Barbados is on the verge of adding another product to its international business and financial services offerings. The Companies Act, Cap 308 is currently being amended to allow for the establishment of incorporated cell companies (ICCs).
Incorporated Cell Companies (ICCs)
An ICC is a robust form of corporate cell structure which was first introduced by Guernsey by virtue of its Incorporated Cell Companies Ordinance in 2006. Each incorporated cell (IC) of an ICC has a separate legal personality from the ICC and the ICC’s other ICs. ICs can enter into binding arrangements with each other and the ICC. ICCs are more cost-efficient than a parent-subsidiary structure due to economies of scale.
Cell company structures differ from traditional company structures. They allow for the creation of one or more underlying cells within the company so that the assets and liabilities of each cell are segregated from the assets and liabilities of the company’s other cells and of the cell company itself. This “ring-fences” the cellular assets allowing for enhanced asset protection and risk management. Cell company structures are particularly attractive for insurance activity (especially captive insurance), but also for other types of financial services activities like banking and mutual fund activity.
Incorporated Cell Companies vs Segregated Cell Companies
ICCs share similarities but also important differences with segregated cell companies (SCCs) which are also known as protected cell companies (PCC). SCCs are an older type of cell company structure which were first established by the Guernsey through its Protected Cell Companies Ordinance in 1997. Unlike ICCs, an SCC is a single legal entity which means its underlying cells do not have separate legal personality from the cell company. Segregated cell companies and segregated accounts have been permitted in Barbados since 2011.
Key Features of the proposed Barbados ICC product
The key features under the proposed Companies Act (Amendment) Bill 2016 are as follows:
- Naming – An ICC will be required to use the suffix “Incorporated Cell Company” or the abbreviation “ICC” after its name. ICs must include the suffix “Incorporated Cell” or the abbreviation “IC”
- Type of Business -any company incorporated or continued under the Act for the purposes of carrying on financial services activities, including insurance, banking and mutual fund activity, may incorporate as an ICC
- Formation – A company may conduct business as an ICC in Barbados in four ways: (a) incorporation as an ICC, (b) the incorporation of an existing company (incorporated under the Act) as an ICC, (c) the registration of an external company as an ICC in Barbados and (d) the continuation of an external company as an ICC in Barbados.
- Creation of ICs – An ICC may by special resolution create an IC.
- Status of ICs – An IC is a legal person separate from its ICC.
- Transactions – The ICC has no power to enter into transactions on the behalf of its ICs. Similarly, an IC has no power to enter into legal transactions on the behalf of its ICC or any of the other ICs of the ICC.
- Separate Assets and Liabilities – Directors of an ICC are to keep the assets and liabilities of each IC separate and separately identifiable from those of the other ICs and the ICC.
- Creditors’ Claims – A creditor of the ICC in respect of a transaction between the creditor and the ICC may not make a claim against the assets of the company’s ICs, while a creditor of the IC in respect of a transaction with that IC, may not make a claim against the assets of the ICC or its other ICs.
- Constitution – The IC is to file its own by-laws within 21 days of being incorporated as a cell and it may not own shares in its ICC
- Directors – An IC may have directors other than the directors of its ICC.
- Registered Office – An IC is required to have the same registered office as its ICC
- Record Keeping – An ICC is required to maintain separate records of the members of each of its ICs
- Annual returns – An ICC is required to submit an annual return for each of its ICs and to ensure that its financial statements are not consolidated with the financial statements of its ICs
- Expulsion – An ICC may apply to the court to expel an IC under one or several of the grounds elaborated in section 356.31(1) of the proposed amended Act.
- Migration provisions– An IC of an ICC may be transferred to another ICC or to a SCC
- Winding Up – The same provisions on winding up under the Act which apply to a non-cell company also apply to an ICC, except that an ICC that is being wound up is not to be dissolved until each of its ICs ceases to exist as an IC of the ICC and an ICC which is dissolved will not be struck off the Registry of Companies until each of its ICs has been incorporated independently, merged with a company, continued under the law of another jurisdiction, transferred to another ICC or SCC or wound up.
Advantages of the ICC Vehicle
ICCs are a very flexible vehicle and some of the advantages are the:
- Ease of establishment of cells – Once the ICC is incorporated, it may by special resolution establish any number of cells as it so chooses
- Portability – An IC of one ICC can be transferred to another ICC or to an SCC
- Cost efficiency – ICC structures are more cost-efficient than parent-subsidiary relationships as economies of scale can be achieved through shared administrative frameworks
- Tax liability – Each IC is separate from the ICC and the other ICs for income tax purposes
- Ability of ICs to enter contracts with each other and with the ICC
- Absolute protection of IC assets from the risks, liabilities and claims of creditors of the ICC or other ICs.
- Segregation – The cell structure allows for the segregation of assets and liabilities, risk and investments
- Unlike some jurisdictions, Barbados’ ICC product is not limited to the insurance sector, but to all financial services activities
The Companies Act (Amendment) Bill 2016 was debated and passed in the House of Assembly last Tuesday, February 2nd, and is currently before the Senate for debate.
The international business and financial services sector is one of Barbados’ main foreign exchange earners, accounting for a significant portion of corporation tax receipts and is a major employer.
Besides Guernsey where it originated, the ICC product already exists in a few other jurisdictions, for example, Jersey, Isle of Man, Malta and the Cayman Islands. The introduction of the ICC product to Barbados is expected to further boost the island’s competitiveness and attractiveness as a preferred domicile for international business.
The full text of the proposed amendment bill may be viewed here.
Disclaimer: This article is for general information purposes only and is NOT intended to provide legal, investment, financial or any other advice. The Author accepts no liability to anyone who relies on the information in this article. The information was taken from sources deemed to be accurate and correct at the time of publication.
Alicia Nicholls B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. The following information is for general You can read more of her commentaries and follow her on Twitter @LicyLaw.