Legalize / United Kingdom / Statutory-Instrument

The Risk Transformation Regulations 2017

Type Statutory-Instrument

Publication 2017-01-01

Last updated 2023-07-11

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

PDF Download

articles Not indexed

Reform history JSON API

Made: 5th December 2017

Coming into force in accordance with regulation 1(2)

The Treasury are a government department designated for the purposes of section 2(2) of the European Communities Act 1972 in relation to financial services.

In the opinion of the Treasury, one of the effects of these Regulations is that an activity which is not a regulated activity, within the meaning of the Financial Services and Markets Act 2000 , will become a regulated activity.

In the opinion of the Treasury, one of the effects of these Regulations is that an activity will become a PRA-regulated activity within the meaning of the Financial Services and Markets Act 2000 .

A draft of these Regulations has been laid before and approved by a resolution of each House of Parliament in accordance with paragraph 2 of Schedule 2 to the European Communities Act 1972 and sections 22B and 429(1) and (2) of, and paragraph 26(2) of Schedule 2 to, the Financial Services and Markets Act 2000 .

The Treasury, in exercise of the powers conferred by section 2(2) of the European Communities Act 1972 and sections 22(1) and (5), 22A, 55C, 284A, 426 and 428(3) of, and paragraph 25 of Schedule 2 to, the Financial Services and Markets Act 2000 , make the following Regulations:

PART 1 — General

Citation and commencement

1

(1) These Regulations may be cited as the Risk Transformation Regulations 2017.

(2) These Regulations come into force 3 days after the day on which they are made.

Interpretation: general

2

(1) In these Regulations—

“alternative inspection location” means any place at which a protected cell company keeps the documents and records relating to the protected cell company, other than the protected cell company's registered office;

“appropriate registrar” means—the registrar of companies for England and Wales if a protected cell company's instrument of incorporation states that its registered office is situated in England and Wales (or Wales);the registrar of companies for Scotland if a protected cell company's instrument of incorporation states that its registered office is situated in Scotland;the registrar of companies for Northern Ireland if a protected cell company's instrument of incorporation states that its registered office is situated in Northern Ireland;

“asset” includes any interest in an asset, any right over an asset or any property;

“cell” has the meaning given in regulation 43;

“contractual arrangement” has the same meaning as in the Implementing Technical Standard;

“core” has the meaning given in regulation 42;

“counsel” means a person who is—a barrister within the meaning given in section 207 of the Legal Services Act 2007 ;a practising member of the faculty of advocates in Scotland; ora barrister who has been called to the bar in Northern Ireland and who holds a current practising certificate;

“creditor” incudes a contingent or prospective creditor;

“debenture” includes debenture stock, bonds and any other securities;

“FSMA” means the Financial Services and Markets Act 2000;

“general meeting” means a meeting of the persons holding voting shares issued on behalf of the core of the protected cell company;

“Implementing Technical Standard” means Commission Implementing Regulation (EU) 2015/462 of 19th March 2015 laying down implementing technical standards with regard to the procedures for supervisory approval to establish special purpose vehicles, for the cooperation and exchange of information between supervisory authorities regarding special purpose vehicles as well as to set out formats and templates for information to be reported by special purpose vehicles in accordance with Directive 2009/138/EC of the European Parliament and of the Council ;

“insolvency legislation” means—the Insolvency Act 1986 ;the Insolvency (Northern Ireland) Order 1989 ;Part 24 of FSMA (insolvency);the Insolvency Act 2000 ;the Insolvency (Northern Ireland) Order 2002 ;the Bankruptcy (Scotland) Act 2016 ; andall subordinate legislation made under the legislation mentioned in sub-paragraphs (a) to (f);

“liability” includes a contingent or prospective liability;

“non-voting share” means a share which is not a voting share;

“officer” includes a director or manager;

“property” includes an interest in property or a right over property;

“the Regulated Activities Order” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ;

“share” means a share in the share capital of a protected cell company or a part of a protected cell company;

“share certificate” means documentary evidence of title to a share;

“solicitor” means a person who is—a solicitor within the meaning given by section 207 of the Legal Services Act 2007;enrolled on the roll of solicitors kept under section 7 of the Solicitors (Scotland) Act 1980 ; ora solicitor within the meaning given by Article 3(2) of the Solicitors (Northern Ireland) Order 1976 ;

“voting share” means a share which confers the right to vote on a written resolution of the protected cell company or at a meeting of shareholders;

“working day” has the meaning given in section 1173(1) of the Companies Act 2006 .

(2) In these Regulations—

(a) a reference to a part of a protected cell company is a reference to the core or a cell of the protected cell company (see regulations 42 and 43);

(b) a reference to enforceable arrangements between cells is a reference to arrangements between cells which—

(i) have been made in accordance with regulations 68 and 69; and

(ii) have not been cancelled in accordance with regulation 70; and

(3) Where these Regulations refer to the Welsh equivalent of a word or expression, the Welsh equivalent of that word or expression is set out in Table 6 in Schedule 1.

(4) Any reference in these Regulations to any EU regulation, EU decision or EU tertiary legislation (within the meaning of section 20 of the European Union (Withdrawal) Act 2018 (“the 2018 Act”)), is, unless the contrary intention appears, to be treated as a reference to that EU regulation, EU decision or EU tertiary legislation as it forms part of domestic law by virtue of section 3 of the 2018 Act.

Meaning of “group of cells”

3

(1) In these Regulations, a “group of cells” is a group of two or more cells in which each cell is linked to every other cell in the group.

(2) For the purposes of this regulation, two cells (“cell A” and “cell B”) are linked if the protected cell company has made enforceable arrangements between—

(a) cell A and cell B; or

(b) cell A and another cell which is linked to cell B.

PART 2 — Authorisation and supervision of insurance risk transformation

Amendment of FSMA

4

(1) FSMA is amended as follows.

(2) In Schedule 6 (threshold conditions) —

(a) in Part 1D (Part 4A permission: conditions for which the PRA is responsible in relation to insurers etc), in paragraph 4A (introduction), after sub-paragraph (4), insert—

(5) If the person concerned (“C”) carries on, or is seeking to carry on, regulated activities which consist of or include a PRA-regulated activity relating to an assumption of risk falling within article 13A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, the threshold conditions which are relevant to the discharge by the PRA of its functions in relation to C are the conditions set out in paragraphs 4B to 4F, subject to sub-paragraph (6). (6) Paragraphs 4B to 4F have effect in relation to persons of the kind specified by sub-paragraph (5) as if— (a) the persons are special purpose vehicles within the meaning given by Article 13(26) of the Solvency 2 Directive ; (b) the persons are not reinsurance undertakings within the meaning given by Article 13(4) of the Solvency 2 Directive; (c) references to contracts of insurance are references to contracts for the assumption of risk; and (d) references to C's policyholders are references to undertakings from whom C assumes a risk.

(b) in Part 1E (Part 4A permission: conditions for which the PRA is responsible in relation to other PRA-authorised persons), in paragraph 5A (introduction)—

(i) at the end of sub-paragraph (b), omit “or”;

(ii) at the end of sub-paragraph (c), insert “ or ”; and

(iii) after sub-paragraph (c), insert—

(d) an assumption of risk falling within article 13A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001,

Amendment of the Regulated Activities Order

5

(1) The Regulated Activities Order is amended as follows.

(2) After article 12A (information society services and managers of UCITS and AIFs) insert—

(12B) A transformer vehicle does not carry on an activity of a kind specified by article 10 by assuming a risk from an undertaking, provided the assumption of the risk is a specified kind of activity falling within article 13A (transformer vehicles: insurance risk transformation).

