Protected Cell Companies Act 2004

Link to law: https://legislation.gov.im/cms/images/LEGISLATION/PRINCIPAL/2004/2004-0001/ProtectedCellCompaniesAct2004_2.pdf
Published: 2015-11-01

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Protected Cell Companies Act 2004

c i e
AT 1 of 2004

PROTECTED CELL COMPANIES ACT 2004

Protected Cell Companies Act 2004 Index


c AT 1 of 2004 Page 3

c i e
PROTECTED CELL COMPANIES ACT 2004

Index Section Page

PART 1 – FORMATION: PROTECTED CELL COMPANIES 5

1 Protected Cell Companies ............................................................................................. 5
2 Fundamental nature of a PCC....................................................................................... 5
3 Names ............................................................................................................................... 5
4 Memorandum of association of PCC ........................................................................... 6
5 Creation of PCC .............................................................................................................. 6
PART 2 – CELLS 6

6 Creation of cells, and cellular and non-cellular assets............................................... 6
7 Cellular and non-cellular assets: directors’ duties ..................................................... 7
PART 3 – CELL SHARE CAPITAL AND DIVIDENDS 7

Cell share capital 7

8 Cell shares and share capital ......................................................................................... 7
Cell share dividends 8

9 Dividends in respect of cell shares ............................................................................... 8
Reduction of cell share capital 8

10 Reduction of cell share capital with approval of High Court .................................. 8
11 Notice of applications to Court ..................................................................................... 8
12 Order authorising reduction of cell share capital ...................................................... 9
13 Safeguards for creditors ................................................................................................. 9
14 Liability of holders of cell shares ................................................................................ 11
15 Offences .......................................................................................................................... 11
PART 4 – ASSETS AND LIABILITIES 11

16 Attribution of non-cellular assets and liabilities ...................................................... 11
17 Liability of cellular and non-cellular assets .............................................................. 11
18 Disputes as to liability attributable to cells ............................................................... 12
19 Position of creditors ...................................................................................................... 13
20 Recourse to cellular assets by creditors ..................................................................... 14
Index Protected Cell Companies Act 2004


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21 Transfer of cellular assets from PCC ......................................................................... 14
22 Cell transfer orders ....................................................................................................... 15
PART 5 – RECEIVERSHIP ORDERS 15

23 Receivership orders in relation to cells ..................................................................... 15
24 Applications for receivership orders ......................................................................... 16
25 Functions of receiver and effect of receivership order ............................................ 17
26 Discharge and variation of receivership orders ....................................................... 18
27 Remuneration of receiver ............................................................................................ 19
PART 6 – LIQUIDATION 19

28 Provisions in relation to liquidation of PCC ............................................................ 19
PART 7 – GENERAL PROVISIONS 20

29 Company to inform persons they are dealing with PCC ....................................... 20
30 Security interests in respect of cell assets .................................................................. 21
31 Power of the Treasury to make regulations ............................................................. 21
32 Interpretation ................................................................................................................ 22
33 Saving for directors’ functions ................................................................................... 23
34 Saving for internal arrangements............................................................................... 23
35 Financial ......................................................................................................................... 23
36 Short title and commencement ................................................................................... 23
ENDNOTES 25

TABLE OF ENDNOTE REFERENCES 25

Protected Cell Companies Act 2004 Section 1


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c i e
PROTECTED CELL COMPANIES ACT 2004

Received Royal Assent: 21 January 2004
Passed: 21 January 2004
Commenced: 31 March 2004
AN ACT
to provide for the incorporation of companies as protected cell
companies; for the conversion of companies into protected cell companies; and
for connected purposes.
PART 1 – FORMATION: PROTECTED CELL COMPANIES

1 Protected Cell Companies

(1) A company may be incorporated as a Protected Cell Company (a “PCC
”)
under the Companies Acts 1931 to 1993 (“the Companies Acts
”).
(2) A company that is not a PCC may be converted into a PCC if the
conversion is authorised by its articles.
(3) A company may be incorporated as, or converted into, a PCC only if it is
a company limited by shares.
(4) The Companies Acts shall apply in respect of a company that is a PCC as
they apply in respect of any other company.
(5) This section is subject to the provisions of this Act.
2 Fundamental nature of a PCC

