Segregated Account Companies and the Emergence of the 'Incorporated Cell'
Segregated accounts companies (also known as "cell companies" or "segregated portfolio companies") have proven to be a successful innovation coming out of the offshore world. Segregated accounts-type entities enable the ring-fencing of assets and liabilities through the creation of specific accounts/cells within the company. These structures have accordingly been used by insurance companies and funds, and also have been utilised for structured finance products and estate planning purposes.
Despite the increasingly wide adoption of segregated accounts companies offshore, one lingering doubt about the application and effectiveness of these companies is whether the ring-fencing of assets and liabilities would be recognised before courts in jurisdictions where there is no segregated accounts legislation. Partly to address this concern, some offshore financial centres, including Jersey, Guernsey, the Isle of Man and Malta, have introduced "incorporated segregated accounts company" (ISAC) legislation by which it is confirmed that each account/cell within an incorporated segregated accounts company is itself an incorporated entity with separate legal personality and the protection of limited liability. Other offshore jurisdictions, including Bermuda, are looking to implement ISAC legislation shortly.
This presentation explores the use of segregated accounts companies and the emergence of ISAC legislation in the offshore world.