(3) After article 13 (application of sections 327 and 332 of FSMA) insert—

(13A) It is a specified kind of activity for a transformer vehicle to assume a risk from an undertaking where— (a) the undertaking assumes a risk under a contract of insurance (“the underlying risk”); and (b) the assumption of risk by the transformer vehicle has the legal or economic effect of transferring some or all of the underlying risk to the transformer vehicle.

(4) After article 19 (risk-management) insert—

(19A) A transformer vehicle does not carry on an activity of a kind specified by article 14 by assuming a risk from an undertaking, provided the assumption of the risk is a specified kind of activity falling within article 13A (transformer vehicles: insurance risk transformation).

Amendment of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013

6

In the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 in article 2 (regulated activities which are PRA-regulated activities), after paragraph (c) insert—

(ca) the activity carried out by a transformer vehicle when it assumes a risk from an undertaking, as specified by article 13A of the Regulated Activities Order;

Limitation on transformer vehicles' activities

7

(1) When the PRA gives permission under Part 4A of FSMA for a transformer vehicle to carry on regulated activities, the PRA must exercise its discretion under section 55F(4)(a) of FSMA to incorporate in the description of those regulated activities a limitation on the scope of the regulated activities which the transformer vehicle may carry on.

(2) The limitation on the scope of the regulated activities referred to in paragraph (1) must be determined by reference to some or all of the activities described in the application for Part 4A permission made by or on behalf of the transformer vehicle.

(3) Where—

(a) the PRA proposes to exercise its discretion under section 55F(4)(a) of FSMA pursuant to the duty imposed on the PRA by paragraph (1); and

(b) the person applying for Part 4A permission consents to the proposed exercise of that discretion,

the PRA need not give a warning notice relating to the proposed exercise of that discretion pursuant to section 55X(1)(a) of FSMA.

(4) Where—

(a) the PRA decides to exercise its discretion under section 55F(4)(a) of FSMA pursuant to the duty imposed on the PRA by paragraph (1); and

(b) the person applying for Part 4A permission consents to the exercise of that discretion,

the PRA need not give a decision notice relating to the exercise of that discretion pursuant to section 55X(4)(a) of FSMA.

(5) After the PRA has given permission under Part 4A of FSMA for a transformer vehicle to carry on regulated activities, the PRA may exercise its discretion under section 55I(1)(c) or 55J(3)(a) of FSMA to vary the limitation referred to in paragraph (1), provided the PRA maintains a limitation on the scope of the regulated activities which the transformer vehicle may carry on.

(6) A variation to the limitation referred to in paragraph (5) must ensure that the limitation is determined by reference to some or all of the activities which the transformer vehicle carries on or proposes to carry on.

Disapplication of Part 12 of FSMA

8

Part 12 of FSMA (control over authorised persons) does not apply in relation to a person who decides to acquire or increase control, or reduce or cease control, over a transformer vehicle carrying on the activity specified in article 13A of the Regulated Activities Order.

Transformer vehicles which are not Solvency 2 special purpose vehicles

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART 3 — Offers of investments by transformer vehicles

Meaning of “qualified investor”

10

(1) In this Part, “qualified investor”, in relation to an offer of investments, means a person—

(a) described in paragraph 3(a) of Schedule 1 to MIFIR;

(b) recognised by the Financial Conduct Authority (“FCA”) as an eligible counterparty for the purposes of Section 6 of Chapter 3 of the Conduct of Business sourcebook in the Handbook of Rules and Guidance published by the FCA containing rules made by the FCA under FSMA, as the sourcebook has effect on IP completion day; or

(2) The conditions referred to in paragraph (1)(c) are satisfied in respect of a person (“the proposed investor”) where—

(a) the proposed investor confirms in writing to the person making the offer (“the offeror”) that the proposed investor is to be treated as a qualified investor for the purposes of this Part;

(b) the offeror carries out an assessment of the proposed investor's expertise, experience and knowledge;

(i) the proposed investor is capable of making an informed decision to acquire the investments; and

(ii) the proposed investor understands the risks involved in acquiring the investments;

(d) the offeror's conclusion referred to in sub-paragraph (c) is reasonable; and

(e) the proposed investor provides sufficient evidence to the offeror that the proposed investor satisfies at least two of the following criteria—

(i) the proposed investor has entered into or arranged at least 40 transactions in the reinsurance markets in the period of one year ending on the date on which confirmation is given under sub-paragraph (a);

(ii) the proposed investor has a portfolio of cash deposits and other financial instruments, the value of which exceeded £425,000 at any time in the period of two weeks ending on the date on which confirmation is given under sub-paragraph (a);

(iii) the proposed investor has worked for at least one year in a professional capacity in the financial sector and the proposed investor's role required knowledge of the reinsurance markets.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In this regulation—

(a) “financial instrument” means a financial instrument listed in Part 1 of Schedule 2 to the Regulated Activities Order;

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(da) “MIFIR” means Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments; and

(e) “reinsurance markets” includes the markets in insurance linked securities.

Investments to be offered only to qualified investors

11

(1) A transformer vehicle must not offer to any person who is not a qualified investor an investment issued by the transformer vehicle.

(2) A transformer vehicle must take such steps as are reasonable in the circumstances to prevent an investment issued by the transformer vehicle to a qualified investor from being offered subsequently to a person who is not a qualified investor.

(3) A contravention of paragraph (1) or (2) is actionable, at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.

PART 4 — Protected Cell Companies

CHAPTER 1 — Overview

Overview

12

(1) This Part enables the creation of a type of body corporate called a protected cell company.

(2) A protected cell company is a transformer vehicle which is intended to be used as a multi-arrangement special purpose vehicle (within the meaning given by Article 2 of the Implementing Technical Standard).

(3) As a result, the protected cell company may only be used to carry out the activities mentioned in regulation 57.

(4) A protected cell company is comprised of different parts, namely the core and the cells created by the protected cell company after its registration and authorisation.

(5) The core administers the protected cell company.

(6) The cells are used for assuming risk from undertakings, issuing investments to investors to fund the protected cell company's exposure to that risk, holding the proceeds of sale of those investments and, where permitted by the protected cell company's instrument of incorporation, entering into arrangements between cells.

(7) The core and the cells do not have legal personality distinct from the protected cell company, but are nevertheless segregated from each other in accordance with the provisions of this Part.

(8) Protected cell companies are governed by the provisions of this Part rather than the Companies Act 2006, but Part 41 (business names) of that Act applies to protected cell companies and these Regulations apply certain other provisions of that Act to protected cell companies with modifications.

CHAPTER 2 — Registration

SECTION 1 — Obtaining registration

Method of forming a protected cell company

13

A protected cell company is formed under this Part by a person—

(a) applying to the PRA for registration of a protected cell company in accordance with regulation 14; and

(b) complying with the requirements for registration set out in regulation 21.

Application to register a protected cell company

14

(1) An application to register a protected cell company may only be made to the PRA.

(2) The application must state—

(a) that the applicant wishes to form a protected cell company;

(b) the name of the proposed protected cell company;

(d) the names of the proposed directors of the protected cell company;

(e) for each proposed director, the particulars set out in regulation 18; and

(f) the names of the persons who are, on registration, to hold voting shares in the core of the protected cell company.

(3) The application must contain or be accompanied by—

(a) an application made in accordance with regulation 15 (application for permission to carry out a regulated activity);

(b) the proposed instrument of incorporation;

(c) a statement signed by each person who is to become a director of the protected cell company that the person consents to being a director; and

(d) a statement signed by each person who will, on registration, hold voting shares in the core of the protected cell company that the person consents to holding those shares.

(4) When the PRA receives an application under paragraph (1), the PRA must forward the application, and any documents received in accordance with paragraph (3), to the FCA without delay.

(5) At any time after receiving an application and before determining it, the FCA may require the applicant to provide such additional information as it may reasonably require.

(6) Any information to be provided to the FCA under paragraph (5) must be set out in such form and verified in such manner as the FCA may reasonably direct.