(1) A PCC is a single legal person.
(2) The creation by a PCC of a cell does not create, in respect of that cell, a
legal person separate from the company.
3 Names

(1) The name of a PCC must include the expression “Protected Cell
Company” or “PCC”.
(2) Each cell of a PCC must have its own distinct name or designation.
Section 4 Protected Cell Companies Act 2004


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(3) A PCC that does not comply with this section is not a PCC.
(4) This section is without prejudice to section 2(1)(a) (use of the word
limited) of the Companies Act 1931 (“the 1931 Act
”) and sections 29 and
30 of the Companies Act 1992 (name of public companies).
4 Memorandum of association of PCC

(1) The memorandum of association of a PCC shall state that it is a PCC.
(2) A PCC may alter its memorandum by special resolution in order to
comply with subsection (1).
(3) A PCC that does not comply with subsection (1) is not a PCC.
5 Creation of PCC

(1) To incorporate a company as a PCC there must be delivered to the
Department of Economic Development —
(a) a statement in the prescribed form signed by or on behalf of the
subscribers of the memorandum; and
(b) all other documents, consents and information as are required for
the registration of the memorandum of a company under the
Companies Acts.1

(2) To convert a company that is not a PCC into a PCC there must be
delivered to the Department of Economic Development; a statement of
conversion in the prescribed form signed by a director of the company.2

(3) A company cannot be incorporated as, nor can a company that is not a
PCC be converted into, a PCC unless —
(a) it carries on, or will when incorporated carry on, insurance
business within the meaning of the Insurance Act 2008; or3

(b) it is (or will be) of such class or description, or carries on (or will
carry on) such business or class of business as is prescribed.
(4) Subsection (2) is subject to section 1(2).
PART 2 – CELLS

6 Creation of cells, and cellular and non-cellular assets

(1) A PCC may create one or more cells for the purpose of segregating and
protecting cellular assets in the manner provided by this Act.
(2) The assets of a PCC are either cellular assets or non-cellular assets.
(3) The non-cellular assets of a PCC are the assets of the company which are
not cellular assets.
Protected Cell Companies Act 2004 Section 7


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(4) The cellular assets of a PCC are the assets of the company attributable to
the cells of the company.
(5) The assets attributable to a cell of a PCC are —
(a) assets represented by the proceeds of cell share capital and
reserves attributable to the cell; and
(b) all other assets attributable to the cell.
(6) In subsection (5), “reserves” includes retained earnings, capital reserves
and share premiums.
7 Cellular and non-cellular assets: directors’ duties

(1) It is the duty of the directors of a PCC —
(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.
(2) Subsection (1) does not prevent the directors arranging for cellular assets
and non-cellular assets to be held —
(a) by or through a trustee, custodian or 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.
(3) There is no default in complying with subsection (1) if cellular assets or
non-cellular assets, or a combination of both, are collectively invested, or
collectively managed, by an investment manager if the assets in question
remain separately identifiable in accordance with that subsection.
(4) If default is made in complying with subsection (1), the directors of the
PCC are liable to a default fine.
PART 3 – CELL SHARE CAPITAL AND DIVIDENDS

Cell share capital
8 Cell shares and share capital

(1) A PCC may create and issue shares in respect of any of its cells (“cell

shares
”).
(2) The proceeds of the issue of cell shares (“cell share capital
”) are cellular
assets attributable to the cell in respect of which the cell shares were
issued.
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(3) The proceeds of the issue of shares other than cell shares are non-cellular
assets.
(4) [Amends section 341(1) of the Companies Act 1931 by adding the words
“and references in this Act to shares include references to cell shares
unless the context requires otherwise” at the end of the definition of
“Share”.]
Cell share dividends
9 Dividends in respect of cell shares

(1) A PCC may pay a dividend in respect of cell shares (“cellular

dividend
”).
(2) 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.
(3) In determining whether or not profits are available for the purpose of
paying a cellular dividend, no account is to 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
10 Reduction of cell share capital with approval of High Court

A reduction of cell share capital may be made under the authority of, and in
accordance with the terms and conditions of, an order of the High Court (“the

