played by "offshore" jurisdictionsi, which in many ways assist or ease different business activities (of commercial, financial or patrimonial nature) around the globe, an aspect often forgotten by many. The operational and business flexibility offered by these jurisdictions is achieved by means of the use of their various legal vehicles or instruments, which in many circumstances facilitate trade, capital flows, legitimately help reduce high/prohibitive tax burdens on business or even assist in fulfilling people's natural and legitimate desires for asset planning and protection. The spectrum of instruments may include -inter alia- the well-known International Business Corporationsii, the traditional common law trusts and captive insurance companiesiii. Authoritative and specialized publications on the subjectiv report a rapid improvement and innovation exemplified by the adoption of laws and regulations giving rise to -among others- private interests foundationsv, the British Nominee Companies, International Headquarters Company, Dual Resident Company and the Open-ended Investment Companies (OEIC)vi, the international corporations from Manx and Jersey, the Irish Non-Resident Company, the American limited liability companies (LLCs) and the Cayman Islands STAR Trustsvii. One of the relatively recent tools available for corporate, tax planning and financial services law practitioners in the comparative legal context is the Protected Cell Company (hereinafter "PCC"), an innovative corporate instrument whose concept, characteristics and uses in the international financial arena are briefly explained in the following paragraphs.




DieThe Protected Cell Company in a Nutshell

These entities originated in Guernsey, specifically by means of The Protected Cell Companies Ordinance 1997 (as amended by "The Protected Cell Companies (Amendment) Ordinance, 1998")viii. Other offshore jurisdictions have followed the path of Guernsey, including the Cayman Islands with its Segregated Portfolio Companies; Bermuda (which passed the New Providence Mutual Ltd. Private Act allowing a PCC structure for this entity); Mauritius (which approved The Protected Cell Companies Act of 1999 [amended in 2000]); and St. Vincent and The Grenadines with their International Insurance (Amendments and Consolidation) Act of 1998 which allows "protected premium accounts" introducing elements of the PCCix. These regulatory schemes constitute a response to claims and heavy lobby from the captive insurance industry and come to resolve structural inefficiencies of the "rent-a-captive" concept. Before describing the intricacies of the PCC it is necessary to briefly express the background which gave rise to this new corporate structure.


The Captive Insurance Companies and the "Rent-a-Captive" Schemes: a background

As expressed in the Introduction, one of the "products"x available in the competitive offshore industry is the captive insurance company. A captive is a corporate entity created and controlled by a parent company (or a group of corporate entities) whose main purpose is to provide insurance for determined risks of such parent company (or of the corporate group), as an alternative to the traditional insurance coverage provided by the insurance industryxi. In short terms, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity (which is a 100% a subsidiary of the self-insured parent company); of a "mutual" captive (which insures the collective risks of industry members) and of an "association" captive (which self-insures individual risks of the members of a professional, commercial or industrial association). Captives represent commercial, economic and tax advantages to their sponsors due to the reductions on costs they help create, the ease for insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which are neither available nor offered in the traditional insurance market at reasonable prices.

In cases in which a company is not financially capable to self-insure itself it may still obtain self-coverage through the use of a "rent-a-captive" scheme. In this case, such company would share the services of a captive with other companies of relatively similar size, by "renting" part of the capital of the rented captive. Unrelated companies would use then the same captive to insure their risks. The patrimony of the captive would thus cover the underwritten risks of the sponsoring entities in the case a triggering event occurs, as described in the respective policy.

Although the rent-a-captive structure represents advantages for the insurance industry, because -among others- it provides for economies of scale (is a costs-savings instrument), it has a major flaw: it constitutes a single entity vis-à-vis third parties, whose single patrimony is thus exposed to unjustified third-party claims, which risks the assets allocated to cover claims for other companies participating in the sponsored captive structure. There is no guarantee nor assurance that the funds provided by one participant-enterprise to the rented captive would not be used to cover any unjustified claims unrelated to the risks such participant wanted to insure through the rented captive. No asset protection is provided for the participants of a rent-a-captive program on an individual basis. In order to circumvent such patrimonial risk-fencing deficiency the insurance industry developed the concept of the PCC.