Application for permission to carry out a regulated activity

15

(1) A person applying to register a protected cell company must make an application under section 55A (application for permission) of FSMA for permission for the proposed protected cell company to carry out a regulated activity.

(2) That regulated activity must be, or include, the activity specified in article 13A (transformer vehicles: insurance risk transformation) of the Regulated Activities Order.

(3) Where an application is made in accordance with paragraphs (1) and (2)—

(a) the application is to be treated for the purposes of FSMA as an application made by the applicant on behalf of the proposed protected cell company;

(b) the PRA must decide whether it will, if the proposed protected cell company is registered by the FCA (see regulation 21), give the proposed protected cell company permission under section 55F (giving permission: the PRA) of FSMA ;

(c) the FCA may only register the proposed protected cell company if the PRA has decided that it will, if the proposed protected cell company is registered by the FCA, give the proposed protected cell company permission under section 55F of FSMA to carry out a regulated activity which is, or includes, the activity specified in Article 13A of the Regulated Activities Order (see regulation 21); and

(d) if the FCA registers the proposed protected cell company, the PRA must, without delay, give the protected cell company permission under section 55F of FSMA in accordance with its decision.

(4) The provisions of FSMA apply to such an application, but the provisions specified in the first column of Table 1 apply with the modifications specified in the second column of Table 1 .

Provision of FSMA	Modification
Section 55A (application for permission)	For subsections (1) and (2) substitute—
Section 55A (application for permission)	1An application for permission to carry on one or more regulated activities may be made to the appropriate regulator on behalf of a proposed protected cell company by a person applying to register the protected cell company under Part 4 of the Risk Transformation Regulations 2017.2The “appropriate regulator”, in relation to such an application, means the PRA.
Section 55A (application for permission)	Ignore subsection (3).
Section 55B (the threshold conditions)	In subsection (3), treat the references to giving permission, imposing a requirement or giving consent as including references to making a decision to do any of those things on the registration of the proposed protected cell company.
Section 55F (giving permission: the PRA)	In subsection (2), treat the reference to “the applicant” as a reference to “the protected cell company”.
Section 55F (giving permission: the PRA)	The PRA may not give permission under subsection (2) until the FCA has registered the protected cell company.
Section 55L (imposition of requirements by FCA)	For subsection (1) substitute—
Section 55L (imposition of requirements by FCA)	1Where a person has applied, on behalf of a proposed protected cell company, to the PRA for a Part 4A permission, the FCA may, on the registration of the protected cell company, impose on the protected cell company such requirements, taking effect on or after the giving of permission, as the FCA considers appropriate.
Section 55M (imposition of requirements by PRA)	For subsection (1) substitute—
Section 55M (imposition of requirements by PRA)	1Where a person has applied, on behalf of a proposed protected cell company, for a Part 4A permission, the PRA may, on the registration of the protected cell company, impose on the protected cell company such requirements, taking effect on or after the giving of permission, as the PRA considers appropriate.
Section 55R (persons connected with an applicant)	In subsection (1), treat the reference to the “applicant” as a reference to the proposed protected cell company.
Section 55U (applications under this Part)	For subsection (1)(a) substitute—
Section 55U (applications under this Part)	acontain a statement by the applicant of the regulated activity or regulated activities for which permission is sought on behalf of the proposed protected cell company, and
Section 55V (determination of applications)	Treat references to the determination of an application as references to the decision made by the PRA as to what action the PRA will take under section 55F of FSMA if the FCA registers the proposed protected cell company.
Section 55V (determination of applications)	After subsection (4) insert—
Section 55V (determination of applications)	4ASubsection (4B) applies where the PRA decides that it will, if the FCA decides to register the proposed protected cell company, give the proposed protected cell company permission under section 55F to carry out a regulated activity which is, or regulated activities which include, the activity specified in Article 13A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.4BThe PRA must give the applicant written notice stating the activities which the proposed protected cell company will be given permission under section 55F to carry out if the FCA decides to register the proposed protected cell company.4CWhere the PRA gives written notice under subsection (4B), a copy must be sent to the FCA without delay.
Section 55X (determination of applications: warning notices and decision notices)	In subsection (1), in paragraphs (a) and (b), after “Part 4A permission” insert “ if the protected cell company is registered by the FCA, ”.
Section 55X (determination of applications: warning notices and decision notices)	The FCA or PRA need not give a warning notice under subsection (1) in the circumstances specified in paragraph (a), (b) or (e) of that subsection if the applicant has consented to the proposed exercise of power referred to in that paragraph.
Section 55X (determination of applications: warning notices and decision notices)	The PRA must give a copy of any warning notice given under subsection (1) to the FCA without delay.
Section 55X (determination of applications: warning notices and decision notices)	In subsection (2), ignore the reference to subsection (3).
Section 55X (determination of applications: warning notices and decision notices)	Ignore subsection (3).
Section 55X (determination of applications: warning notices and decision notices)	In subsection (4), in paragraphs (a) and (b), after “Part 4A permission” insert “ if the protected cell company is registered by the FCA, ”.
Section 55X (determination of applications: warning notices and decision notices)	The FCA or PRA need not give a decision notice under subsection (4) in the circumstances specified in paragraph (a), (b) or (e) of that subsection if the applicant has consented to the exercise of power referred to in that paragraph. Where the applicant consents to an exercise of power referred to in paragraph (a) or (b), the PRA must notify the FCA without delay.
Section 55Z3 (right to refer matters to the tribunal)	In subsection (1), treat the reference to the determination of an application as a reference to the decision made by the PRA as to what action the PRA will take under section 55F of FSMA if the FCA registers the proposed protected cell company.
Section 55Z3 (right to refer matters to the tribunal)	In subsection (2), treat the reference to the exercise of an own-initiative requirement power as a decision to exercise that power if the proposed protected cell company is registered.
Section 390 (final notices)	Where the PRA gives a final notice under this section, the PRA must send a copy of the final notice to the FCA without delay.

Applications for approval of persons

16

(1) Where a person makes an application to the PRA in accordance with paragraphs (1) and (2) of regulation 15, the person may also make an application under section 59 (approval for particular arrangements) of FSMA .

(2) The application is to be treated for the purposes of FSMA as an application made by the applicant on behalf of the proposed protected cell company.

(3) The provisions of FSMA apply to such an application, but the provisions specified in the first column of Table 2 apply with the modifications specified in the second column of Table 2.

Provision of FSMA	Modification
Section 60 (applications for approval)	In subsection (1), treat the reference to the authorised person concerned as a reference to the applicant on behalf of the proposed protected cell company.
Section 60 (applications for approval)	In the rest of the section, treat the references to the authorised person concerned as including references to the proposed protected cell company.
Section 60A (vetting of candidate)	On the coming into force of paragraph 5 of Schedule 4 to the Bank of England and Financial Services Act 2016 , references to an authorised person are to be treated as references to the applicant on behalf of the proposed protected cell company.
Section 61 (determination of applications)	In subsection (5), ignore paragraph (b).
Section 62 (applications for approval: procedure and right to refer to Tribunal)	Subsection (2) does not apply where the regulator to which an application is made proposes to grant the application subject to conditions or for a limited period, and the applicant and the person in respect of whom the application has been made have consented to those conditions or that limited period.
Section 62 (applications for approval: procedure and right to refer to Tribunal)	Subsection (3) does not apply where the regulator to which an application is made decides to grant the application subject to conditions or for a limited period, and the applicant and the person in respect of whom the application has been made have consented to those conditions or that limited period.
Section 62 (applications for approval: procedure and right to refer to Tribunal)	In subsection (5), ignore paragraph (c).
Section 62A (changes in responsibilities of senior managers)	An application made by the applicant on behalf of the proposed protected cell company is to be treated, for the purposes of subsection (1)(a), as an application made by the proposed protected cell company.
Section 63 (withdrawal of approvals)	On the coming into force of paragraph 8 of Schedule 4 to the Bank of England and Financial Services Act 2016, an application made by the applicant on behalf of the proposed protected cell company is to be treated, for the purposes of subsection (2A), as an application made by the proposed protected cell company.
Section 390 (final notices)	Where the PRA gives a final notice under this section, the PRA must send a copy of the final notice to the FCA without delay.

