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Protected Cell Companies Act 2001


Published: 2001-11-01

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Protected Cell Companies

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2001-22

PROTECTED CELL COMPANIES ACT 2001

Principal Act

Act. No. 2001-22 Commencement 1.11.2001

Assent 12.7.2001

Amending

enactments

Relevant current

provisions

Commencement

date

Act. 2003-13 ss. 17 and 25(5)(a)(ii). 31.7.2003

LN. 2003/098 s. 24(5)(a)(ii). 4.9.2003

Act. 2013-25 ss. 2, 9(1), 9(6)(e), 11, 18(8)(b),

20(1)(f), 20(3)(c), 25(1)(e) & 25(3)(b)

31.10.2013

2014-14 2(1), 2A, 9(6)(b), (12), (13), 17, 18(7),

19(1), (2), (3), (3A), (4), (5), 20(1),

(2), (3), 20A, 21(1), (2), (3), (4), (5),

(6), 22(1), (2), (3), (4A), (5), (5A), (7),

23, 24(3A), (4)(b), (5)(a), (6),

25(2)(b), 26(6), 28

1.11.2014

English sources

None cited

Protected Cell Companies

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2001-22

Protected Cell Companies

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2001-22

ARRANGEMENT OF SECTIONS

Section

1. Title and commencement.

2. Interpretation.

2A. Disapplication of provisions of Insolvency Act 2011.

PART I

FORMATION & ATTRIBUTES

3. Protected cell companies.

4. Creation of cells.

5. Cellular and non-cellular assets.

6. Position of creditors.

7. Recourse to cellular assets by creditors.

8. Cell shares and share capital.

9. Reduction of cell share capital.

10. Name and memorandum of protected cell company.

11. Consent of the Chief Executive required for protected cell company.

12. Incorporation of company as protected cell company.

13. Liability of cellular assets.

14. Disputes as to liability attributable to cells.

15. Company to inform persons they are dealing with protected cell

company.

16. Attribution of non-cellular assets and liabilities.

17. Provisions in relation to winding up of protected cell company.

18. Transfer of cellular assets from protected cell company.

PART II

CELL LIQUIDATION

19. Cell liquidation orders.

20. Applications for cell liquidation orders.

20A. Application of Insolvency Act 2011 to cell liquidations.

21. Functions of cell liquidator and effect of cell liquidation order.

22. Discharge and variation of cell liquidation orders.

23. Remuneration of cell liquidator.

PART III

ADMINISTRATION ORDERS

24. Administration orders in relation to protected cell companies or

cells.

25. Applications for administration orders.

26. Functions of administrator and effect of administration order.

Protected Cell Companies

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2001-22

27. Discharge and variation of administration orders.

28. Remuneration of administrator.

PART IV

GENERAL PROVISIONS

29. Offences.

Protected Cell Companies

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2001-22

AN ACT TO PROVIDE FOR PROTECTED CELL COMPANIES IN

GIBRALTAR.

Title and commencement.

1. This Act may be cited as the Protected Cell Companies Act 2001 and

comes into operation on the day appointed by the Minister by notice in the

Gazette.

Interpretation.

2.(1) In this Act, unless the context requires otherwise–

“administration order” means an order of the Court under section 24 in

relation to a protected cell company or a cell thereof;

“administrator” means the person appointed as such by an administration

order;

“cell” means a cell created by a protected cell company for the purpose of

segregating and protecting cellular assets in the manner provided by

this Act;

“cell liquidation” means the liquidation of a cell under a cell liquidation

order;

“cell liquidation order” means an order made under section 19;

“cell liquidator” means the person appointed as cell liquidator under a

cell liquidation order;

“cell shares” means shares created and issued by a protected cell

company in respect of one of its cells pursuant to the provisions of

section 8, the proceeds of the issue of which (the “cell share

capital”) shall be comprised in the cellular assets attributable to that

cell;

“cell share capital” means the proceeds of issue of cell shares;

“cell transfer order” means an order of the Court under section 18(3)

sanctioning the transfer of the cellular assets attributable to any cell

of a protected cell company to another person;

“cellular assets” of a protected cell company means the assets of the

company attributable to the company's cells pursuant to section

5(4);

Protected Cell Companies

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2001-22

“cellular dividend” means a dividend payable by a protected cell

company in respect of cell shares pursuant to the provisions of

section 8(3);

“Chief Executive” means the person appointed under section 8 of the

Financial Services Commission Act 2007;

“licensed insolvency practitioner” has the meaning specified in the

Insolvency Act 2011;

“liquidation”, in relation to a protected cell company, means liquidation

under the Insolvency Act 2011;

“liquidator”, in relation to a protected cell company, means a liquidator

or provisional liquidator appointed under the Insolvency Act 2011 or a

voluntary liquidator;

“Minister” means the Minister with responsibility for Trade, Industry and

Telecommunications;

“non-cellular assets” of a protected cell company comprise the assets of

the company which are not cellular assets;

“prescribed” means prescribed by regulations;

“protected cell company” means a company incorporated as, or

converted into, a protected cell company in accordance with the

provisions of this Act;

“Registrar” means the Registrar of Companies;

“transaction” means anything (including, without limitation, any

agreement, arrangement, dealing, disposition, circumstance, event

or relationship) whereby any liability arises or is imposed; and

cognate expressions shall be construed accordingly.