Court
”) under this Part but not otherwise.
11 Notice of applications to Court

(1) Before an application for an order authorising the reduction of cell share
capital is made, public notice of the application must be placed in two
newspapers published and circulating in the Island setting out the terms
of the application and the date, time and place of the hearing.
(2) Notice of an application to the Court for an order authorising the
reduction of cell share capital must be given to —
(a) the PCC (except where the company is itself the applicant);
(b) the receiver (if any) of the cell;
(c) the liquidator (if any) of the company;
(d) all holders of cell shares of the cell (other than the applicant);
(e) such persons as are specified in regulations under section 31; and
Protected Cell Companies Act 2004 Section 12


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(f) such other persons as the Court may direct.
(3) Each person specified in subsection (2)(a) to (f) is entitled to make
representations to the Court before the order is made.
(4) The Court may dispense with the requirement to give notice to any
person specified in subsection (2)(a) to (d).
12 Order authorising reduction of cell share capital

(1) The Court may, on the application of a PCC or a holder of cell shares, by
order authorise the company to reduce the cell share capital —
(a) if the applicant is the company, of any of the company’s cells; or
(b) if the applicant is the holder of cell shares, of the cell in which the
cell shares are held.
(2) An order under subsection (1) may authorise the PCC —
(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
needs of the company.
(3) An order of the Court authorising a reduction of cell share capital —
(a) shall be deemed to be substituted for the corresponding part of
the PCC’s memorandum; and
(b) shall have effect as if originally contained therein.
(4) A Court order authorising a reduction of cell share capital does not
prejudice anything done in accordance with the memorandum before the
date of the order.
(5) The PCC may, so far as is necessary, alter its memorandum to reflect a
Court order authorising a reduction of cell share capital.
(6) 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.
(7) Subsection (2) does not prejudice the generality of subsection (1).
13 Safeguards for creditors

(1) The Court must not make an order authorising the reduction of cell share
capital unless it is satisfied —
Section 13 Protected Cell Companies Act 2004


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(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.
(2) 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.
(3) Subsections (5) and (6) apply if —
(a) a creditor whose consent is required under subsection (1) 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 are or are likely to be
insufficient to discharge the claims of creditors in respect of that
cell.
(4) In determining the cellular assets attributable to the cell in question
under subsection (3)(b), no account is to be 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.
(5) Every person who, at the date of the Court order 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 winding up of the company had commenced on the
day before that date.
(6) Subsection (7) applies if the PCC is wound up, or if an order is made
under section 23 (“a receivership order
”) in respect of the cell of the
company in relation to which the Court order authorising the reduction
of cell share capital was made.
(7) The Court, on the application of the creditor in question and upon proof
of the matters set out in subsection (3)(a) —
(a) may, if it thinks fit, settle a list of persons liable to contribute; and
(b) may make and enforce calls and orders against the contributories
settled on the list as if they were ordinary contributories in a
winding up.
(8) Nothing in subsections (3) to (7) affects the rights of the contributories
among themselves.
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14 Liability of holders of cell shares

(1) If a PCC’s cell share capital is reduced, no past or present holder of cell
shares of the cell in question is 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.
(2) Subsection (1) is subject to this Act.
15 Offences

(1) Any officer of a PCC who —
(a) intentionally conceals the name of a creditor whose consent is
required under this Part to the reduction of the company’s cell
share capital;
(b) intentionally misrepresents the nature or amount of the debt or
claim of a 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.
(2) A person guilty of an offence under this section is liable —
(a) on summary conviction, to a fine not exceeding £5,000, or custody
for a term not exceeding 6 months or both;
(b) on conviction on information, to a fine, or to custody for a term
not exceeding 2 years or both.
PART 4 – ASSETS AND LIABILITIES

16 Attribution of non-cellular assets and liabilities

(1) Liabilities of a PCC not otherwise attributable to any of its cells are to be
discharged from the company’s non-cellular assets.
(2) Income, receipts and other property or rights of or acquired by a PCC not
otherwise attributable to any cell are to be applied to and comprised in
the company’s non-cellular assets.
17 Liability of cellular and non-cellular assets

(1) If any liability arises which is attributable to a particular cell of a PCC —
(a) the cellular assets attributable to that cell will be primarily liable;
Section 18 Protected Cell Companies Act 2004


