Protected Cell Company (PCC)
What Is a Protected Cell Company (PCC)?
A protected cell company (PCC) is a corporate structure wherein a single legal entity comprises of a core linked to several cells that have separate assets and liabilities. A PCC has a comparable design to a hub and spoke. The central core organization is linked to individual cells and every cell is independent of one another and the company's core, yet the whole unit is as yet a single legal entity. A PCC is here and there alluded to as a segregated portfolio company.
How a Protected Cell Company (PCC) Works
A protected cell company works (PCC) with two distinct groups: a single-core company and an unlimited number of cells. It is represented by a single board of directors, which is responsible for the management of the PCC as a whole. Every cell is managed by a committee or comparable group, with authority to the committee conceded by the PCC board of directors. A PCC documents a single annual return to regulators, however business and operational plans of every cell might in any case require individual survey and endorsement by regulators.
Cells inside a PCC are formed under the authority of the board of directors, who are commonly able to make new cells as necessary. The articles of incorporation give rules that the directors must follow.
Protected Cell Companies and Creditors
In certain purviews, where the assets of a segregated portfolio are lacking to meet that portfolio's obligations, then, at that point, a creditor may have recourse to the overall assets of the PCC, yet not to those assets that have a place with an alternate segregated portfolio. A PCC is technically a single legal entity, and the segregated portfolios inside the PCC are not separate legal elements, however, for bankruptcy purposes, they are treated in that capacity.
Insurance and reinsurance companies utilize this form of organizational structure. Creditors may likewise approach the core assets of the company. Every individual cell is frequently expected to keep collateralized underwriting risk on its own inside the cell.
Financial institutions, like banks, may make PCCs to make insurance products or other structured products through derivatives from banking products. Along these lines, it is making a special purpose vehicle (SPV) to securitize a transaction.
In certain wards, the separation of liabilities is accomplished by various systems. For instance, Barbados permits the formation of both "Protected Cell Companies" and "Companies with a Separate Account Structure." The last option separates liabilities by permitting a company to distribute assets and liabilities to quite a few separate accounts. These legal substances and practices enable tax optimization procedures, and consider better results in case of bankruptcy, liquidation, and different restructuring circumstances.
Features
- A protected cell company (PCC) is a legal entity that comprises of a core linked to several cells.
- A PCC is represented by a single board of directors that regulates the whole legal entity. Every cell is managed by a committee or group authorized by the board.
- Cells in a PCC have separate assets and liabilities and are independent of each other.
- For bankruptcy purposes, the cells are treated as separate legal elements; creditors can't pursue the assets of different cells.
- Just a single annual return should be petitioned for a PCC, incorporating the core and the cells.