“voluntary liquidation” means voluntary liquidation under the Companies

Act 2014;

“voluntary liquidator” means a liquidator appointed under Part X of the

Companies Act 2014;

(2) Expressions used in this Act shall (unless the context requires

otherwise) have the same meanings as in the Companies Act.

Disapplication of provisions of Insolvency Act 2011.

2A. Parts 2 and 3 of the Insolvency Act 2011 do not apply in relation to a

protected cell company.

Protected Cell Companies

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2001-22

PART I

FORMATION & ATTRIBUTES

Protected cell companies.

3.(1) Subject to the provisions of this Act, a company may be–

(a) incorporated as a protected cell company;

(b) converted, if so authorised by its articles, into a protected cell

company.

(2) For the avoidance of doubt, and notwithstanding that a protected cell

company may have created one or more cells under this Act–

(a) a protected cell company is a single legal person; and

(b) the creation by a protected cell company of a cell does not

create, in respect of that cell, a legal person separate from the

company.

(3) The provisions of the Companies Act shall, subject to the provisions of

this Act, and unless the context requires otherwise, apply in relation to a

protected cell company.

Creation of cells.

4. A protected cell company may create one or more cells for the purpose of

segregating and protecting cellular assets in the manner provided by this

Act.

Cellular and non-cellular assets.

5.(1) The assets of a protected cell company shall be either cellular assets or

non-cellular assets.

(2) 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.

Protected Cell Companies

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2001-22

(3) The cellular assets of a protected cell company comprise the assets of

the company attributable to the cells of the company.

(4) The assets attributable to a cell of a protected cell company comprise–

(a) assets represented by the proceeds of cell share capital and

reserves attributable to the cell;

(b) all other assets attributable to the cell.

(5) For the purposes of subsection (4), the expression “reserves” includes

retained earnings, capital reserves and share premiums.

(6) The non-cellular assets of a protected cell company comprise the assets

of the company which are not cellular assets.

(7) Notwithstanding the provisions of subsection (2), the directors of a

protected cell company may cause or permit cellular assets and non-cellular

assets to be held–

(a) by or through a nominee; or

(b) by a company the shares and capital interests of which may be

cellular assets or non-cellular assets, or a combination of both.

(8) The duty imposed by subsection (2) is not breached by reason only that

the directors of a protected cell company cause or permit cellular assets or

non-cellular assets, or a combination of both, to be collectively invested, or

collectively managed by an investment manager, provided that the assets in

question remain separately identifiable in accordance with subsection (2).

Position of creditors.

6.(1) The rights of creditors of a protected cell company shall correspond

with the liabilities provided for in section 13.

(2) No such creditor shall have any rights other than the rights referred to

in this section and in sections 7 and 13.

(3) There shall be implied (except in so far as the same is expressly

excluded in writing) in every transaction entered into by a protected cell

company the following terms–

(a) that no party shall seek, whether in any proceedings or by any

other means whatsoever or wheresoever, to make or attempt to

use any cellular assets attributable to any cell of the company to

satisfy a liability not attributable to that cell;

Protected Cell Companies

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2001-22

(b) that if any party succeeds by any means whatsoever or

wheresoever in using any cellular assets attributable to any cell

of the company to satisfy a liability not attributable to that cell,

that party shall be liable to the company to pay a sum equal to

the value of the benefit thereby obtained by him; and

(c) that if any party succeeds in seizing or attaching by any means

or otherwise levying execution against any cellular assets

attributable to any cell of the company to satisfy a liability not

attributable to that cell, that party shall hold those assets or

their proceeds on trust for the company and shall keep those

assets or proceeds separate and identifiable as such trust

property.

(4) All sums recovered by a protected cell company as a result of any such

trust as is described in subsection (3)(c) shall be credited against any

concurrent liability imposed under the implied term set out in subsection

(3)(b).

(5) Any asset or sum recovered by a protected cell company under the

implied term set out in subsection (3)(b) or (3) (c) or by any other means

whatsoever or wheresoever in the events referred to in those subsections

shall, after the deduction or payment of any costs of recovery, be applied by

the company so as to compensate the cell affected.

(6) In the event of any cellular assets attributable to a cell of a protected

cell company being taken in execution in respect of a liability not

attributable to that cell, and in so far as such assets or compensation in

respect thereof cannot otherwise be restored to the cell affected, the

company shall–

(a) cause or procure its auditor, acting as expert and not as

arbitrator, to certify the value of the assets lost by the cell

affected; and

(b) transfer or pay to the cell affected, from the cellular or non-

cellular assets to which the liability was attributable, assets or

sums sufficient to restore to the cell affected the value of the

assets lost.

(7) Where under subsection (6)(b) a protected cell company is obliged to

make a transfer or payment from cellular assets attributable to a cell of the

company, and those assets are insufficient, the company shall so far as

possible make up the deficiency from its non-cellular assets.

Protected Cell Companies

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2001-22

(8) This section shall apply to cellular and non-cellular assets of a

protected cell company wherever situated.

Recourse to cellular assets by creditors.

7. Without prejudice to the provisions of sections 6 and 13, cellular assets

attributable to a cell of a protected cell company–

(a) shall only be available to the creditors of the company who are

creditors in respect of that cell and who are thereby entitled, in

conformity with the provisions of this Act, to have recourse to

the cellular assets attributable to that cell;

(b) shall be absolutely protected from the creditors of the company

who are not creditors in respect of that cell and who

accordingly are not entitled to have recourse to the cellular

assets attributable to that cell.

