Introduction

Protected Cell Companies ("PCCs") were introduced in Mauritius by the Protected Cell Companies Act No. 137 of 1999. Initially thought to be a suitable structure for the business of insurance, it was also worked out to become a versatile vehicle for collective investment funds and for asset holding in Mauritius.

A PCC is a company limited by shares which consists of a core and an indefinite number of cells which are kept legally separate from each others. This structure allows for the segregation of risks, assets/liabilities of different individuals and/or corporate entities under a shared structure.

Additionally, PCCs in Mauritius can take the form of Category 1 Global Business Licence companies and thus obtain favourable tax treatment by being granted access to the 33 double taxation agreements currently in force.

In this article, we shall go briefly over the main characteristics of the PCC and provide examples of its possible uses.

Main Characteristics of PCCs

A PCC consists of two main parts which are legally distinct from each other. On one hand, there is one core and on the other hand, there can be an unlimited number of cells.

A PCC is managed by its directors, which can be provided by AAMIL Ltd, but the investment management is usually delegated to another person or entity having specialised knowledge in the field. The investment manager will normally hold the core shares of the PCC for effective decision making.

Each cell of the PCC will have its own name or designation which may be the name of the holder of the cellular shares attributed to it, or which may simply be an identifying number, in order to preserve anonymity.

Core shares of the PCC will carry rights as to voting, but not cellular shares. While dividends will be payable only by reference to the profits made by each individual cell, the PCC will be taxed as a single entity.

Some Uses of PCCs in Mauritius

Example 1: Insurance and Captive Insurance

Each cell of a PCC can be used to write different risks so that upon the insolvency of one cell, the creditors can only have access to the assets of that cell, and to a certain extent, to the core, but not to the other cells. For example, a life insurance entity can create a cell for each of its high net worth individual policyholders, and thus offering greater security and investment flexibility. The owner of the PCC will charge a fee for the use of each cell.

A cell of a PCC can additionally be used as a captive insurance entity and the cellular shares will be held by the captive’s parent company under a common corporate structure. A captive is aninsurance or a re-insurance entity, created and owned, directly or indirectly, by one or more commercial companies, with the ultimate aim of providing insurance or re-insurance cover for the risks of the entity or entities to which it belongs, or for entities connected to those entities, and a small part of it may be to provide insurance cover for third parties.

The PCC will hold the insurance licence and it will then offer cells to his clients, to operate as captives, without the need to set up another company. This is similar to a ‘rent-a-captive’ arrangement.

Example 2: Collective Investment Fund Structures

A PCC can be used for collective investment fund structures - a close-ended or an open-ended fund.

The main advantage is administrative; repeat transactions can be executed within a reduced timeframe. The PCC allows a framework of administrators, managers, investment managers and custodians to be put in place so that quick investment decisions can be made by the addition of new cells under a framework which has been agreed beforehand by the Financial Services Commission of the Republic of Mauritius.

From the investors’ point of view, the PCC allows them to spread their investment risks in a number of sub-funds (with varying investment strategies) in the same umbrella structure or to switch their investments between sub-funds.

Example 3: Asset Holding

The PCC allows the holding and managing of assets (or portfolios of assets) ‘ring-fenced’ in different cells for such persons as high net worth individuals and institutional investors. Here again, PCCs allow the spreading of risks and provides definite administrative cost advantages.

Each cell will have assets/liabilities attributed to it, and its assets cannot be used to meet the liabilities of any other cell, the non-cellular (core) assets possibly being available to meet the liabilities that cannot be attributed to any individual cell.

Conclusion

With its many advantages, including its 33 double taxation agreements, namely with India, China, South Africa, the United Kingdom and Luxembourg, to name but a few, Mauritius stands today as one of the best International Financial Centres. It proposes a variety of up-to-date financial services which can be conducted through best-suited structures such as PCCs for fund management, asset holding and insurance/re-insurance businesses.

Mauritius additionally offers lower operations costs, is home to a pool of highly skilled bilingual workforce and is situated in a time zone which renders doing business with the far east and far west possible during normal working hours, among others.

Head Office

European Office

Suites 340-345 Barkly Wharf
Le Caudan Waterfront
P.O. Box 1070, Port Louis
Republic of Mauritius

8, Place du Bourg de Four
P.O. Box 3627
CH-1211 Geneva 3
Switzerland

Tel. (230) 210 1000
Fax. (230) 210 2000

Tel.: (41) (22) 818 61 00
Fax: (41) (22) 818 61 01

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.