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

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(2) A protected cell company's alternative inspection location must be located in the same part of the United Kingdom as the protected cell company's registered office.

(3) Where a protected cell company decides to have an alternative inspection location, the protected cell company must notify the FCA.

(4) The notification referred to in paragraph (3) must state the address of the alternative inspection location.

(5) Where a protected cell company has notified the FCA of an alternative inspection location under paragraph (3), the protected cell company must notify the FCA of any change of address of its alternative inspection location.

(6) If a protected cell company—

(a) has notified the FCA of an alternative inspection location under paragraph (3);

(b) but subsequently decides to keep the documents and records relating to the protected cell company at its registered office,

the protected cell company must notify the FCA.

CHAPTER 6 — Arrangements and contracts between cells

Creation of arrangements between cells

68

(1) Where a protected cell company enters into a contract with an undertaking to assume a risk on behalf of a cell (“cell A”), the protected cell company may make arrangements between cell A and another cell of the protected cell company (“cell B”) to discharge some or all of any actual liability arising out of the assumption of risk under that contract.

(2) The protected cell company may only make those arrangements during the period—

(a) beginning when the protected cell company enters into the contract; and

(b) ending when it is no longer possible for the undertaking to make a claim under the contract or, if the undertaking has made a claim under the contract, to revise the amount payable in respect of the claim under the terms of the contract.

(3) The arrangements may only enable the protected cell company to discharge some or all of the actual liability referred to in paragraph (1) by—

(a) moving assets held by the protected cell company on behalf of cell A to cell B before the actual liability arises; and

(b) if the actual liability arises, moving assets held by the protected cell company on behalf of cell B to cell A in order to discharge some or all of that actual liability.

(4) The arrangements must include full details of—

(a) the circumstances in which assets may be moved between the cells;

(b) the timing of any movement of assets when those circumstances arise; and

(5) In this regulation, “actual liability” means a liability which is not a contingent liability.

Creation of arrangements between cells: procedure

69

(1) The protected cell company may only make arrangements between cells in accordance with regulation 68 if the following conditions are satisfied—

(a) the protected cell company's instrument of incorporation must permit the protected cell company to make the arrangements;

(b) the arrangements must be approved by a written resolution of the directors of the protected cell company before they are made;

(d) the following persons must have given their prior written consent to the arrangements—

(i) the undertaking from whom the protected cell company assumed the risk to which the arrangements relate; and

(ii) all persons holding investments issued by the protected cell company on behalf of either cell.

(2) Where a protected cell company makes the arrangements, the protected cell company must—

(a) notify the PRA before the end of a period of 5 working days beginning with the day the arrangements are made;

(b) keep the written resolution of the directors approving the arrangements with the records of the protected cell company at its registered office or at any alternative inspection location notified to the FCA in accordance with regulation 67;

(d) notify any person to whom the protected cell company proposes to issue or allot an investment on behalf of either cell after the arrangements have been made that the cells are party to arrangements of the kind referred to in regulation 68(1).

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

(a) the form in which a notification under paragraph (2)(a) is to be made;

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

Arrangements between cells: amendment and cancellation

70

(1) Where a protected cell company makes arrangements between cells in accordance with regulations 68 and 69, the protected cell company may amend or cancel those arrangements—

(a) in accordance with the terms of those arrangements; or

(b) provided the conditions mentioned in paragraph (2) are satisfied.

(2) The conditions referred to in paragraph (1)(b) are that—

(a) the protected cell company's instrument of incorporation must permit the protected cell company to amend or cancel the arrangements;

(b) the amendment or cancellation must be approved by a written resolution of the directors of the protected cell company before they are amended or cancelled;

(i) the written resolution of the directors must set out the matters referred to in paragraph (4) of regulation 68 in relation to the amended arrangements; and

(ii) the amended arrangements must continue to comply with the requirements of paragraph (4) of regulation 68; and

(d) the following persons must have given their prior written consent to the amendment or cancellation—

(i) the undertaking from whom the protected cell company assumed the risk to which the arrangements relate; and

(ii) all persons holding investments issued by the protected cell company on behalf of either cell.

(3) Where a protected cell company amends or cancels the arrangements, the protected cell company must notify the PRA before the end of a period of 5 working days beginning with the day the arrangements are amended or cancelled.

(4) Where a protected cell company amends or cancels the arrangements other than in accordance with the terms of those arrangements, the protected cell company must—

(a) keep the written resolution of the directors approving the amendment or cancellation with the records of the protected cell company at its registered office or at an alternative inspection location notified to the FCA in accordance with regulation 67; and

(b) send a copy of the written resolution of the directors approving the amendment or cancellation to the FCA.