Cell shares and share capital.

8.(1) A protected cell company may, in respect of any of its cells, create and

issue shares (“cell shares”) the proceeds of the issue of which (“cell share

capital”) shall be comprised in the cellular assets attributable to the cell in

respect of which the cell shares were issued.

(2) The proceeds of the issue of shares other than cell shares created and

issued by a protected cell company shall be comprised in the company's

non-cellular assets.

(3) A protected cell company may pay a dividend (a “cellular dividend”)

in respect of cell shares.

(4) Cellular dividends may be paid in respect of cell shares by reference

only to the cellular assets and liabilities, or the profits, attributable to the cell

in respect of which the cell shares were issued; and accordingly, in

determining whether or not profits are available for the purpose of paying a

cellular dividend, no account need be taken of–

(a) the profits and losses, or the assets and liabilities, attributable

to any other cell of the company; or

(b) non-cellular profits and losses, or assets and liabilities.

Reduction of cell share capital.

9.(1) Except in the case of a protected cell company which is authorised by

the Chief Executive as a collective investment scheme and which is

Protected Cell Companies

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2001-22

redeeming units or shares in accordance with its scheme particulars, a

protected cell company or a holder of cell shares in a cell of a protected cell

company may apply to the Court for an order authorising the company to

reduce the cell share capital–

(a) where the applicant is the company, of any of the company 's

cells; or

(b) where the applicant is the holder of cell shares, of the cell in

which the cell shares are held;

and no reduction of cell share capital may be made except under the

authority of, and in accordance with the terms and conditions of, an order of

the Court under this section.

(2) In particular, and without prejudice to the generality of subsection (1),

the Court may by order authorise the protected cell company–

(a) to extinguish or reduce the liability on any cell shares in respect

of cell share capital not paid up; or

(b) with or without extinguishing or reducing any liability on any

cell shares–

(i) to cancel any paid-up cell share capital which is lost or

unrepresented by available cellular assets; or

(ii) to pay off any paid-up cell share capital which exceeds

the company’s wants;

and the company may, so far as is necessary, alter its memorandum

accordingly.

(3) The Court shall not make an order authorising the reduction of cell

share capital unless it is satisfied–

(a) that the creditors of the company entitled to have recourse to

the cellular assets attributable to the cell in question consent to

the reduction; or

(b) that those creditors would not be unfairly prejudiced by the

reduction.

(4) The Court may dispense with the consent of a creditor upon the

company securing payment of its liability to the creditor in such form and

manner as the Court may direct.

Protected Cell Companies

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2001-22

(5) Notice of an application to the Court for an order authorising the

reduction of cell share capital shall, at least four weeks before the

application is made, be placed in the Gazette setting out the terms of the

application and the date, time and place of the hearing.

(6) Notice of an application to the Court for an order authorising the

reduction of cell share capital shall be given to–

(a) the protected cell company (except where the company is itself

the applicant);

(b) the cell liquidator (if any);

(c) the liquidator (if any) of the company;

(d) the administrator (if any) of the cell or the company;

(e) the Chief Executive , in respect of a protected cell company

falling under section 11(1)(a) or (b);

(f) all holders of cell shares of the cell (other than the applicant, in

cases where the applicant is the holder of such shares); and

(g) such other persons as the Court may direct;

who shall each be given an opportunity of making representations to the

Court before the order is made.

(7) The Court may dispense with the requirement to give notice to any

person or body mentioned in subsection (6).

(8) The Court, on hearing an application for an order authorising the

reduction of cell share capital, may make an interim order, or adjourn the

hearing, conditionally or unconditionally.

(9) An order of the Court authorising the reduction of cell share capital–

(a) shall be deemed to be substituted for the corresponding part of

the protected cell company’s memorandum; and

(b) shall have effect as if originally contained therein;

but without prejudice to anything done in accordance with the provisions of

the memorandum before the date of the order.

(10) If a protected cell company’s cell share capital is reduced, no past or

present holder of cell shares of the cell in question shall (subject to the

Protected Cell Companies

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2001-22

following provisions of this section) be liable in respect of any cell share to

any call or contribution exceeding the amount of the difference (if any)

between the following amounts–

(a) the amount of the cell share as fixed by the order of the Court

authorising the reduction of cell share capital; and

(b) the amount paid on the cell share or (if appropriate) the reduced

amount deemed to have been paid on it.

(11) Subsection (12) and (13) apply if–

(a) a creditor whose consent is required under this section to the

reduction of cell share capital has not, without neglect or

default on his part, been given written notice by the company

that his consent to the reduction is required; and

(b) after the reduction of cell share capital, the cellular assets

attributable to the cell in question (when account is taken of the

company’s non-cellular assets, unless there are no creditors in

respect of that cell entitled to have recourse to the company’s

non-cellular assets) are or are likely to be insufficient to

discharge the claims of creditors in respect of that cell.

(12) Every person who, at the date of the order of the Court authorising the

reduction of cell share capital, was a holder of cell shares of the cell in

question shall be liable to contribute, towards payment of the liability in

question, an amount not exceeding that which he would have been liable to

contribute if the liquidation of the company had commenced on the day

before that date.