The name of a protected cell company

17

(1) A protected cell company's name must include one of the following expressions (or their Welsh equivalents)—

“protected cell company”;

“PCC Limited”;

“PCC Ltd”.

(2) No protected cell company may have a name that—

(a) is undesirable or misleading;

(b) includes any of the following words or expressions (or, where applicable, their Welsh equivalents)—

(i) “unlimited” or “public limited company”;

(ii) “insurance”, “insurer”, “insured”, “reinsurance”, “reinsurer”, “reinsured”;

(iii) UK Economic Interest Grouping;

(d) is the same as the name of any other protected cell company registered by the FCA;

(e) is the same as the name of any other protected cell company which was registered by the FCA and then dissolved; or

(f) is the same as the name of any other company appearing on the appropriate registrar's index of company names.

(3) The following are to be disregarded for the purposes of determining whether one name is the same as another name—

(a) the definite article, where it is the first word of the name;

(b) the following words and expressions (or, where applicable, their Welsh equivalents) where they appear at the end of the name—

“company”;

“and company”;

“company limited”;

“limited”;

“unlimited”;

“public limited company”;

“protected cell company”;

“PCC Limited”;

“PCC Ltd”;

“UK Economic Interest Grouping”;

(c) abbreviations of the words and expressions referred to in sub-paragraph (b) where they appear at the end of the name; and

(d) type and case of letters, accents, spaces between letters and punctuation marks.

(4) For the purposes of determining whether one name is the same as another name, “and” and “&” are to be taken to be the same.

Particulars of directors

18

(1) The particulars which must be provided in relation to a director are—

(a) in the case of an individual, the individual's—

(i) name;

(ii) former name (if any);

(iii) usual residential address;

(iv) nationality;

(v) date of birth;

(b) in the case of a body corporate, the body corporate's—

(i) corporate or firm name;

(ii) registered or principal office;

(c) whether the director or proposed director has authority to act on behalf of the protected cell company alone or jointly with another director or proposed director; and

(d) if the director or proposed director only has authority to act jointly with another director or proposed director, the name of the other director or proposed director.

(2) In paragraph (1)(a)—

(a) a reference to an individual's name means the person's forename and surname, except that in the case of a peer or an individual usually known by a British title, the title may be stated instead of or in addition to the individual's forename and surname;

(b) the reference to an individual's former name does not include—

(i) in the case of a peer or an individual usually known by a British title, the name by which the individual was known before the adoption of or succession to the title;

(ii) a name which the individual changed or ceased to use before the individual attained the age of 18 years;

(iii) a name which the individual changed or ceased to use before a period of 20 years ending on the date the application to register a protected cell company is made to the PRA;

(iv) in the case of a married person, the name by which the person was known before marriage.

Instrument of incorporation: requirements

19

(1) The instrument of incorporation of a protected cell company must include—

(a) the statements set out in paragraph (3); and

(b) provision as to the matters mentioned in paragraph (4).

(2) The instrument of incorporation must not include—

(a) anything that conflicts with a statement required by paragraph (1)(a); or

(b) a statement to the effect that the protected cell company is a public company.

(3) The statements required by paragraph (1)(a) are that—

(a) the company is a protected cell company registered by the Financial Conduct Authority under the Risk Transformation Regulations 2017;

(b) the registered office of the protected cell company is situated in England and Wales (or Wales), Scotland or Northern Ireland (as the case may be);

(d) the protected cell company is comprised of a core and the cells created by the protected cell company after its registration and authorisation;

(e) the core administers the protected cell company and the cells are used to assume risk from undertakings, issue investments to investors to fund the protected cell company's exposure to that risk, hold the proceeds of sale of those investments and, where permitted by the instrument of incorporation, enter into arrangements between cells (see regulation 68);

(f) the cells are segregated from each other and from the core;

(g) the assets held on behalf of a cell are treated as if they belong exclusively to that cell and shall not be used to discharge liabilities incurred on behalf of or attributable to the core or any other cell, and shall not be available for any such purpose;

(h) the protected cell company may issue non-voting and voting shares on behalf of the core;

(i) the protected cell company may issue non-voting shares on behalf of a cell, but not voting shares;

(j) the liability of a person holding a share issued by the protected cell company is limited to the amount (if any) unpaid on the share.

(4) The matters referred to in paragraph (1)(b) are—

(a) the name of the protected cell company;

(b) the address of the protected cell company's registered office;

(d) when the creation of a new cell takes effect;

(e) the way in which cells in the protected cell company are to be named or numbered;

(f) whether the protected cell company may make arrangements between cells and, if so, whether they may be amended or cancelled (see regulation 70);

(g) the rights attaching to shares issued on behalf of the core and the cells;

(h) the maximum and minimum sizes of the voting share capital in the core;

(i) the classes of shares which may be issued on behalf of the core and the cells;

(j) if the protected cell company is to have a company seal, the form, custody and use of the seal;

(k) the procedure for the appointment and removal of a director of the protected cell company (for which provision is not made in this Part); and

(l) the currency in which the accounts of the protected cell company must be prepared.

(5) The way in which the cells of a protected cell company are given a name or number in accordance with the instrument of incorporation must not result in a cell having a name or number which would contravene the requirements of regulation 17(2) if it were the name of the protected cell company.

Instrument of incorporation: model articles

20

A protected cell company's instrument of incorporation may apply (with or without modification) all or any part of the model articles set out in the Companies (Model Articles) Regulations 2008 , except to the extent that it would contravene a requirement of this Part.

Requirements for registration

21

(1) The FCA must register a protected cell company where all of the following conditions are satisfied—

(a) the application for registration satisfies the requirements of regulation 14;

(b) the registered office of the protected cell company is situated in the United Kingdom;

(d) the protected cell company's instrument of incorporation satisfies the requirements of regulation 19;

(e) the protected cell company will have at least one director;

(f) there is at least one person who will, on registration, hold voting shares in the core of the protected cell company;

(g) the PRA has notified the FCA that the PRA will, if the FCA registers the proposed protected cell company, give the protected cell company permission under section 55F of FSMA to carry out the regulated activity referred to in Article 13A of the Regulated Activities Order; and

(h) if a warning notice has been served by a regulator on the applicant under paragraph (a), (b) or (e) of section 55X(1) of FSMA, then one of the following conditions is satisfied—

(i) the applicant has consented to the proposed action to which the warning notice relates;

(ii) where the regulator is the FCA, the FCA has decided not to exercise the power referred to in paragraph (e) of section 55X(1) of FSMA; or

(iii) in any other case, the regulator has served a final notice on the applicant which relates to—

(aa) the proposed action to which the warning notice relates; or

(bb) action which the regulator has decided to take instead of, or in addition to, that proposed action.

(2) For the purposes of determining whether the protected cell company's instrument of incorporation satisfies the requirements of regulation 19, the FCA may rely on a statement signed by the solicitor or counsel for the applicant confirming that the instrument of incorporation satisfies the requirements of regulation 19.

Representations against refusal of registration

22

(1) If the FCA proposes to refuse an application made under regulation 14 to register a protected cell company, it must give the applicant a warning notice.

(2) If the FCA decides to refuse the application—

(a) the FCA must give the applicant a decision notice; and

(b) the applicant may refer the matter to the Tribunal.

(3) Paragraphs (1) and (2) do not apply where the PRA has decided not to give the protected cell company permission to carry out the activity specified in Article 13A of the Regulated Activity Order.