(5) Rules made under section 137G of FSMA may specify—

(a) the form in which a notification under paragraph (3) is to be made;

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

(6) Regulation 69(2)(d) ceases to apply to arrangements which have been cancelled in accordance with this regulation.

Arrangements between cells: enforcement

71

(1) This regulation applies where a protected cell company makes enforceable arrangements between cells.

(2) The following persons may bring proceedings against the protected cell company for an order requiring the protected cell company to give effect to the arrangements—

(a) the undertaking from whom the protected cell company assumed the risk to which the arrangements relate; and

(b) any person holding investments issued by the protected cell company on behalf of either cell.

(3) The protected cell company may apply to court for directions as to what the protected cell company must do or refrain from doing in order to give effect to the arrangements.

(4) Where a person brings proceedings referred to in paragraph (2) or the protected cell company makes an application referred to in paragraph (3), the court may make any such order as the court sees fit (including an order for service of the application on any person who appears to the court to have an interest in the matter).

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

Arrangements between cells: records and accounts

72

(1) Where a protected cell company makes enforceable arrangements between cells, the protected cell company must record the arrangements in the records and accounts kept by the protected cell company in accordance with regulation 46.

(2) For the purposes of recording the arrangements in the protected cell company's accounts, the records in the accounts must be made as if—

(a) the cells have distinct legal personality; and

(b) the arrangements take effect by virtue of a contract agreed between the cells.

(3) But where a protected cell company—

(a) prepares accounts in accordance with Part 15 (accounts and reports) of the Companies Act 2006, as applied by regulation 163; and

(b) those accounts do not distinguish between the assets, liabilities, profits or losses of the different parts of the protected cell company,

then the arrangements may be disregarded except to the extent necessary to give a true and fair view of the assets, liabilities, profits and losses of the protected cell company.

Inspection of directors' resolutions

73

(1) An undertaking from whom a protected cell company has assumed a risk on behalf of a cell, or a person to whom a protected cell company has issued an investment on behalf of a cell, may—

(a) inspect any written resolution of the directors of the protected cell company relating to arrangements made between that cell and another cell, or amending or cancelling any such arrangements; and

(b) require a copy of any such written resolution on payment of a fee (which may not exceed the administrative cost to the protected cell company of providing the copy).

Contracts between parts of a protected cell company

74

(1) Where a protected cell company enters into a contract which purports to create rights and obligations between two or more cells, or two or more cells of a protected cell company purport to enter into a contract creating rights and obligations between the cells, the rights and obligations between the cells—

(a) take effect as arrangements made between the cells, provided the requirements of—

(i) regulations 68 and 69; or

(ii) where applicable, regulation 70,

are satisfied; and

(b) have no other effect as between the cells.

(2) Where a protected cell company enters into a contract which purports to create rights and obligations between the core and a cell, or the core and a cell of a protected cell company purport to enter into a contract creating rights and obligations between the core and the cell, the rights and obligations between the core and the cell have no effect as between the core and the cell.

(3) This regulation does not prevent a protected cell company from entering into a contract with a person on behalf of two or more parts of the protected cell company.

CHAPTER 7 — Dealings with third parties

Change of name

75

Where a protected cell company changes its name—

(a) the change does not affect any rights or obligations of the protected cell company or render defective any legal proceedings by or against it; and

(b) any legal proceedings that might have been commenced or continued against the protected cell company by its former name may be commenced or continued against it by its new name.

Change of address of registered office

76

(1) Where a protected cell company changes the address of its registered office—

(a) the change takes effect when the FCA registers the new address; and

(b) until the end of a period of 14 days beginning with the date on which the new address is registered, a person may validly serve any document on the protected cell company at the address previously registered.

(2) Where an enactment makes provision for service of a document on a previous registered office of a protected cell company, any reference in that enactment to section 87(2) (change of address of registered office) of the Companies Act 2006 is to be treated as a reference to paragraph (1).

Name and other particulars to appear in correspondence

77

(1) A protected cell company must ensure that the particulars specified in paragraph (3) are disclosed in all letters and e-mails sent, and in all other documents issued, by or on behalf of the protected cell company.

(2) If a protected cell company has a website, the protected cell company must also ensure that the particulars specified in paragraph (3) are disclosed on the website.

(3) The particulars mentioned in paragraphs (1) and (2) are—

(a) the protected cell company's name;

(b) the protected cell company's registered number;

(d) the fact that the protected cell company is a protected cell company registered by the FCA under the Risk Transformation Regulations 2017; and

(e) the fact that the assets, liabilities and obligations of the core and cells of the protected cell company are segregated in accordance with the Risk Transformation Regulations 2017.

(4) The particulars must be disclosed in characters that can be read with the naked eye.