(13) If a liquidator or voluntary liquidator is appointed in relation to a

protected cell company, or if a cell liquidation order is made in respect of

the cell of the company in relation to which the order of the Court

authorising the reduction of cell share capital was made, the Court, on the

application of the creditor in question and upon proof of the matters set out

in subsection (11)(a), may if it thinks fit settle a list of persons accordingly

so liable to contribute, and may make and enforce calls and orders against

the contributories settled on the list as if they were ordinary contributories in

the liquidation or voluntary liquidation.

(14) Nothing in subsection (11),(12) or (13) shall affect the rights of the

contributories among themselves.

(15) Any officer of a protected cell company who–

Protected Cell Companies

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2001-22

(a) wilfully conceals the name of a creditor whose consent is

required under this section to the reduction of the company’s

cell share capital;

(b) wilfully misrepresents the nature or amount of the debt or

claim of any such creditor; or

(c) aids, abets, connives in or is privy to any such concealment or

misrepresentation as is described in paragraph (a) or (b);

is guilty of an offence and liable–

(i) on summary conviction, to a fine up to level 5 on the

standard scale, imprisonment for a term up to 3 months

or both;

(ii) on conviction on indictment, to a fine, imprisonment for

a term up to 2 years or both.

Name and memorandum of protected cell company.

10.(1) The name of a protected cell company shall, include the expression

“Protected Cell”, “PCC” or any cognate expression approved in writing by

the Registrar.

(2) The memorandum of a protected cell company shall state that it is a

protected cell company.

(3) A protected cell company may, in order to comply with subsection (2),

alter its memorandum by special resolution.

(4) Unless and until a protected cell company has complied with the

provisions of this section, it shall be deemed not to be a protected cell

company.

(5) Each cell of a protected cell company shall have its own distinct name

or designation.

Consent of the Chief Executive required for protected cell company.

11.(1) Subject to subsection (2), a company may not be incorporated as a

protected cell company, and an existing company may not be converted into

a protected cell company, except in accordance with the terms and

conditions of the written consent of the Chief Executive, which shall only be

granted in the case of a company–

Protected Cell Companies

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2001-22

(a) which is (or which will be) a Gibraltar insurer as defined in

section 2 of the Financial Services (Insurance Companies) Act;

or

(b) which is (or which will be) a collective investment scheme

authorised by the Authority under the Financial Services

(Collective Investment Schemes) Act, 2011.

(2) A company–

(a) which is established principally for the purposes of issuing

bonds, notes or loan 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; and

(b) which is not required to be licensed or authorised under the

Financial Services (Investment and Fiduciary Services) Act or

the Financial Services (Markets in Financial Instruments) Act

2006,

may not be incorporated as a protected cell company, and an existing

company may not be converted into a protected cell company except in

accordance with the terms and conditions of the written consent of the Chief

Executive.

(3) The Minister may by regulations prescribe any other class or

descriptions of company which may be incorporated as or converted into a

protected cell company with the consent of the Chief Executive.

(4) The Chief Executive may, from time to time, in such manner as he

thinks fit–

(a) vary or revoke any term or condition subject to which a consent

under subsections (1) or (2) was granted; and

(b) impose any new term or condition in relation to any such

consent.

Incorporation of company as protected cell company.

12. A person wishing to incorporate a company as a protected cell company

shall make an application to the Registrar for the registration of the

company's memorandum and articles in accordance with the Companies

Act, the provisions of which shall apply accordingly.

Liability of cellular assets.

Protected Cell Companies

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2001-22

13.(1) Subject to the provisions of subsection (2), and save to the extent

that the company may have agreed that a liability shall be the liability solely

of the company’s non-cellular assets, or of the cellular assets attributable to

a particular cell of the company, where any liability arises which is

attributable to a particular cell of a protected cell company–

(a) the cellular assets attributable to that cell shall be primarily

used to satisfy the liability;

(b) the company’s non-cellular assets shall be secondarily used to

satisfy the liability, provided that the cellular assets attributable

to the relevant cell have been exhausted; and

(c) any cellular assets not attributable to the relevant cell shall not

be used to satisfy the liability.

(2) In the case of loss or damage which is attributable to a particular cell of

a protected cell company and which is caused by fraud, the loss or damage

shall be the liability solely of the company’s non-cellular assets, without

prejudice to any liability of any person other than the company.

(3) Any liability not attributable to a particular cell of a protected cell

company shall be the liability solely of the company’s non-cellular assets.

(4) Notwithstanding the above provisions of this section–

(a) the liabilities under subsection (1)(a) of the cellular assets

attributable to a particular cell of a protected cell company shall

abate rateably until the value of the aggregate liabilities equals

the value of those assets except that the provisions of this

paragraph shall be disregarded in assessing the existence and

extent of any secondary liability under subsection (1)(b);

(b) the liabilities of the company’s non-cellular assets shall abate

rateably until the value of the aggregate liabilities equals the

value of those assets:

(5) This section shall apply to the assets of the company wherever situated.

Disputes as to liability attributable to cells.

14.(1) In the event of any dispute as to–

(a) whether any right is or is not in respect of a particular cell;

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(b) whether any creditor is or is not a creditor in respect of a

particular cell;

(c) whether any liability is or is not attributable to a particular cell;

(d) the amount to which any liability is limited;

the Court, on the application of the protected cell company, and without

prejudice to any other right or remedy of any person, may issue a declaration

in respect of the matter in dispute.

(2) The Court, on hearing an application for a declaration under subsection

(1)–

(a) may direct that any person shall be heard on the application;

(b) may make an interim declaration, or adjourn the hearing,

conditionally or unconditionally;

(c) may make the declaration subject to such terms and conditions

as it thinks fit;

(d) may direct that the declaration shall be binding upon such

persons as may be specified.