Registration and certificates of incorporation

23

(1) If the FCA determines that the requirements of regulation 21 as to registration are satisfied, the FCA must register the documents delivered to it.

(2) On registration, the FCA must issue a certificate that the protected cell company is incorporated.

(3) The certificate must state—

(a) the name of the protected cell company;

(b) the registered number of the protected cell company;

(d) that the protected cell company is a protected cell company incorporated under the Risk Transformation Regulations 2017; and

(e) whether the registered office is situated in England and Wales (or Wales), Scotland or Northern Ireland.

(4) The certificate must not state that the protected cell company is a public company.

(5) The certificate must be signed on behalf of the FCA or authenticated by the FCA's company seal.

(6) The certificate is conclusive evidence that the requirements of regulation 21 as to registration are satisfied.

(7) The FCA may issue duplicate certificates at any time after registration.

(8) Where the FCA registers a protected cell company, the FCA must notify the PRA without delay.

Registration: notification to appropriate registrar

24

When the FCA registers a protected cell company under regulation 23, the FCA must notify the appropriate registrar of the name of the protected cell company.

Effect of registration

25

(1) The registration of a protected cell company has the following effects from the date of incorporation.

(2) The following persons are a body corporate by the name stated in the certificate of incorporation—

(a) the persons named in the application for registration as the persons who will, on registration, hold voting shares in the core of the protected cell company; and

(b) such other persons as may from time to time hold shares issued on behalf of the core of the protected cell company.

(3) That body corporate is capable of exercising all the functions of an incorporated company.

(4) The registered office of the protected cell company is as stated in the application for registration.

(5) The persons named as proposed directors in the application for registration are appointed to that office.

(6) The persons named in the application for registration as the persons who will, on registration, hold voting shares in the core of the protected cell company become the holders of those shares.

(7) The shares referred to in paragraph (6) are deemed to be have been issued by the protected cell company on behalf of the core.

(8) The provisions of the protected cell company's instrument of incorporation are binding on the following persons to the same extent as if there were covenants between them—

(a) the protected cell company;

(b) each person holding shares issued by the protected cell company on behalf of any part of the protected cell company.

(9) All the persons mentioned in paragraph (8) (but no others) are to be taken to have notice of the provisions of the protected cell company's instrument of incorporation.

SECTION 2 — Amendments to registration

Changes to name and registered office

26

A protected cell company may change its name or the address of its registered office by amending the relevant part of its instrument of incorporation.

FCA's approval for amendments to instrument of incorporation

27

(1) A protected cell company must give written notice to the FCA of a proposed amendment to the protected cell company's instrument of incorporation.

(2) Notice under paragraph (1) must be accompanied by—

(a) the proposed amendment; and

(b) a draft of the protected cell company's instrument of incorporation as amended by the proposed amendment.

(3) The FCA must approve the proposed amendment unless the proposed amendment would affect the protected cell company's compliance with the requirements of regulations 17 and 19.

(4) For the purposes of determining whether the proposed amendment will affect the protected cell company's compliance with the requirements of regulation 19, the FCA may rely on a statement signed by the solicitor or counsel for the protected cell company confirming that the proposed amendment does not affect the protected cell company's compliance with regulation 19.

(5) Effect must not be given to any proposed amendment to the protected cell company's instrument of incorporation unless—

(a) the FCA has given its approval to the proposal by notice in writing; or

(b) the FCA has failed to give the protected cell company a warning notice within a period of six weeks beginning with the date on which written notice referred to in paragraph (1) was given to the FCA.

Procedure when refusing approval of proposed amendment

28

(1) If the FCA proposes to refuse approval, it must give the protected cell company a warning notice.

(2) To be valid, the warning notice must be received by the protected cell company within a period of six weeks beginning with the date on which written notice was given to the FCA in accordance with regulation 27(1).

(3) If the FCA decides to refuse approval—

(a) the FCA must give the protected cell company a decision notice; and

(b) the protected cell company may refer the matter to the Tribunal.

Notification of appropriate registrar

29

If an amendment to a protected cell company's instrument of incorporation results in a change to the protected cell company's name, the FCA must notify the appropriate registrar of the change.

SECTION 3 — The register

Register of protected cell companies

30

The FCA must maintain a register of protected cell companies.

Registered numbers

31

(1) The FCA must allocate to every protected cell company a number, which is to be known as the protected cell company's registered number.

(2) Protected cell companies' registered numbers must be in such form as the FCA may determine from time to time, and may consist of one or more sequences of numbers or letters.

(3) The FCA may, upon adopting a new form of registered number, make such changes to existing registered numbers as appear to it to be necessary.

(4) A change to a protected cell company's registered number has effect from the date on which the protected cell company is notified by the FCA of the change.

Information on register

32

(1) The following information must be recorded on the register in relation to every protected cell company—

(a) the protected cell company's name;

(b) any names by which the protected cell company was previously known;

(d) the date of the protected cell company's registration;

(e) the address of the protected cell company's registered office;

(f) if an alternative inspection location has been notified to the FCA in accordance with regulation 67, the alternative inspection location;

(g) the protected cell company's instrument of incorporation as at the date of incorporation;

(h) any amendments to the protected cell company's instrument of incorporation which have been approved by the FCA under regulation 27;

(i) the protected cell company's instrument of incorporation, as amended by any amendments approved by the FCA under regulation 27;

(j) the names or numbers of all the cells which have been created by the protected cell company;

(k) in respect of each cell, the time and date when the cell was created;

(l) if a cell has been dissolved, the time and date when the cell was dissolved;

(m) copies of any written resolutions of the directors of the protected cell company provided in accordance with regulation 69(2)(c) (creation of arrangements between cells: procedure) or regulation 70(4)(b) (arrangements between cells: amendment and cancellation);

(n) the names of the directors of the protected cell company;

(o) the date on which each director was appointed;

(p) the particulars of each director, with the exception, in the case of a director who is an individual, of the director's usual residential address and date of birth;

(q) whether each director has or had the authority to act alone or jointly with another director, and if the director may or could only act jointly with another director, the name of that other director;

(r) if a director was removed from office, the date on which the director was removed;

(s) the information provided by the protected cell company in accordance with regulation 114(5)(b) (single members);

(t) the information provided by the protected cell company in accordance with regulation 133 (information on capital subscribed);

(u) all documents required to be delivered to the FCA for registration under Part 25 (company charges) of the Companies Act 2006, as applied by regulation 155 (registration of charges);

(v) all documents required to be delivered to the FCA under the following provisions of the Companies Act 2006, as applied by regulation 163 (application of Companies Act regime)—

(i) section 394A(2)(e) (individual accounts: exemption for dormant subsidiaries) ;

(ii) section 441 (annual accounts and reports) ;

(iii) section 448A(2)(e) (dormant subsidiaries exempt from obligation to file accounts) ;

(iv) section 479A(2)(e) (subsidiary companies: conditions for exemption from audit) ;

(w) anything that must be given to the FCA under Part 15 (accounts and reports) of the Companies Act 2006, as applied by regulation 163, other than a document referred to in sub-paragraph (v);

(x) any application registered under regulation 174 (fast track transfers);

(y) any order made under regulation 175 or 177 (transfers sanctioned by court order);

(z) anything that must be registered as a result of a court order made under regulation 41;

(aa) a copy of any winding-up order made in respect of any part of the protected cell company;

(bb) a notice of the appointment of liquidators in respect of any part of a protected cell company;

(cc) an order for the dissolution of a part of the protected cell company on its winding up;

(dd) a return by a liquidator of the final meeting of part of a protected cell company on its winding up;

(ee) anything which must be given to the FCA in accordance with a requirement imposed by the insolvency legislation (as applied by regulations 166 and 167), other than the documents referred to in sub-paragraphs (aa) to (dd);

(ff) whether the protected cell company has been dissolved and, if so, the date of dissolution; and

(gg) any notice given to the FCA in accordance with section 1013(6) of the Companies Act 2006 (crown disclaimer of property vesting as bona vacantia) as applied by regulation 180(10) (dissolution of a protected cell company).