Page 12 AT 1 of 2004 c

(b) the company’s non-cellular assets will be secondarily liable,
provided that the cellular assets attributable to the relevant cell
have been exhausted; and
(c) the liability will not be a liability of any cellular assets not
attributable to the relevant cell.
(2) Subsection (1) is subject to subsections (3) to (10).
(3) If the company has agreed with the person in respect of whom the
liability arises that a liability is the liability solely of —
(a) the company’s non-cellular assets; or
(b) the cellular assets attributable to a particular cell of the company,
subsection (1) will have effect subject to that agreement.
(4) In the case of loss or damage which is attributable to a particular cell of a
PCC and which is caused by fraud, the loss or damage shall be the
liability solely of the company’s non-cellular assets.
(5) Subsection (4) is without prejudice to any liability of any person other
than the company.
(6) The fraud referred to in subsection (4) does not include the fraud of any
person making a claim against the company or any of its assets or of that
person’s servants, employees, officers or agents.
(7) Any liability not attributable to a particular cell of a PCC will be the
liability solely of the company’s non-cellular assets.
(8) The liabilities under subsection (1)(a) of the cellular assets attributable to
a particular cell of a PCC will reduce proportionally until the value of the
aggregate liabilities equals the value of those assets but this subsection
will be disregarded in assessing the existence and extent of any
secondary liability under subsection (1)(b).
(9) The liabilities of the company’s non-cellular assets will reduce
proportionally until the value of the aggregate liabilities equals the value
of those assets but this subsection will not apply in any situation in
which any of the liabilities of the company’s non-cellular assets arises
from fraud or by reason of a special agreement such as is referred to in
subsection (3).
(10) This section has extra-territorial application.
18 Disputes as to liability attributable to cells

(1) In the event of any dispute as to —
(a) whether any right is or is not in respect of a particular cell;
(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;
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(d) the amount to which any liability is limited,
the Court, on the application of the PCC, and without affecting 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 is binding upon such persons as
are specified.
19 Position of creditors

(1) The rights of creditors of a PCC shall correspond with the liabilities
provided for in section 17.
(2) No such creditor shall have any rights other than the rights referred to in
this section and in sections 17 and 20.
(3) There is implied in every transaction entered into by a PCC (unless
expressly excluded in writing) the following terms —
(a) that no party will seek, whether in any proceedings or by any
other means, to make or attempt to make liable any cellular assets
attributable to any cell of the company in respect of a liability not
attributable to that cell;
(b) that if any party succeeds by any means in making liable any
cellular assets attributable to any cell of the company in respect of
a liability not attributable to that cell, that party is liable to the
company to pay a sum equal to the value of that benefit;
(c) that if any party succeeds in arresting, seizing or attaching by any
means, or otherwise levying execution against, any cellular assets
attributable to any cell of the company in respect of a liability not
attributable to that cell, that party holds those assets or their
proceeds on trust for the company and must keep those assets or
proceeds separate and identifiable as such trust property; and
(d) that the law applicable to the transaction is the law of the Island
and that the parties submit to the exclusive jurisdiction of the
Court.
(4) All sums recovered by a PCC as a result of a trust under subsection (3)(c)
will be credited against any concurrent liability imposed pursuant to the
implied term set out in subsection (3)(b).
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(5) Any asset or sum recovered by a PCC under the implied term set out in
paragraphs (b) or (c) of subsection (3) or by any other means in the
events referred to in those paragraphs must, 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 PCC 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 must —
(a) cause or procure its auditor, acting as expert and not as arbitrator,
to certify the value of the assets lost to the cell affected; and
(b) transfer or pay, from the cellular or non-cellular assets to which
the liability was attributable to the cell affected, assets or sums
sufficient to restore to the cell affected the value of the assets lost.
(7) Where under subsection (6)(b) a PCC 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.
(8) This section shall have extra-territorial application.
20 Recourse to cellular assets by creditors

Without prejudice to the provisions of sections 17 and 19, cellular assets
attributable to a cell of a PCC —
(a) are available only 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) are absolutely protected from the creditors of the company who
are not creditors in respect of that cell and who accordingly will
not be entitled to have recourse to the cellular assets attributable
to that cell.
21 Transfer of cellular assets from PCC