Company to inform persons they are dealing with protected cell

company.

15.(1) A protected cell company shall–

(a) inform any person with whom it transacts that it is a protected

cell company; and

(b) for the purposes of that transaction, identify or specify the cell

in respect of which that person is transacting, unless that

transaction is not a transaction in respect of a particular cell.

(2) If, in contravention of subsection (1), a protected cell company–

(a) fails to inform a person that he is transacting with a protected

cell company, and that person is otherwise unaware that, and

has no reasonable grounds to believe that, he is transacting with

a protected cell company; or

(b) fails to identify or specify the cell in respect of which a person

is transacting, and that person is otherwise unaware of, and has

Protected Cell Companies

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no reasonable basis of knowing, which cell he is transacting

with;

then, in either such case–

(i) the directors shall (notwithstanding any provision to the

contrary in the company’s articles or in any contract with

the company or otherwise) incur personal liability to that

person in respect of the transaction; and

(ii) the directors shall have a right of indemnity against the

non-cellular assets of the company, unless they were

fraudulent, reckless or negligent, or acted in bad faith.

(3) Notwithstanding the provisions of subsection (2)(i), the Court may

relieve a director of all or part of his personal liability thereunder if he

satisfies the Court that he ought to be so relieved because–

(a) he was not aware of the circumstances giving rise to his

liability and, in being not aware, he was neither fraudulent,

reckless or negligent, nor acted in bad faith; or

(b) he expressly objected, and exercised such rights as he had as a

director, whether by way of voting power or otherwise, so as to

try to prevent the circumstances giving rise to his liability.

(4) Where, pursuant to the provisions of subsection (3), the Court relieves

a director of all or part of his personal liability under subsection (2)(i), the

Court may order that the liability in question shall instead be met first by

any other director or directors whose personal liability is not relieved and

thereafter, if necessary, from such of the cellular or non-cellular assets of the

protected cell company as may be specified in the order.

(5) Any provision in the articles of a protected cell company, and any

other contractual provision under which the protected cell company may be

liable, which purports to indemnify directors in respect of conduct which

would otherwise disentitle them to an indemnity against non-cellular assets

by virtue of subsection (2)(ii), shall be void.

Attribution of non-cellular assets and liabilities.

16.(1) Liabilities of a protected cell company not otherwise attributable to

any of its cells shall be discharged from the company’s non-cellular assets.

(2) Income, receipts and other property or rights of or acquired by a

protected cell company not otherwise attributable to any cell shall be applied

to and comprised in the company’s non-cellular assets.

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Provisions in relation to winding up of protected cell company.

17.(1) Notwithstanding the provisions of the Insolvency Act 2011 or Part X

of the Companies Act 2014 or any other statutory provision or rule of law to

the contrary, in the liquidation or voluntary liquidation of a protected cell

company–

(a) the assets forming part of the estate shall only be the

non-cellular assets;

(b) the liquidation or voluntary liquidation shall not

terminate any agency, or in any way whatsoever affect

the authority or power, of any officer, receiver,

administrator, servant or agent of the protected cell

company in respect of the cellular assets;

(c) if and to the extent that any liquidator of the protected

cell company has any dealing with, or has possession

custody or control of, any of the cellular assets, he shall

be subject to the duty set out in section 5(2) hereof as if

he were a director.

(2) The Insolvency Act 2011 and Part X of the Companies Act 2014

apply to the liquidation or voluntary liquidation of a protected cell company

subject to such modifications as are necessary to give effect to subsection

(1) and, in the event of any conflict between the provisions in the Insolvency

Act 2011, or Part X of the Companies Act 2014, and this Act, this Act

prevails.

Transfer of cellular assets from protected cell company.

18.(1) Subject to the provisions of subsection (3), the cellular assets

attributable to any cell of a protected cell company, but not the non-cellular

assets of a protected cell company may be transferred to another person,

wherever resident or incorporated, and whether or not a protected cell

company.

(2) A transfer, under subsection (1), of cellular assets attributable to a cell

of a protected cell company shall not of itself entitle creditors of that

company to have recourse to the assets of the person to whom the cellular

assets were transferred.

(3) No transfer of the cellular assets attributable to a cell of a protected cell

company may be made except under the authority of, and in accordance with

the terms and conditions of, an order of the Court under this section (a “cell

transfer order”).

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(4) The Court shall not make a cell transfer order in relation to a cell of a

protected cell company unless it is satisfied–

(a) that the creditors of the company entitled to have recourse to the

cellular assets attributable to the cell consent to the transfer; or

(b) that those creditors would not be unfairly prejudiced by the

transfer.

(5) The Court, on hearing an application for a cell transfer order–

(a) may make an interim order or adjourn the hearing,

conditionally or unconditionally;

(b) may dispense with any of the requirements of subsection (4).

(6) The Court may attach such conditions as it thinks fit to a cell transfer

order, including conditions as to the discharging of claims of creditors

entitled to have recourse to the cellular assets attributable to the cell in

relation to which the order is sought.

(7) The Court may make a cell transfer order in relation to a cell of a

protected cell company notwithstanding that–

(a) a liquidator or voluntary liquidator has been appointed in

respect of the protected cell company;

(b) a cell liquidation order has been made in respect of the cell or

any other cell of the company;

(c) an administration order has been made in respect of the cell,

the company or any other cell thereof.