Contracts

78

(1) Where a protected cell company enters into a contract with a person, the protected cell company must ensure that the contract states clearly and unambiguously—

(a) whether the protected cell company enters into the contract on behalf of the core or a cell; and

(b) where the protected cell company enters into the contract on behalf of a cell, the cell's name or number.

(2) Where a protected cell company enters into a contract with a person on behalf of two or more parts of the protected cell company, the protected cell company must ensure that the contract states clearly and unambiguously which rights and obligations of the protected cell company relate to each part.

(3) The protected cell company must also ensure that every contract into which it enters contains a statement that a liability incurred by the protected cell company on behalf of the core or a cell of that protected cell company is to be discharged solely out of assets held by the protected cell company on behalf of the core or the cell (as the case may be).

Terms implied into contracts

79

(1) This regulation applies where—

(a) a protected cell company enters into a contract with a person; and

(b) the person may assert a right under the contract against the protected cell company in respect of a part of the protected cell company (“part A”).

(2) The following terms are implied into the contract—

(a) the person may only assert that right in respect of part A;

(b) the person waives any right that the person may have to make a claim which—

(i) arises under the law of a country or territory other than the United Kingdom; and

(ii) entitles the person to assert that right in respect of any part of the protected cell company other than part A;

(c) if the person obtains property from the protected cell company by asserting that right in respect of a part of the protected cell company other than part A, then the person—

(i) will transfer the property to the protected cell company to hold on behalf of that other part without delay; and

(ii) holds the property on trust for the benefit of that other part until the transfer takes effect.

(3) A provision, whether contained in the instrument of incorporation, a contract or otherwise, is void to the extent that it purports to waive or limit the effect of the implied terms referred to in paragraph (2).

Reliance on the register

80

(1) A protected cell company may only rely against another person (“P”) on an event which must be notified to the FCA to be recorded on the register where—

(a) the event has been recorded on the register published by the FCA on its website; or

(b) the protected cell company shows that P knew of the event at the material time.

(2) If the material time falls—

(a) on or before the 15th day after the date that the event was recorded in the register published by the FCA on its website; or

(b) where the 15th day was not a working day, on or before the next day that was,

then the protected cell company is not entitled to rely on the happening of the event as against P if P shows that P was unavoidably prevented from knowing of the event at that time.

Capacity of protected cell company

81

(1) The validity of an act done by a protected cell company cannot be called into question on the ground of lack of capacity by reason of anything in the enactments and documents specified in paragraph (7) (the “governing documents”).

(2) A party to a transaction with a protected cell company is not bound to enquire—

(a) as to whether the transaction is permitted by the governing documents; or

(b) as to any limitation on the powers of the directors deriving from the governing documents.

(3) But sub-paragraph (b) of paragraph (2) does not apply if the party is not dealing in good faith.

(4) In favour of a person dealing in good faith, the following powers are deemed to have been exercised free of any limitation in the governing documents—

(a) the powers of the directors to bind the protected cell company or authorise others to do so; and

(b) the power of the protected cell company in a general meeting to bind the protected cell company or authorise others to do so.

(5) For the purposes of this regulation—

(a) a person deals with a protected cell company if the person is a party to a transaction or other act to which the protected cell company is a party;

(b) a person acts in good faith unless—

(i) the person has actual knowledge that the protected cell company did not have the power to do the relevant act; or

(ii) the person deliberately fails to make enquiries in circumstances where a reasonable and honest person would have done so; and

(6) This regulation does not affect—

(a) the right of a person holding a share issued on behalf of the core of the protected cell company to bring proceedings to restrain the protected cell company from doing an act which would be beyond the protected cell company's capacity (see regulation 98(1));

(b) the duty on the directors to observe any limitation on their powers; or

(7) In this regulation, the “governing documents” are—

(a) these Regulations;

(b) Commission Delegated Regulation (EU) 2015/35 of 10th October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) ;

(d) rules made under FSMA;

(e) the protected cell company's instrument of incorporation;

(f) written resolutions of the persons holding voting shares issued on behalf of the core of the protected cell company; and

(g) resolutions passed in general meeting.

CHAPTER 8 — Directors

Requirement for a director

82

A protected cell company must have at least one director.

Directors' duties

83

(1) The provisions of the Companies Act 2006 specified in the first column of Table 3 apply to the directors of a protected cell company as they apply to the directors of a company incorporated under the Companies Act 2006 with any modification specified in the second column of Table 3.

Provision of Companies Act 2006	Modification
Sections 170 and 171
Section 172	In subsection (1)(f), the reference to members is to be treated as a reference to shareholders, and the need to act fairly as between shareholders of the protected cell company is to be assessed for each part of the protected cell company separately.
Sections 173 to 179, and 182 to 187

(2) The directors of a protected cell company also owe a duty to the protected cell company to—

(a) ensure that the protected cell company complies with the provisions of this Part; and

(b) act in accordance with any enforceable arrangements made between the cells of the protected cell company.