The Protected Cell Company Explained

What is a PCC and which are its uses? How does it work?
In simple terms, the PCC is a corporation structured with different patrimonies, all segregated through "cells", which are independent and separate from each other and from a "core" patrimony of the entity. The segregation of patrimonies helps avoid commingling of funds and assets of the different sponsoring participants, ensuring thus that no claim against one participant-beneficiary of the captive-insurance entity would be covered by funds or assets furnished by another participating/sponsoring enterprise. Based on the aforementioned, a PCC may be defined thus as:

A corporation whose patrimony is composed of assets contained in structurally separate parts named "cells" [cellular assets], which are legally and functionally separate, distinct and independent among each other, and of assets not constituting "cells" [non-cellular assets], also structurally and legally independent, that has as main legal characteristic the fact that the portion of capital designated to a specific cell is neither liable for the general obligations, commitments or liabilities of the corporation nor for the specific liabilities of the other cells.

It is possible to extract the main characteristics of these entities from the above, as follows:

a) Legal Entity: the PCC has its own juridical personality, thus is capable of owning rights and assuming obligations on its own. The "cells", although being separate individual patrimonies, do not constitute separate entities themselves;

b) "Cellular" Patrimonies: the patrimony of the entity is divided in different "protected cells", which allows segregation of funds, thus enabling ring-fencing among the distinct cells and the core patrimony;

c) "Core" Patrimony: a portion of the PCC's patrimony is composed of general assets ("non-cellular" assets), which are separate and distinct from each of the assets composing the protected cells, creating what is commonly known as the "core cell";

d) Segregation of Assets and Liabilities: the assets allocated to each specific cell may only be liable for liabilities incurred by such cell and thus should not be attached by creditors of the other company's cells. The liabilities unrelated to a specific cell are covered by the non-cellular assets or the core cell. The core assets respond -on subsidiary grounds- once the specific cellular assets are depleted.

In summary, a PCC -structurally speaking- involves a core capital, cellular capital, cellular assets and liabilities, and core assets and liabilities. The ring-fencing rules are also applicable to any liquidator or receiver of the entity. Thus the insolvency of a cell should not affect the business of the whole entity or the performance of the other cells.

For each business, activity or agreement contracted, the PCC must disclose which cell is contracting or if the entity is committing its core assets or both, core and specific cell assets. The PCC must have a name and each and every cell must also be clearly identified in the formation documents of the entity. Once formed, these entities may issue shares ("cellular" or "non-cellular" shares, depending on whether they represent an equity interest in a specific cell or in the core assets) or other types of securities. The entity must keep accounting books showing the corresponding patrimonial divisions among the segregated cells and the core cell within the entity.




The Protected Cell Company: a new form of investment fund

Protected Cell Companies are also authorized in Guernsey to operate as investment fundsxii. These entities are suitable vehicles for the operation of mutual funds, especially in the form of umbrella funds, having each cell as a sub-fund. A sponsor, for example, may structure a multiple series fund by setting up a PCC, in which case each cell may represent the different group of investments for which the distinct classes or series of shares are offered to the fund's investors. The use of a single entity structure for the different funds ("series fund") -in contrast to a "family of funds" structured with multiple entities in which each separate legal entity represents a particular fund- would eliminate or reduce costs, by using -for example- a single board, the same distributor, custodian, transfer and payment agent, and the same prospectusxiii.




Die Protected Cell Company as Conduit for Structured Finance

Although relatively a new instrument, the uses of a PCC have grown and diversified in the past recent years. Since its inception in 1997 this entity have evolved from being an alternative to the rent-a-captive scheme and an investment fund vehicle to become a suitable conduit for insurance risk management.