(8) Notice of an application to the Court for a cell transfer order shall be

served upon–

(a) any liquidator or receiver of the company or any cell liquidator

of the cell concerned;

(b) the Chief Executive , in respect of a protected cell company

falling under section 11(1)(a) or (b); and

(c) such other persons (if any) as the Court may direct.

(9) The provisions of this section are without prejudice to any power of a

protected cell company lawfully to make payments or transfers from the

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cellular assets attributable to any cell of the company to a person entitled, in

conformity with the provisions of this Act, to have recourse to those cellular

assets.

(10) For the avoidance of doubt, a protected cell company shall not require

a cell transfer order to invest, and change investment of, cellular assets or

otherwise to make payments or transfers from cellular assets in the ordinary

course of the company’s business.

PART II

CELL LIQUIDATION

Cell liquidation orders.

19.(1) Subject to the provisions of this section, if in relation to a protected

cell company the Court is satisfied–

(a) that the cellular assets attributable to a particular cell of the

company (when account is taken of the company's non-cellular

assets, unless there are no creditors in respect of that cell

entitled to have recourse to the company's non-cellular assets)

are or are likely to be insufficient to discharge the claims of

creditors in respect of that cell;

(b) that the making of an administration order under section 24 in

respect of that cell would not be appropriate; and

(c) that the making of an order under this section would achieve

the purposes set out in subsection (3);

the Court may make an order under this section (a cell liquidation order) in

respect of that cell.

(2) A cell liquidation order may be made in respect of one or more cells.

(3) A receivership order is an order directing that the business and cellular

assets of or attributable to a cell shall be managed by a person specified in

the order (the cell liquidator) for the purposes of–

(a) the orderly winding up of the business of or attributable to the

cell; and

(b) the distribution of the cellular assets attributable to the cell to

those entitled to have recourse thereto.

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(3A) The Court shall not appoint a person as cell liquidator under a cell

liquidation order unless the person is a licensed insolvency practitioner.

(4) A cell liquidation order –

(a) may not be made if a liquidator has been appointed to act in

respect of the protected cell company;

(b) may be made in respect of a cell subject to an administration

order under section 24;

(c) shall cease to be of effect upon the appointment of a liquidator

to act in respect of the protected cell company, but without

prejudice to prior acts.

(5) No resolution for the appointment of a voluntary liquidator of a

protected cell company any cell of which is subject to a cell liquidation

order shall be effective without leave of the Court.

Applications for cell liquidation orders.

20.(1) An application for a cell liquidation order in respect of a cell of a

protected cell company may be made by–

(a) the company;

(b) the directors of the company;

(c) any creditor of the company in respect of that cell;

(d) any holder of cell shares in respect of that cell;

(e) the administrator of that cell; or

(f) the Chief Executive , in respect of a protected cell company

falling under section 11(1)(a) or (b).

(2) The Court, on hearing an application–

(a) for a cell liquidation order; or

(b) for leave, pursuant to section 19(5), for a resolution for the

appointment of a voluntary liquidator;

may make an interim order or adjourn the hearing, conditionally or

unconditionally.

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(3) Notice of an application to the Court for a cell liquidation order in

respect of a cell of a protected cell company shall be served upon–

(a) the company;

(b) the administrator (if any) of the cell;

(c) the Chief Executive in respect of a protected cell company

falling under section 11(1)(a) or (b); and

(d) such other persons (if any) as the Court may direct;

who shall each be given an opportunity of making representations to the

Court before the order is made.

Application of Insolvency Act 2011 to cell liquidations.

20A.(1) The Insolvency Act 2011 applies to a cell liquidation as if the cell

was a company in liquidation under that Act and, for the purposes of the cell

liquidation, the cell shall be treated as if it were a separate legal person.

(2) Notwithstanding subsection (1)–

(a) the appointment of the cell liquidator and the powers and duties

of the cell liquidator are confined to the cell in respect of which

the cell liquidation order is made; and

(b) in a cell liquidation, the provisions of the Insolvency Act 2011

are subject to such modifications as are necessary to give effect

to this Act and in the event of any conflict between the

provisions in the Insolvency Act 2011 and this Act, this Act

prevails.

Functions of cell liquidator and effect of cell liquidation order.

21.(1) The cell liquidator –

(a) may do all such things as may be necessary for the purposes set

out in section 19(3); and

(b) shall have all the functions and powers of the directors in

respect of the business and cellular assets of or attributable to

the cell.

(2) The cell liquidator may at any time apply to Court–

(a) for directions as to the extent or exercise of any function or

power;

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(b) for the cell liquidation order to be discharged or varied; or

(c) for an order as to any matter arising in the course of the

liquidation of the cell.

(3) In exercising his functions and powers the cell liquidator is deemed to

act as the agent of the protected cell company, and shall not incur personal

liability except to the extent that he is fraudulent, reckless or grossly

negligent, or acts in bad faith.

(4) Any person dealing with the cell liquidator in good faith is not

concerned to enquire whether the cell liquidator is acting within his powers.

(5) When an application has been made for, and during the period of

operation of, a cell liquidation order, no proceedings may be commenced or

continued against the protected cell company in relation to the cell in respect

of which the cell liquidation order was applied for or made except with the

consent of the cell liquidator or the leave of the Court and subject (where the

Court gives leave) to such terms and conditions as the Court may impose.