(2) For the purposes of paragraph (1), the FCA may rely on information provided by the protected cell company.

Directors: residential addresses and dates of birth

33

(1) This regulation applies where a director is an individual.

(2) Where the FCA is notified that a document, other than a document setting out the particulars of a director, includes a statement of the director's usual residential address or date of birth, the FCA must redact that statement from the document where the document is to be included on the register.

(3) Notification under paragraph (2) must state where in the document the statement is to be found.

(4) But the FCA is not required to search any document other than the director's particulars for a statement of the director's usual residential address or date of birth and, in the absence of notification in accordance with paragraphs (2) and (3), the FCA may include such a document on the register notwithstanding the fact that it includes such a statement.

Delivery of documents to the FCA

34

Where these Regulations require a person to deliver a document to the FCA to be recorded on the register, the person—

(a) may deliver the document by electronic means; and

(b) subject to paragraph (a), must deliver the document in such form as the FCA may from time to time require.

Keeping of records by the FCA

35

(1) The FCA must keep the register in electronic form.

(2) The FCA must put in place procedures to ensure that any change to the information referred to in regulation 32(1) is normally recorded on the register within a period of 21 days beginning with the day when the FCA receives notice of the change.

(3) But paragraph (2) does not apply to the protected cell company's annual accounts.

(4) The originals of documents delivered in hard copy form to the FCA to be recorded on the register must be kept for a period of three years beginning with the date they are received by the FCA, after which they may be destroyed provided the information contained in them has been recorded on the register.

(5) The FCA is under no obligation to keep documents delivered in electronic form, provided the information contained in them has been recorded on the register.

(6) Where a protected cell company has been dissolved, the FCA may, at any time after a period of six years beginning with the date of dissolution, direct that any records in its custody relating to the protected cell company be removed to the Public Records Office.

(7) Where records are removed to the Public Records Office in accordance with a direction under paragraph (6), the records in respect of which the direction is given must be disposed of in accordance with the enactments relating to that Office and the rules made under them.

(8) Paragraphs (6) and (7) do not extend to Scotland.

Publication of register

36

(1) The FCA must publish the information contained in the register on its website, with the exception of the information referred to in sub-paragraphs (m), (s), (u), (w), (x), (y), (z) and (ee) of regulation 32(1).

(2) Where information published in accordance with paragraph (1) has a chronological order, the FCA must ensure that it can be accessed in chronological order.

Inspection of records kept by the FCA

37

(1) The FCA must on request provide a copy of the whole or part of a document or particular recorded on the register.

(2) The request may be made in hard copy form or by electronic means.

(3) The FCA must comply with a request made to have the document or particular provided in hard copy form or by electronic means.

(4) The FCA may satisfy the obligation to provide a document or particular by electronic means in response to a request made by electronic means by ensuring that—

(a) the document or particular may be downloaded from its website; and

(b) the person making the request is sent a message referring the person to its website.

(5) Where the FCA provides a hard copy of a document or particular, it must be certified as a “true copy” unless the person requesting it dispenses with certification.

(6) Where the FCA provides an electronic copy of a document or particular, it must not be certified as a “true copy” unless the applicant requests certification.

(7) Where the FCA certifies an electronic copy as a “true copy”, it must do so with an advanced electronic signature which meets the requirements set out in Article 26 of Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for the electronic transactions in the internal market and repealing Directive 1999/93/EC.

(8) The FCA may charge a fee for the provision of any document or particular recorded on its register provided the fee does not exceed the administrative cost of providing it.

(9) Where the information available on the FCA's website is illegible or unavailable, a person may inspect any copies of documents retained by the FCA in which the information is recorded.

(10) No process for compelling the production of a document kept by the FCA under these regulations is to issue from any court except with permission of the court.

(11) Where the FCA provides a certified copy of a document recorded on the register, the certified copy is deemed to be an accurate record of the contents of the original document and is in all legal proceedings admissible—

(a) as evidence of equal validity to the original document; and

(b) as evidence (in Scotland, sufficient evidence) of any fact stated in the original document of which direct oral evidence would be admissible.

Provision of information for publication on European e-Justice portal

38

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Documents relating to Welsh protected cell companies

39

(1) This regulation applies to any document which is delivered to the FCA under these Regulations and relates to a protected cell company or proposed protected cell company whose instrument of incorporation states that the registered office is situated in Wales.

(2) A document may be in Welsh, but must be accompanied by a certified English translation of the document unless it is in a form prescribed in Welsh (or partly in Welsh and partly in English) by virtue of section 26 (powers to prescribe Welsh forms) of the Welsh Language Act 1993 .

(3) Where a document is properly delivered to the FCA in Welsh without a certified English translation—

(a) the FCA must obtain such a translation if the document is to be available for public inspection; and

(b) the translation is to be treated as if delivered to the FCA in accordance with the same provision as the original.

(4) Where a document has been delivered to the FCA in English, the protected cell company may also deliver a certified translation of the document into Welsh.

FCA's notice to resolve inconsistency on the register

40

(1) Where it appears to the FCA that the information contained in a document delivered to the FCA is inconsistent with other information on the register, the FCA may give notice to the protected cell company to which the document relates—

(a) stating in what respects the information contained in it appears to be inconsistent with other information on the register; and

(b) requiring the protected cell company to resolve the inconsistency.

(2) The notice must—

(a) state the date on which it is issued; and

(b) require the delivery to the FCA, within a period of 14 days beginning with that date, of such replacement or additional documents as may be required to resolve the inconsistency.

Rectification of the register under court order

41

(1) The FCA must remove from the register any material—

(a) that derives from anything that the court has declared to be invalid or ineffective, or to have been done without the authority of the protected cell company; or

(b) that the court declares to be factually inaccurate, or to be derived from something that is factually inaccurate, or forged,

and that the court directs should be removed from the register.

(2) The court order must specify what is to be removed from the register and indicate where it is on the register.

(3) The court must not make an order for the removal of anything the registration of which has the legal consequences specified in paragraph (4) unless satisfied—

(a) that the presence of the material on the register has caused, or may cause, damage to the protected cell company; and

(b) that the protected cell company's interest in removing the material outweighs any interest of other persons in the material continuing to appear on the register.

(4) The legal consequences mentioned in paragraph (3) are legal consequences for the protected cell company as regards—

(a) its formation;

(b) an amendment to its instrument of incorporation;

(d) its dissolution.

(5) Where a court makes an order for removal under paragraph (3), the court may make such consequential orders as appear just with respect to the legal effect (if any) to be accorded to the material by virtue of its having appeared on the register.

(6) The court's powers also include a power to order that any of the following be included on the register—

(a) a copy of the order;

(b) a note of such matters as may be determined by the court.

(7) In this regulation, “court” means the High Court or, in Scotland, the Court of Session.

CHAPTER 3 — Structure of a protected cell company

The core

42

(1) A protected cell company must have a core.

(2) The core—

(a) is part of the protected cell company; and

(b) does not have legal personality distinct from the protected cell company.

(3) The purpose of the core is to administer the protected cell company.

(4) For that purpose, the protected cell company may, on behalf of the core, carry out such functions as are conferred on the core by the protected cell company's instrument of incorporation.

(5) The instrument of incorporation may, amongst other things, enable the protected cell company to do the following things on behalf of the core—

(a) hold property;

(b) lease premises;

(d) issue voting and non-voting shares;

(e) borrow money;

(f) incur liabilities.

(6) But a protected cell company may not assume a risk from an undertaking on behalf of the core.

