Introduction
Open-Ended Collective Investment Schemes
Closed-Ended Collective Investment Schemes
Effect
Introduction
The Guernsey Financial Service Commission (GFSC) has introduced new regulations concerning protected cell companies (PCCs). Previously, the only companies that could be established as or converted into PCCs were (i) authorized collective investment schemes under The Protection of Investors (Bailiwick of Guernsey) Law 1987, and (ii) registered insurers under The Insurance Business (Guernsey) Law 1986 or other insurers that are exempt from registration (see Guernsey Protected Cell Companies). This position has now changed.
Open-Ended Collective Investment Schemes
Authorized collective investment schemes must be either (i) 'open-ended' investment companies or (ii) unit trusts. 'Open-ended' is defined by the Protection of Investors Law to mean that:
"the investors are entitled under the terms of the scheme (i) to have their units redeemed or repurchased by, or out of funds provided by, the scheme; or (ii) to sell their units on an investment exchange at a price related to the value of the property to which they relate."
Authorization under the Protection of Investors Law is achieved through compliance with a series of rules and regulations established by the GFSC.
Closed-Ended Collective Investment Schemes
In October 1999 the GFSC used its powers under The Protected Cell Companies Ordinance 1997 to issue new PCC regulations. These extend the class of companies which can be established or converted into PCCs to include closed-ended investment companies.
Closed-ended investment companies cannot be authorized collective investment schemes under the POI Law. However, these companies still require the consent of the GFSC to raise capital through issuing shares pursuant to the Control of Borrowing (Bailiwick of Guernsey) Ordinance 1959. In practice, the process for obtaining the GFSC's consent under this ordinance is less formal than for the authorization of a scheme.
Effect
The new regulations increase the scope for establishing closed-ended collective investment schemes through the use of PCCs in order to benefit from the segregation of assets and liabilities of cells while minimizing administrative costs. PCCs will be particularly attractive in cases where GFSC authorization is not essential for marketing purposes, for example, in the administration of private client funds within different cells of a single PCC.
For further information on this topic please contact Sean Cheong at Collas Day by telephone (+44 0481 723 191) or by fax (+44 1481 711 880) or by e-mail ([email protected]). The Collas Day web site can be accessed at www.collasday.com.
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