(5A) Subsection (5) applies in place of section 159 of the Insolvency Act

2011 in relation to an application for a cell liquidation order.

(6) During the period of operation of a cell liquidation order –

(a) the functions and powers of the directors shall cease in respect

of the business and cellular assets of or attributable to the cell

in respect of which the order was made; and

(b) the cell liquidator of the cell shall be deemed a director of the

protected cell company in respect of the non-cellular assets of

the company, unless there are no creditors in respect of that cell

entitled to have recourse to the company's non-cellular assets.

Discharge and variation of cell liquidation orders.

22.(1) The Court shall not discharge a cell liquidation order unless it

appears to the Court that the purpose for which the order was made has been

achieved or substantially achieved or is incapable of achievement.

(2) The Court, on hearing an application for the discharge or variation of a

cell liquidation order, may make any interim order or adjourn the hearing,

conditionally or unconditionally.

(3) Upon the Court discharging a cell liquidation order in respect of a cell

of a protected cell company on the ground that the purpose for which the

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order was made has been achieved or substantially achieved, the Court may

direct that any payment made by the receiver to any creditor of the company

in respect of that cell shall be deemed full satisfaction of the liabilities of the

company to that creditor in respect of that cell; and the creditor’s claims

against the company in respect of that cell shall be thereby deemed

extinguished.

(4) Nothing in subsection (3) shall operate so as to affect or extinguish any

right or remedy of a creditor against any other person, including any surety

of the protected cell company.

(4A) Creditors of a cell that is subject to a cell liquidation order shall be

regarded as preferential creditors of the cell to the extent that they would be

preferential creditors under the Insolvency Act 2011 if–

(a) the cell was a company; and

(b) the cell liquidator was a liquidator appointed under the

Insolvency Act 2011.

(5) Subject to the provisions of–

(a) this Act and, in particular subsection (4A); and

(b) any agreement between the protected cell company and any

creditor thereof as to the subordination of the debts due to that

creditor to the debts due to the company’s other creditors;

the company’s cellular assets attributable to any cell of the company in

relation to which a cell liquidation order has been made shall, in the winding

up of the business of or attributable to that cell under the provisions of this

Part of this Act, be realised and applied in satisfaction of the company’s

liabilities attributable to that cell pari passu.

(6) Any surplus shall thereafter be distributed (unless the memorandum or

articles provide otherwise)–

(a) among the holder of the cell shares or the person otherwise

entitled to the surplus; or

(b) where there are no cell shares and no such persons, among the

holders of the non-cellular shares;

in each case according to their respective rights and interests in or against

the company.

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(7) The Court may, upon discharging a cell liquidation order in respect of

a cell of a protected cell company, direct that the cell shall be dissolved on

such date as the Court may specify.

(8) Immediately upon the dissolution of a cell of a protected cell company,

the company may not undertake business or incur liabilities in respect of that

cell.

Remuneration of cell liquidator.

23. The remuneration of a cell liquidator shall be fixed by the Court

applying the general principles set out in section 466 of the Insolvency Act

2011 and the remuneration, and any expenses properly incurred by him,

shall be payable, in priority to all other claims, from–

(a) the cellular assets attributable to the cell in respect of which the

cell liquidator was appointed; and

(b) to the extent that these may be insufficient, the non-cellular

assets of the protected cell company.

PART III

ADMINISTRATION ORDERS

Administration orders in relation to protected cell companies or cells.

24.(1) Subject to the provisions of this section, if in relation to a protected

cell company the Court is satisfied–

(a) that the cellular assets attributable to a particular cell of the

company (when account is taken of the company's non-cellular

assets, unless there are no creditors in respect of that cell

entitled to have recourse to the company’s non-cellular assets)

are or are likely to be insufficient to discharge the claims of

creditors in respect of that cell; or

(b) that the company’s cellular assets and non-cellular assets are or

are likely to be insufficient to discharge the liabilities of the

company;

and the Court considers that the making of an order under this section may

achieve one of the purposes set out in subsection (4), the Court may make an

order under this section (an “administration order”) in respect of that cell or

(as the case may be) in respect of that company.

(2) An administration order may be made in respect of one or more cells.

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(3) An administration order is an order directing that, during the period for

which the order is in force, the business and assets of or attributable to the

cell or, as the case may be, the business and assets of the company, shall be

managed by a person (an “administrator”) appointed for the purpose by the

Court.

(3A) The Court shall not appoint a person as administrator under an

administration order unless the person is a licensed insolvency practitioner.

(4) The purposes for which an administration order may be made are–

(a) the survival as a going concern of the cell or (as the case may

be) of the company;

(b) the more advantageous realisation of the business and assets of

or attributable to the cell or (as the case may be) the business

and assets of the company than would be achieved by a cell

liquidation or (as the case may be) by the liquidation of the

company.

(5) An administration order, whether in respect of a protected cell

company or a cell thereof–

(a) may not be made if:

(i) a liquidator has been appointed to act in respect of the

protected cell company;

(ii) Deleted

(iii) the company is one which section 11(2) applies and its

Memorandum of Association so provides;

(b) shall cease to be of effect upon the appointment of a liquidator

to act in respect of the company, but without prejudice to prior

acts.

(6) No resolution for the appointment of a voluntary liquidator of a

protected cell company which, or any cell of which, is subject to an

administration order shall be effective without the leave of the Court.

Applications for administration orders.