The PCC may be used for securitizing insurance risk against catastrophic losses, such as natural disasters; thus increasing sources and availability of capital and stabilizing underwriting results of domestic insurance companiesxiv. Securitization of catastrophe risk have taken several forms, which include among the principal ones "contingent surplus notes", catastrophe or "Act of God" bonds (CAT Bonds), CatEPuts, and exchange-traded catastrophe optionsxv. In terms of regulatory developments for these purposes, various States in the United States of America have adopted the PCC concept, looking for ways to generate insurance risks securitization business "onshore". In this regard, for example, sponsored by the National Association of Insurance Commissioners (NAIC) -which approved a model law-, Illinois adopted the Protected Cell Company Law (amending its Insurance Code)xvi, which purpose is the creation of "more efficiency in conducting insurance securitization, to allow domestic companies easier access to alternative sources of capital, and to promote the benefits of insurance securitization generally"xvii. Rhode Island copied the strategy by means of The Protected Cell Companies Act (Chapters 27-64 of Title 27 Insurance of its Code)xviii, and Vermont followed the trend with the concept of the "Sponsored Captive Insurance Company", which is defined in such law as any captive insurance company that segregates each participant's liability through one or more protected cellsxix. Lastly, South Carolina joined also the clubxx.


Protected Cell Companies and Securitization Corporations: Twin Conduits

It has been reported the introduction of single cell/class fund concepts into Italian company law, "which are at odds with the pari passu principle which treats debtors equally on insolvency"xxi. Law No. 130 of April 30, 1999, approved by the Italian Parliament, provides for the creation of "securitization companies", pursuant to which the receivables assigned to such entities are segregated from other assets of the securitization company and may only be attached by holders of the securitization securities pertaining to those receivables. To the best of my knowledge, the Italian securitization company has as precedent the "sociedad securitizadora" (securitization corporation), which originated in Chile by means of Law 19,301 of 1994 (which amended the Securities Markets Laws)xxii. The PCC concept resembles the Chilean sociedad securitizadora in the sense that it also provides for the segregation of assets, which back the different issued securities. Under Chilean law, the sociedad securitizadora is deemed a special corporation ("anónima especial") whose sole purpose is the acquisition of credits (as defined by law) and rights over cash flows, and the issuance of debt securities (short or long term instruments); therefore, they may act as the assignee of the transferred financial assets and as special purpose issuer of the asset-backed securities. Pursuant to the Chilean law, each issuance originates the formation of separate patrimonies distinct from the common patrimony of the entity, a structural corporate characteristic found in the PCC. The difference among these is that the Chilean law allows for the securitization of various underlying financial assets, to wit: mortgage notes, "mutuos hipotecarios", assets and leasing contracts, credits and rights over cash flows (mainly of public projects) and any other credits documented in writing and that are transferable in naturexxiii, while the PCC American legislation restricts their use to securitizing insurance risks. Other jurisdictions, such as Brazilxxiv, Paraguayxxv, Peruxxvi, and Ecuadorxxvii have followed the trend and adopted -either by law or regulation- similar versions of securitization companies, all of which have brought remarkable progress and innovations to the Latin American asset-backed securities markets. Lastly, with the aim of bringing securitization "onshore" the United States, the National Association of Insurance Commissioners' Insurance Securitization Working Group focused in the adoption of a model law on "special-purpose vehicles"xxviii and on February 6, 2001 agreed -in principle- to such model actxxix, which would facilitate setting up securitization special purpose entities within the United States. This trend shows the increasing and strong competition among jurisdictions to provide the best vehicles to generate structured finance businessxxx.

If properly structured and with the adequate regulatory scheme in place, a PCC may be used for multi-series structured finance transactions, in a similar manner as the Chilean securitizadoras may be utilized. For example, the PCC may act as the special purpose vehicle-issuer for the securitization of different pools of assets, by repackaging them and issuing different types of asset-backed notes, each type of note been backed by the assets forming a separate protected ring-fenced cell (giving rise to "cellular-asset-backed securities"). Even the core assets may be used as a credit enhancement mechanism within the structure. The PCC may be structured in a way in which it would have as many and distinct cells as needed for the different pools of receivables that may be repackaged. In this sense, a bank or finance company may pool and repackage loans per geographic areas, per outstanding balances, per type of loans or by type of security backing such creditsxxxi. A segregated cell "X" would then back the notes "X", cell "Y" would back notes "Y" and so on. In the event of default on the X notes, then the assets backing the Y notes would not be affected, giving complete ring-fencing protection to the different asset-backed securities-holders, enabling the bank or finance company to structure the deal with such flexibility that it may issue ring-fenced multi-series of securities for different markets or type of investors. The segregated cells may provide for a legally strong manner for "tranching"xxxii (thus creating different levels of prioritization or subordination among the securities), in which case each separate cell may represent a tranche and even within such cell different levels of tranches may be established. Obviously, the transaction documentation must clearly set forth the rights and obligations of the parties, including the ones of each protected-segregated cellxxxiii.