(1) Subject to the provisions of subsections (2) and (3), the cellular assets
attributable to any cell of a PCC may be transferred to another person,
wherever resident or incorporated, and whether or not a PCC.
(2) Subsection (1) does not apply to non-cellular assets of a PCC.
(3) No transfer of the cellular assets attributable to a cell of a PCC may be
made except under the authority of, and in accordance with the terms
and conditions of, an order of the Court under section 22 (a “cell transfer

order
”).
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(4) A transfer of cellular assets attributable to a cell of a PCC 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.
(5) The provisions of this section are without prejudice to any power of a
PCC lawfully to make payments or transfers from the cellular assets
attributable to any cell of the company to a person entitled to have
recourse to those cellular assets.
(6) A PCC does 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.
22 Cell transfer orders

(1) The Court shall not make a cell transfer order in relation to a cell of a
PCC 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.
(2) 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 (1).
(3) 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.
(4) The Court may make a cell transfer order in relation to a cell of a PCC
even if —
(a) a liquidator has been appointed to act in respect of the company
or the company has passed a resolution for voluntary winding up;
(b) a receivership order has been made in respect of the cell or any
other cell of the company.
PART 5 – RECEIVERSHIP ORDERS

23 Receivership orders in relation to cells

(1) 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 receiver
”) for the purposes of —
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(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.
(2) If 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; and
(b) that the making of an order under this section would achieve the
purposes set out in subsection (1),
the Court may make a receivership order under this section in respect of
that cell.
(3) A receivership order —
(a) must not be made if —
(i) a liquidator has been appointed to act in respect of the
PCC; or
(ii) the PCC has passed a resolution for voluntary winding up;
(b) shall cease to be of effect upon the appointment of a liquidator to
act in respect of the PCC.
(4) A receivership order may be made in respect of one or more cells.
(5) A receivership order does not affect prior acts.
(6) No resolution for the voluntary winding up of a PCC any cell of which is
subject to a receivership order shall be effective without leave of the
Court.
24 Applications for receivership orders

(1) An application for a receivership order in respect of a cell of a PCC 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) such other person as may be specified in regulations under
section 31; or
(f) the Official Receiver.
(2) The Court, on hearing an application —
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(a) for a receivership order; or
(b) for leave, under section 23(6), for a resolution for voluntary
winding up,
may make an interim order or adjourn the hearing, conditionally or
unconditionally.
(3) Notice of an application to the Court for a receivership order in respect of
a cell of a PCC shall be served upon —
(a) the company;
(b) the Official Receiver;
(c) such other person as may be specified in regulations under
section 31; 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.
25 Functions of receiver and effect of receivership order

(1) The receiver of a cell —
(a) shall, within 1 month from the date of the receivership order,
deliver to the Department of Economic Development a certified
copy of the order;4

(b) may do anything necessary for the purposes set out in section
23(1); and
(c) has all the functions of the directors in respect of the business and
cellular assets of or attributable to the cell.
(2) The receiver 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 receivership order to be discharged or varied; or
(c) for an order as to any matter arising in the course of his
receivership.
(3) In exercising any functions the receiver is the agent of the PCC, and does
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 receiver in good faith is not concerned to
enquire whether the receiver is acting within his powers.
(5) When an application has been made for, and during the period of
operation of, a receivership order —
(a) no proceedings may be instituted or continued by or against the
PCC in relation to the cell in respect of which the receivership
order was made; and
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(b) no steps may be taken to enforce any security or in execution of
legal process in respect of the business or cellular assets of or
attributable to the cell in respect of which the receivership order
was made,
except by leave of the Court, which may be conditional or unconditional.
(6) During the period of operation of a receivership order —
(a) the functions 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 receiver of the cell is deemed to be a director of the PCC 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.
(7) If default is made in complying with subsection (1)(a), the directors of the
PCC are liable to a default fine.
26 Discharge and variation of receivership orders