25.(1) An application for an administration order may be made by–

(a) the company;

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(b) the directors of the company;

(c) the shareholders or any class of shareholders of the company or

of any cell;

(d) any creditor of the company (or, where the order is sought in

respect of a cell, any creditor of the company in respect of that

cell); or

(e) the Chief Executive , in respect of a protected cell company

falling under section 11(1)(a) or (b).

(2) The Court, on hearing an application–

(a) for an administration order; or

(b) for leave, under section 24(6), for a resolution for the

appointment of a voluntary liquidator;

may make an interim order or adjourn the hearing, conditionally or

unconditionally.

(3) Notice of an application to the Court for an administration order in

respect of a protected cell company or a cell thereof shall be served upon–

(a) the company;

(b) the Chief Executive in respect of a protected cell company

falling under section 11(1)(a) or (b); and

(c) such other persons (if any) as the Court may direct

who shall each be given an opportunity of making representations to the

Court before the order is made.

Functions of administrator and effect of administration order.

26.(1) The administrator of a cell of a protected cell company–

(a) may do all such things as may be necessary for the purpose set

out in section 24(4) for which the administration order was

made; and

(b) shall have all the functions and powers of the directors in

respect of the business and cellular assets of or attributable to

the cell.

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(2) The administrator of a protected cell company–

(a) may do all such things as may be necessary for the purpose set

out in section 24(4) for which the administration order was

made; and

(b) shall have all the functions and powers of the directors in

respect of the business and assets of the company, including its

cells.

(3) The administrator may at any time apply to the Court–

(a) for directions as to the extent or exercise of any function or

power;

(b) for the administration order to be discharged or varied; or

(c) for an order as to any matter arising in the course of his

administration.

(4) In exercising his functions and powers the administrator is deemed to

act as the agent of the protected cell company, and shall not incur personal

liability except to the extent that he is fraudulent, reckless or grossly

negligent, or acts in bad faith.

(5) Any person dealing with the administrator in good faith need not

enquire whether the administrator is acting within his powers.

(6) When an application has been made for, and during the period of

operation of, an administration order, no proceedings may be commenced or

continued against the protected cell company in relation to the cell in respect

of which the administration order was applied for or made except with the

consent of the administrator or the leave of the Court and subject (where the

Court gives leave) to such terms and conditions as the Court may impose.

(7) During the period of operation of an administration order–

(a) in respect of a cell of a protected cell company–

(i) the functions and powers of the directors shall cease in

respect of the business and cellular assets of or

attributable to the cell; and

(ii) the administrator shall be deemed a director of the

company in respect of the company’s non-cellular assets,

unless there are no creditors of the company in respect of

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that cell entitled to have recourse to the non-cellular

assets;

(b) in respect of a protected cell company, the functions and

powers of the directors shall cease.

Discharge and variation of administration orders.

27.(1) The Court shall not discharge an administration order unless it

appears to the Court that–

(a) the purpose for which the order was made has been achieved or

is incapable of achievement; or

(b) it would otherwise be desirable or expedient to discharge the

order.

(2) The Court, on hearing an application for the discharge or variation of

an administration order, may make any interim order or adjourn the hearing,

conditionally or unconditionally.

(3) Upon discharging an administration order, the Court may direct–

(a) where the administration order was made in respect of a

protected cell company, that any payment made by the

administrator to any creditor of the company shall be deemed

full satisfaction of the liabilities of the company to that

creditor; and the creditor's claims against the company shall be

thereby deemed extinguished;

(b) where the administration order was made in respect of a cell,

that any payment made by the administrator to any creditor of

the company in respect of that cell shall be deemed full

satisfaction of the liabilities of the company to that creditor in

respect of that cell; and the creditor's claims against the

company in respect of that cell shall be thereby deemed

extinguished.

(4) Nothing in subsection (3) shall operate so as to affect or extinguish any

right or remedy of a creditor against any other person, including any surety

of the protected cell company.

Remuneration of administrator.

28. The remuneration of an administrator shall be fixed by the Court

applying the general principles set out in section 466 of the Insolvency Act

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2011 and the remuneration,, and any expenses properly incurred by him,

shall be payable in priority to all other claims–

(a) in the case of the administration of a cell, from–

(i) the cellular assets attributable to the cell; and

(ii) to the extent these may be insufficient, the noncellular

assets of the protected cell company; and

(b) in the case of the administration of a protected cell company,

from:

(i) the non-cellular assets of the company; and

(ii) to the extent these may be insufficient, the cellular assets,

in such shares or proportions as the Court may direct.

PART IV

GENERAL PROVISIONS

Offences.

29. A person who, in connection with an application under section 12 for

the incorporation of a company as a protected cell company, or for the

conversion of an existing company into a protected cell company–

(a) makes a statement which he knows or has reasonable cause to

believe to be false, deceptive or misleading in a material

particular;

(b) recklessly makes a statement, dishonestly or otherwise, which

is false, deceptive or misleading in a material particular;

(c) produces or furnishes or causes or permits to be produced or

furnished any information or document which he knows or has

reasonable cause to believe to be false, deceptive or misleading

in a material particular; or

(d) recklessly produces or furnishes or recklessly causes or permits

to be produced or furnished, dishonestly or otherwise, any

information or document which is false, deceptive or

misleading in a material particular;

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shall be guilty of an offence and liable on summary conviction to a fine up

to level 5 on the standard scale, to imprisonment for a term not exceeding

three months, or to both.