The cells

43

(1) The protected cell company may have one or more cells.

(2) A cell—

(a) is part of the protected cell company; and

(b) does not have legal personality distinct from the protected cell company.

(3) The purpose of the cells is to—

(a) assume risk from undertakings;

(b) issue investments to investors to fund the protected cell company's exposure to the risks it has assumed;

(d) where permitted by the protected cell company's instrument of incorporation, enter into arrangements between cells (see regulations 68 to 74); and

(e) carry out any other functions conferred on the cells by the protected cell company's instrument of incorporation.

(4) A protected cell company may carry out the activity referred to in paragraph (3)(c) by using a trustee or nominee.

(5) Where a protected cell company uses a cell which is not a member of a group of cells to assume risk from an undertaking under a contractual arrangement, the protected cell company may not, during the time it is exposed to that risk, use that cell to assume risk from another undertaking or under a separate contractual arrangement.

(6) Where a protected cell company uses one or more cells which are members of a group of cells to assume risk from an undertaking under a contractual arrangement, the protected cell company—

(a) may not, during the time it is exposed to that risk, use any cell in that group of cells to assume risk from another undertaking or under a separate contractual arrangement;

(b) may use different cells in the group to carry out different activities (for example one cell may be used to assume risk and another cell may be used to issue investments to investors).

(7) A protected cell company may use different cells in a group of cells to assume risk under successive separate contractual arrangements.

Assets, liabilities and obligations

44

(1) Assets which are held by a protected cell company must be held on behalf of a part of the protected cell company.

(2) Liabilities or obligations incurred by a protected cell company must be incurred on behalf of a part of the protected cell company.

Liabilities and obligations which are not incurred on behalf of a part

45

A liability or obligation of the protected cell company which is not incurred by the protected cell company on behalf of a part of the protected cell company is to be treated as being attributable to the part of the protected cell company to which the liability or obligation is most closely related.

Records and accounts of assets, liabilities and obligations

46

(1) A protected cell company must at all times keep records and accounts which distinguish—

(a) the assets held on behalf of each part of the protected cell company from the assets held on behalf of the other parts of the protected cell company; and

(b) the liabilities and obligations which are incurred on behalf of, or which are attributable to, each part of the protected cell company from the liabilities and obligations which are incurred on behalf of, or which are attributable to, the other parts of the protected cell company.

(2) A protected cell company must ensure that the records and accounts kept by the protected cell company in accordance with paragraph (1) are accurate at all times.

Assets to be held in accordance with records and accounts

47

(1) A protected cell company must at all times hold its assets in accordance with the protected cell company's records and accounts kept in accordance with regulation 46.

(2) Where a protected cell company holds an asset on behalf of a part (“part A”) of the protected cell company which is recorded in the records and accounts as an asset held on behalf of another part (“part B”) of the protected cell company—

(a) the protected cell company must move the asset from part A to part B; and

(b) part A holds the asset on trust for the benefit of part B until the movement takes effect.

(3) For the purposes of the trust referred to in paragraph (2), parts A and B are to be treated as if they are distinct legal persons.

Segregation within a protected cell company

48

(1) The assets held by a protected cell company on behalf of a part of the protected cell company may not be used to discharge—

(a) a liability or obligation incurred on behalf of, or attributable to, another part of the protected cell company; or

(b) a claim brought in respect of another part of the protected cell company.

(2) A liability or obligation incurred on behalf of, or attributable to, a part of a protected cell company is to be discharged solely out of the assets held by the protected cell company on behalf of that part.

(3) A claim which a person has against a protected cell company in respect of a part of the protected cell company may not be set off or netted against a claim which the protected cell company has against that person in respect of another part of the protected cell company.

(4) A provision, whether contained in the instrument of incorporation, a contract or otherwise, is void to the extent that it is inconsistent with paragraphs (1) to (3).

(5) An application of assets, or agreement to apply assets, in contravention of paragraphs (1) to (3) is void.

(6) Notwithstanding the fact that the parts of a protected cell company are not legal persons distinct from the protected cell company—

(a) the assets held by the protected cell company on behalf of a part of the protected cell company are to be treated as assets belonging exclusively to that part of the protected cell company;

(b) a liability or obligation incurred by the protected cell company on behalf of, or which is attributable to, a part of the protected cell company is to be treated as a liability or obligation of that part of the protected cell company;

(c) a creditor of a protected cell company is to be treated as a creditor of that part of the protected cell company which is treated as being indebted to the creditor by virtue of sub-paragraph (b);

(d) the property held by a protected cell company on behalf of a part of the protected cell company may be subject to orders of the court as if the part were a distinct legal person; and

(e) a protected cell company may sue or be sued in respect of a part of the protected cell company.

Third parties circumventing segregation

49

Where—

(a) a person has a claim against a protected cell company;

(b) the claim relates to a part of the protected cell company (“part A”);

(d) the property was held by the protected cell company on behalf of a part of the protected cell company other than part A (“part B”),

then the person holds the property on trust for the benefit of part B.

Set-off: modification of insolvency legislation

50

(1) This regulation applies where—

(a) a protected cell company has a liability (“liability A”) to a person which was incurred on behalf of, or which is attributable to, a part of the protected cell company; and

(b) that person has a liability (“liability B”) to the protected cell company in respect of a different part of the protected cell company.

(2) Nothing in the insolvency legislation enables the netting or setting off against each other of liability A and liability B.

CHAPTER 4 — Movements of assets, liabilities and obligations within a protected cell company

Meaning of “records and accounts”

51

In this Chapter, “records and accounts” of a protected cell company means the records and accounts of the protected cell company kept by the protected cell company in accordance with regulation 46.

Movement of assets between cells

52

(1) Where an asset is recorded in the records and accounts of a protected cell company as an asset held by the protected cell company on behalf of a cell, the protected cell company may only amend its records and accounts so as to reallocate that asset to another cell where—

(a) the amendment is made pursuant to enforceable arrangements made between the cells (see regulations 68 and 69);

(b) the records and accounts mistakenly allocate the asset to the incorrect cell and the amendment corrects that mistake; or

(2) An amendment made in contravention of paragraph (1) has no effect.

Movement of assets from a cell to core

53

(1) Where an asset is recorded in the records and accounts of a protected cell company as an asset held by the protected cell company on behalf of a cell, the protected cell company may only amend its records and accounts so as to reallocate that asset to the core where—

(a) the amendment is made pursuant to a contract which the protected cell company has entered into on behalf of the cell and the core;

(b) the records and accounts mistakenly allocate the asset to the cell and the amendment corrects that mistake;

(c) the asset is deemed to be moved to the core by virtue of regulation 179(1)(c) (dissolution of a cell: effect on property and liabilities);

(d) the following conditions are satisfied—

(i) the protected cell company previously assumed a risk or a succession of risks from an undertaking, or risks from a succession of undertakings, on behalf of the cell or, if the cell is a member of a group of cells, on behalf of any of the cells in that group of cells;

(ii) the protected cell company no longer has any liability to that undertaking or those undertakings on behalf of the cell or, if the cell is a member of a group of cells, on behalf of any of the cells in that group; and

(iii) all the investors holding investments issued on behalf of the cell have been paid in full; or

(e) the amendment is made pursuant to an order of the court.

(2) An amendment made in contravention of paragraph (1) has no effect.

Movement of liabilities and obligations

54

(1) Where a liability or obligation is recorded in the records and accounts of a protected cell company as a liability or obligation incurred on behalf of, or attributable to, a part of the protected cell company, the protected cell company may only amend its records and accounts so as to reallocate that liability or obligation to another part of the protected cell company—

(a) with the consent of the person to whom the liability or obligation is owed;

(b) where the records and accounts mistakenly allocate the liability or obligation to the incorrect part of the protected cell company and the amendment corrects that mistake; or

(2) An amendment made in contravention of paragraph (1) has no effect.