(1) The Court cannot discharge a receivership order unless the Court is
satisfied that the purpose for which the order was made —
(a) has been achieved or substantially achieved; or
(b) is incapable of achievement.
(2) The Court, on hearing an application for the discharge or variation of a
receivership order, may make any interim order or adjourn the hearing,
conditionally or unconditionally.
(3) Upon the Court discharging a receivership order in respect of a cell of a
PCC on the ground that the purpose for which the 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) Subsection (3) shall not affect or extinguish any right or remedy of a
creditor against any other person, including any surety of the PCC.
(5) Subject to the provisions of —
(a) this Act and any rule of law as to preferential payments; and
(b) any agreement between the PCC 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 receivership order has been made must, in the
Protected Cell Companies Act 2004 Section 27


c AT 1 of 2004 Page 19

winding up of the business of or attributable to that cell pursuant to the
provisions of this Act, be realised and applied proportionately in
satisfaction of the company’s liabilities attributable to that cell.
(6) Any surplus must thereafter be distributed (unless the memorandum or
articles provide otherwise) —
(a) among the holders of the cell shares or the persons 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.
(7) The Court may, upon discharging a receivership order in respect of a cell
of a PCC, direct that the cell shall be dissolved on such date as the Court
may specify.
(8) On the dissolution of a cell of a PCC, the company may not undertake
business or incur liabilities in respect of that cell.
27 Remuneration of receiver

The remuneration of a receiver 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
receiver was appointed; and
(b) to the extent that these may be insufficient, the non-cellular assets
of the PCC.
PART 6 – LIQUIDATION

28 Provisions in relation to liquidation of PCC

(1) Notwithstanding any statutory provision or rule of law to the contrary,
in the liquidation of a PCC, the liquidator —
(a) must deal with the company’s assets in accordance with the
requirements of section 7(1);
(b) in discharge of the claims of creditors of the PCC, shall apply the
company’s assets to those entitled to have recourse thereto in
conformity with the provisions of this Act.
(2) Section 235 of the 1931 Act (distribution of property of a company)
applies, with the necessary modifications, in relation to PCC’s but subject
to this Act.
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Page 20 AT 1 of 2004 c

PART 7 – GENERAL PROVISIONS

29 Company to inform persons they are dealing with PCC

(1) A PCC shall —
(a) inform any person with whom it enters into any transaction in
respect of a particular cell that the company is a PCC; and
(b) for the purposes of that transaction, identify or specify the cell in
respect of which that person is transacting.
(2) If, in contravention of subsection (1), a PCC —
(a) fails to inform a person that he is entering into a transaction with
a PCC, and that person is otherwise unaware that, and has no
reasonable grounds to believe that, he is entering into a
transaction with a PCC; or
(b) fails to identify or specify the cell in respect of which a person is
entering into a transaction, and that person is otherwise unaware
of, and has no reasonable basis of knowing, the cell in respect of
which he is entering into a transaction;
then, in both cases —
(i) the directors shall 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) Subsection (2) will apply even if there is a provision to the contrary in the
company’s articles or in any contract with the company or otherwise.
(4) The Court may none the less relieve a director of all or part of his
personal liability under subsection (2)(i) if the Court is satisfied that it is
fair to relieve him because —
(a) he was not aware of the circumstances giving rise to his liability
and, in being not so 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.
(5) Where, under subsection (4), 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 from such of the cellular or non-
cellular assets of the PCC as may be specified in the order.
(6) Any provision in the articles of a PCC, and any other contractual
provision under which the PCC may be liable, which purports to
indemnify directors in respect of conduct which would otherwise
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disentitle them to an indemnity against non-cellular assets by virtue of
subsection (2)(ii), shall be void.
30 Security interests in respect of cell assets

(1) A company may create any security interest in respect of assets
attributable to a particular cell in relation to —
(a) any liability attributable to that cell;
(b) any liability that is not attributable to that cell.
(2) A company cannot exercise the powers referred to in subsection (1)
without the written consent of all the members of the relevant cell.
(3) Without affecting the generality of section 2 —
(a) Part III of the 1931 Act (registration, etc. of charges); and
(b) Part VI of the 1931 Act (receivers and managers),
apply in respect of each cell of a PCC as if each cell were a separate
company.
31 Power of the Treasury to make regulations

(1) The Treasury may make such regulations as are necessary to give full
effect to this Act.
(2) Without limiting the generality of subsection (1), regulations under this
Act may make provision in respect of any of the following matters —
(a) restricting the business that PCC’s may carry out;
(b) the conduct of the business of PCC’s;
(c) the manner in which PCC’s may carry on, or hold themselves out
as carrying on, business;
(d) the form and content of the accounts of PCC’s;
(e) the winding up, administration or receivership of PCC’s;
(f) the transfer of domicile (in accordance with Schedule 4 to the
Insurance Act 2008 or the Companies (Transfer of Domicile) Act 1998)
of companies that are, or are equivalent to, PCC’s.5