Fazit

Intense competition among traditionally known "offshore" jurisdictions and "onshore" players, such as various States of the United States of America, have caused a visible trend on increasing innovation in the creation and evolution of legal structures, all with the aim of providing better and cost-effective financial services to the international markets. The Protected Cell Company, a multi-use corporate structure, constitutes a clear reflection of this legal-financial engineering dynamic phenomenon, whose success in the marketplace remains on challenge.




ffbkdavid@business-podium.com
www.creatrustconsult.com

steht "meine" lieblingsstruktur vor dem durchbruch? - neue ideen, vor allem, wenn sie uns klassisch denkenden mitteleuropäern als (zu) exotisch erscheinen, brauchen in unseren breitengraden offensichtlich mehr zeit, bis deren vorteile einer breiteren potentiellen kundenzahl offenbar wird

die neue ICC-gesetzgebung auf jersey - sie entspricht im wesentlichen den pcc-regulatorien (protected cell structures) in common law jurisdictions wie beispielsweise anguilla - hat nun offensichtlich bei der französischen bankengruppe société générale anklang gefunden:

- - - - - - - - - -

It emerged this week that law firm Ogier has acted for Société Générale in establishing the first Incorporated Cell Company (ICC) to be set up in Jersey.

Societé Générale, advised by Ogier’s Michael Lombardi and Nathan Powell, selected the ICC as the most efficient structure in a complex asset financing transaction, in order to facilitate ring-fencing the assets and liabilities attributable to the initial portion of the financing.

SG Hambros Trust Company (Channel Islands) Limited has been selected to act as administrator of the ICC and it is anticipated that additional cells will be added for subsequent financings.

Ogier finance partner, Michael Lombardi commented that:

“The new Incorporated Cell Company provides transaction sponsors and arrangers with a wider range of cost effective structuring options than is currently available elsewhere. It is anticipated that Incorporated Cell Companies will be used for a variety of applications in medium term note programmes, multi-series asset backed securities issues, umbrella investment funds and structured equity products.”

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in einer zeit, in der diversifikation/risikoverteilung/mitspielen auf unterschiedlichen hochzeiten etc. an oberster stelle wirtschaftlicher tätigkeit steht, bieten pcc's die einzigartige möglichkeit, unter einem dach (und den damit verbundenen kosteneinsparungen!) auch die unterschiedlichsten geschäftlichen aktivitäten über einzelne, voneinander unabhängige zellen ein und derselben gesellschaft abzuwickeln

geheimtip für immobilienpromotoren: eigentumswohnungen (vor allem solche an offshoreplätzen, aber auch im europäischen ausland), die via iuristische personen gehalten werden, verkaufen sich um ein vielfaches besser und schneller als die konventionelle übertragung auf privatpersonen. mit der gestaltung über eine pcc können die doch beträchtlichen kosten für eine überbauung mit beispielsweise 50 einheiten auf ein absolut vertretbares niveau heruntergefahren werden... und man kann den käufern die optimale verwaltung unter dem pcc-dach gleich mit anbieten

honni soit qui mal-y pense 8-)


ffbkdavid@business-podium.com
www.creatrustconsult.com

Für Inhaber verschiedener geschäftlicher Interessen kann die Verlagerung von Vermögenswerten in Firmen nicht primär von steuerlichem Interesse sein, sondern im Hinblick auf die zunehmende Gefahr der Haftung für Aktivitäten von Gesellschaften, an denen Beteiligungsverhältnisse offensichtlich sind, von existentieller Bedeutung sein/werden - man denke an den Besitzer einer Tankstelle (Explosionsgefahr/Umweltschäden), der gleichzeitig als Ergebnis seiner erfolgreichen Aktivitäten einige Miethäuser besitzt... ein willkommenes "Ziel von Attacken"