Procedure for moving an asset, liability or obligation

55

(1) Any amendment to the protected cell company's records and accounts made in accordance with regulation 52, 53 or 54 must be approved by a written resolution of the directors of the protected cell company.

(2) A copy of the written resolution referred to in paragraph (1) must be kept with the records and accounts of the protected cell company at its registered office or at an alternative inspection location notified to the FCA in accordance with regulation 67.

Reallocations pursuant to mistakes in the records and accounts

56

(1) This regulation applies where a protected cell company proposes to amend its records and accounts in accordance with regulation 52(1)(b), 53(1)(b) or 54(1)(b) so as to reallocate an asset, liability or obligation from one part of the protected cell company to another part of the protected cell company.

(2) The protected cell company must give written notice of the proposed amendment to the following persons before the beginning of a period of 10 working days ending on the day the amendment is made—

(a) the FCA;

(b) the PRA;

(d) any person to whom the protected cell company has a liability or obligation which has been incurred by the protected cell company on behalf of a relevant part or, so far as the protected cell company is aware, is attributable to a relevant part;

(e) any person holding an investment issued by the protected cell company on behalf of a relevant part.

(3) In paragraph (2), a “relevant part” is a part of the protected cell company referred to in paragraph (1) or, where such a part is a cell, any other cell which has entered into enforceable arrangements with that cell.

(4) The protected cell company may apply to court for an order abridging the time period of 10 working days referred to in paragraph (2) or dispensing with the requirement to notify some or all of the persons mentioned in that paragraph.

(5) On an application made pursuant to paragraph (4), the court may make any order it sees fit.

(6) A person may apply to court for an order—

(a) restraining the protected cell company from making the amendment referred to in paragraph (1); or

(b) if the amendment has already taken place, declaring the amendment to have no effect.

(7) On an application made pursuant to paragraph (6), the court may—

(a) make an order referred to in paragraph (6); or

(b) make any other order the court sees fit (including an order as to the amendment of the protected cell company's records and accounts).

(8) In this regulation, “court” means the High Court or, in Scotland, the Court of Session.

CHAPTER 5 — Operation of a protected cell company

Objects of a protected cell company

57

(1) The objects of a protected cell company are the carrying on of—

(a) the activity referred to in section 284A(2)(a) (transformer vehicles) of FSMA to the extent that the activity is a specified kind of activity falling within Article 13A of the Regulated Activities Order;

(b) the activities referred to in section 284A(2)(b) of FSMA; and

(c) any activity which is incidental to, consequential on, or supplemental to, any of the activities mentioned in sub-paragraphs (a) or (b).

(2) A protected cell company may not carry out any other kind of activity.

Offence of carrying on other activities

58

(1) A protected cell company that contravenes the prohibition in regulation 57(2) is guilty of an offence and liable—

(a) on summary conviction, to imprisonment for a term not exceeding six months or—

(i) in England and Wales, a fine, or both;

(ii) in Scotland or Northern Ireland, a fine not exceeding the statutory maximum, or both;

(b) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both.

(2) In proceedings for an offence under paragraph (1), it is a defence for the accused to show that it took all reasonable precautions and exercised all due diligence to avoid committing the offence.

Creation of a cell

59

(1) The time and date on which a cell is created by the protected cell company is to be determined in accordance with the provisions of the protected cell company's instrument of incorporation.

(2) A protected cell company must notify the FCA when it creates a cell.

(3) The notification must state—

(a) the name or number of the cell; and

(b) the time and date when the cell was created.

(4) A protected cell company may not create a cell if the core of the protected cell company is in administration or liquidation (see regulation 167).

(5) This regulation does not apply when a cell is deemed to have been created as a result of a Case 1 transfer scheme (within the meaning given by regulation 170).

Assumption of risk: notification to PRA

60

(1) Where a protected cell company assumes a risk from an undertaking, the protected cell company must notify the PRA.

(2) The notification must be sent to the PRA within a period of 5 working days beginning with the day the protected cell company assumed the risk.

(3) Rules made under section 137G (the PRA's general rules) of FSMA may specify—

(a) the form in which such a notification is to be made;

(b) the information to be included with such a notification; and

Company seal: England and Wales, and Northern Ireland

61

(1) A protected cell company may have a common seal.

(2) A protected cell company which has a common seal must have its name engraved in legible characters on the seal.

(3) This regulation does not form part of the law of Scotland.

Contracts: England and Wales, and Northern Ireland

62

(1) The following provisions have effect under the law of England and Wales, or Northern Ireland, with respect to contracts made by a protected cell company.

(2) A contract may be made—

(a) by a protected cell company by writing under its common seal; or

(b) on behalf of a protected cell company by any person acting under its authority (whether express or implied).

(3) Any formalities required by law in the case of a contract made by an individual also apply to a contract made by or on behalf of a protected cell company.

Execution of documents: England and Wales, and Northern Ireland

63

(1) The following provisions have effect under the law of England and Wales, or Northern Ireland, with respect to the execution of a document by a protected cell company.

(2) Where a protected cell company has a common seal, the protected cell company may execute a document by affixing its common seal to the document.

(3) A document that is signed by at least one director and expressed (in whatever form of words) to be executed by the protected cell company has the same effect as if executed under the common seal of the protected cell company.

(4) A document executed by a protected cell company which makes it clear on its face that it is intended by the person or persons making it to be a deed—

(a) has effect, on delivery, as a deed; and

(b) is to be presumed, unless the contrary intention is proved, to be delivered upon its being executed.

(5) In favour of a purchaser—

(a) a document is deemed to be executed by the protected cell company if it purports to be signed by at least one director or, in the case of a director which is a body corporate, it purports to be executed by that director;

(b) if the document makes it clear on its face that it is intended by the person making it to be a deed, the document is deemed to have been delivered upon its being executed.

(6) In paragraph (5), “purchaser” means a purchaser in good faith for valuable consideration and includes—

(a) an undertaking from whom the protected cell company has assumed a risk on behalf of a cell; and

(b) a person to whom the protected cell company has issued an investment on behalf of a cell.

Execution of documents: Scotland

64

(1) The following provisions form part of the law of Scotland only.

(2) Notwithstanding the provisions of any enactment, a protected cell company need not have a company seal.

(3) For the purposes of any enactment—

(a) providing for a document to be executed by a protected cell company by affixing its common seal; or

(b) referring (in whatever terms) to a document so executed,

a document signed, subscribed or, in the case of an electronic document, authenticated by or on behalf of the protected cell company in accordance with the provisions of the Requirements of Writing (Scotland) Act 1995 has effect as if so executed.

Execution of deeds by attorney: England and Wales, and Northern Ireland

65

(1) Under the law of England and Wales, or Northern Ireland, a protected cell company may, by an instrument executed as a deed, empower any person, either generally or in respect of specific matters, as its attorney to execute deeds on its behalf.

(2) A deed executed by such an attorney on behalf of the protected cell company has effect as if the deed were executed by the protected cell company.

66

(1) This regulation applies where a protected cell company has a common seal.

(2) The protected cell company may have, for use for sealing shares issued by the protected cell company and for sealing documents creating or evidencing such shares, an official seal with a facsimile of its official seal with the addition on its face of the word “securities”.

(3) Such an official seal has the same effect as the company's common seal when affixed to a document.

Alternative inspection location

67

(1) A protected cell company may have an alternative inspection location.

Reading this document does not replace reading the official text published on legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0. We assume no responsibility for any inaccuracies arising from the conversion of the original CLML XML to this format.

This text is published under legislation.gov.uk's own terms of reuse, not a Legalize or public-domain licence. legislation.gov.uk
Open Government Licence v3.0 (attribution required)
© Crown and database right. Derived from content available under the Open Government Licence v3.0 from legislation.gov.uk.