(3) Regulations under subsection (2) may modify provisions of the
Companies Acts in their application to companies that are PCC’s but
only to such extent as is necessary to prevent conflict between those Acts
and this Act.
(4) Regulations under this Act —
(a) may contain such consequential, incidental, supplemental and
transitional provisions as may appear to the Treasury to be
necessary or expedient;
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Page 22 AT 1 of 2004 c

(b) may provide that the provisions of this Act shall apply in relation
to any class or description of company specified by or prescribed
under regulations subject to such exceptions, adaptations and
modifications as may be specified in the regulations.
(5) Before making regulations under this Act, the Treasury shall consult
with such bodies as appear to it to be representative of interests likely to
affected by the regulations.
(6) Regulations under this Act shall be laid before Tynwald as soon as
practicable after they are made, and if Tynwald at the sitting at which the
regulations are laid or at the next following sitting fails to approve them,
the regulations shall cease to have effect.
32 Interpretation

(1) In this Act —
“the 1931 Act
” has the meaning given in section 3(4);
“cell
” means a cell created by a PCC for the purpose of segregating and
protecting cellular assets in the manner provided by this Act;
“cell share capital
” has the meaning given in section 8;
“cell shares
” has the meaning given in section 8;
“cell transfer order
” has the meaning given in section 21(3);
“cellular assets
” has the meaning given in section 6;
“cellular dividend
” has the meaning given in section 9(1);
“the Companies Acts
” means the Companies Acts 1931 to 1993;
“the Court
” means the High Court;
“creditors
” includes present, future and contingent creditors;
“liability
” includes any debt or obligation;
“non-cellular assets
” has the meaning given in section 6(3);
“prescribed
” means prescribed by regulations of the Treasury;
“PCC
” means a company incorporated as, or converted into, a PCC in
accordance with the provisions of this Act;
“receiver
” has the meaning given in section 23(1);
“receivership order
” has the meaning given in section 23(1);
“transaction
” means anything (including, without limitation, any agreement,
arrangement, dealing, disposition, circumstance, event or relationship)
whereby any liability arises or is imposed.
(2) Expressions used in this Act shall have the same meanings as in the 1931
Act unless the context requires otherwise.
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c AT 1 of 2004 Page 23

33 Saving for directors’ functions

(1) This Act does not affect the functions of the directors of a PCC in respect
of the affairs of the company including the due administration of the
affairs of each cell except as expressly provided.
(2) Subsection (1) does not affect the powers of delegation by directors.
34 Saving for internal arrangements

(1) This Act does not prevent, in the ordinary course of business of a PCC,
arrangements —
(a) as between cells; or
(b) as between cells and the PCC,
in relation to the PCC’s business or to the PCC’s business attributable to
the cells concerned.
(2) In respect of any arrangements of a kind mentioned in subsection (1), the
PCC shall make the necessary adjustments to the accounting records of
the PCC and those attributable to its cells.
(3) This section does not affect the generality of section 2.
35 Financial

There shall be paid out of monies provided by Tynwald any increase in the
expenses of the Treasury and the Department of Economic Development that
are attributable to this Act.6

36 Short title and commencement

(1) This Act may be cited as the Protected Cell Companies Act 2004 and shall
be construed as one with the Companies Acts, and those Acts and this
Act may together be cited as the Companies Acts 1931 to 2004.
(2) This Act shall come into force on such day as the Treasury may by order
appoint and different days may be so appointed for different provisions
and for different purposes.7

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c AT 1 of 2004 Page 25

ENDNOTES

Table of Endnote References

1
Subs (1) amended by SD155/10 Sch 2. 2
Subs (2) amended by SD155/10 Sch 2. 3
Para (a) amended by Insurance Act 2008 Sch 8. 4
Para (a) amended by SD2015/0090 as amended by SD2015/0276. 5
Para (f) amended by Insurance Act 2008 Sch 8. 6
S 35 amended by SD155/10 Sch 2. 7
ADO (whole Act) 31/3/2004 (SD148/04).