Als valable Alternative zur Ausgliederung unterschiedlicher Investments in jeweils unabhängige iuristische Personen (was als Konsequenz bedeuten würde, dass 25 Mietwohnungen in 25 verschiedene Firmen verlagert werden müssten... was alleine schon aus Kosten- und Verwaltungsgründen wohl kaum praktikabel wäre!) besteht in einigen Offshoreländern, aber auch in verschiedenen US-Staaten, die Möglichkeit, unter dem Dach einer PCC (Protected Cell Company) - in einigen Ländern auch als "Series LLC" bezeichnet - unterschiedlichste Aktivitäten abzuwickeln, ohne dass Investitions-Flops in der einen "Zelle" die PCC als ganzes in Gefahr bringen.

Durch die professionelle Gestaltung des einen notwendigen Operating Agreements können Verantwortlichkeiten von den Members (= Aktionären) auf Manager übertragen und so Verantwortlichkeitsansprüche erfolgreich abgewehrt werden

Kostenmässig werden PCC's/Series LLC's - vor allem hinsichtlich der staatlichen Abgaben - wie "Einzellösungen" erfasst... wobei durch die (im Normalfall in bescheidenem Rahmen) Mehrarbeit selbstverständlich bei grösseren Strukturen mit höheren Kosten im Vergleich zu einer "Standardlösung" gerechnet werden muss


ffbkdavid@business-podium.com
www.creatrustconsult.com

Haupteinsatzmöglichkeit vornehmlich in den USA eingesetzter PCC's (Protected Cell Companies) resp. Series LLC's zeigen sich aufgrund der Erfahrungen der vergangenen Jahre im Immobilienbereich... sei es für die Verwaltung grösserer Mehrfamilienhäuser mit dem Gedanken, einzelne Einheiten zu einem späteren Zeitpunkt als Einzelobjekte verkaufen zu können... oder für die optimale Abwicklung konkreter Resortprojekte (in diesem Fall wird die PCC nach Abschluss der Bauarbeiten und den Verkauf der einzelnen Objekte liquidiert)

Als neues "Einsatzgebiet" haben sich Bonusprogramme von Firmen entwickelt - von der Geschäftsleitung zugestandene Boni, die erst zu einem späteren Zeitpunkt in Bargeld umgewandelt werden können/dürfen, werden in eine iuristische Person ausgegliedert und rechtlich abgesichert und in der gewünschten (unterschiedlichen) Höhe und unter unterschiedlichen Voraussetzungen/Bedingungen den jeweiligen Berechtigten gutgeschrieben

Auch im Falle von Uebernahmen (Mergers and Acquisitions) kann die Einrichtung einer PCC/Series LLC-Lösung Vorteile hinsichtlich der teilweise erheblichen Kosten bieten - Zusammenschlüsse von Gesellschaften unterschiedlicher Grösse können via separate "Zellen" optimal gestaltet und den jeweiligen Inhabern (= Einbringern der entsprechenden Werte) die ihnen zustehenden Stimmrechte übertragen werden

Last but not least bieten PCC-Lösungen auch ausgezeichnete Möglichkeiten, unterschiedliche Beteiligungen beispielsweise an Geschäftsflugzeugen und/oder Yachten/Schiffen optimal zu gestalten - im Hinblick auf die anspruchsvollen behördlichen Voraussetzungen zur Eintragung entsprechender Besitzverhältnisse eine valable Alternative zu kostspieligen und schwerfälligen "normalen" Firmenlösungen mit unterschiedlichen Aktienwerten/-klassen


ffbkdavid@business-podium.com
www.creatrustconsult.com