(3) A director (“D”) does not breach a duty imposed on D by paragraph (2) if D—

(a) acts in good faith; and

(b) exercises reasonable care, skill and diligence,

in the discharge of that duty.

(4) Paragraph (3)(b) is to be construed in accordance with section 174(2) (duty to exercise reasonable care, skill and diligence) of the Companies Act 2006.

Offence of failing to comply with certain duties

84

(1) A director of a protected cell company commits an offence if the director fails to ensure that the protected cell company complies with the requirements of—

(a) regulation 46(1) (company records of segregation);

(b) regulation 77 (name and other particulars to appear on correspondence); or

(2) A director of a protected cell company commits an offence if the director knowingly or recklessly causes records kept by the protected cell company in accordance with regulation 46(1) to be inaccurate at any time.

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

(4) A person guilty of an offence under paragraph (1) or (2) is liable—

(a) on conviction on indictment, to a fine; or

(b) on summary conviction—

(i) in England and Wales, to a fine;

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

Directors' powers

85

(1) The directors have such powers as—

(a) are necessary to fulfil their duties; or

(b) are conferred upon them by the protected cell company's instrument of incorporation.

(2) Those powers extend to each part of the protected cell company, except to the extent that the instrument of incorporation provides otherwise.

Appointment

86

(1) If the protected cell company holds annual general meetings, an appointment of a director of a protected cell company must be made—

(a) by the protected cell company in an annual general meeting; or

(b) by the directors to fill any vacancy until the next annual general meeting.

(2) If a protected cell company does not hold annual general meetings, the director (if there is only one director) or directors (if there is more than one director) of the protected cell company may appoint a person as a director.

(3) An act of a director is valid notwithstanding any defect which may be discovered in the director's appointment after the date of the director's appointment.

Removal

87

(1) The directors of a protected cell company must convene a general meeting without delay if—

(a) one or more persons holding shares issued on behalf of the core of the protected cell company gives notice to the protected cell company that a meeting must be held;

(b) the notice is signed by the person or persons giving notice;

(c) the person or persons giving notice hold at least 10% of the paid-up voting shares issued on behalf of the core of the protected cell company; and

(d) the notice states that the object of the meeting is to consider the removal of a director.

(2) A protected cell company may remove a director of the protected cell company by—

(a) a written resolution of the persons holding voting shares issued on behalf of the core of the protected cell company; or

(b) a resolution passed in a general meeting by a simple majority of the total voting rights of those shareholders who are entitled to vote on the resolution at the meeting.

(3) This regulation does not—

(a) deprive a person of compensation or damages payable in respect of the termination of the person's appointment as a director; or

(b) exclude any power to remove a person as a director which exists apart from this regulation.

Notification to the FCA

88

(1) The protected cell company must notify the FCA if a director is appointed or removed.

(2) Where a director is appointed, the notification must be accompanied by the particulars referred to in regulation 18 for the director.

(3) A protected cell company must notify the FCA of any change to the particulars of any current director of the protected cell company.

Invalidity of certain transactions involving directors

89

(1) This regulation applies where—

(a) a protected cell company enters into a transaction;

(b) the parties to the transaction include a director of the protected cell company or an associate of such a director; and

(c) the directors of the protected cell company (whether or not acting as a board) exceed their powers under the protected cell company's instrument of incorporation in connection with the transaction.

(2) The transaction referred to in paragraph (1)(a) is voidable at the instance of the protected cell company.

(3) Whether or not the transaction is avoided, the director or associate referred to in paragraph (1)(b) and any other director who authorised the transaction is liable—

(a) to account to the protected cell company for any gain which the director or associate made, directly or indirectly, from the transaction; and

(b) to indemnify the protected cell company for any loss or damage resulting from the transaction.

(4) The transaction ceases to be voidable if—

(a) restitution of the money or other asset which was the subject matter of the transaction is no longer possible;

(b) the protected cell company is indemnified for any loss or damage resulting from the transaction;

(c) avoidance would affect rights acquired by a person acting in good faith, for value and without actual notice of the fact that the directors exceeded their powers; or

(d) the transaction is ratified by a resolution of the persons holding voting shares issued on behalf of the core of the protected cell company.

(5) An associate of a director is not liable under paragraph (3) if the associate did not know at the time that the protected cell company entered into the transaction that the directors had exceeded their powers.

(6) This regulation does not affect—

(a) the operation of any other enactment or rule of law by virtue of which the transaction may be called into question or any liability to the protected cell company which may arise; or

(b) the operation of regulation 81(4) in relation to any party to the transaction who is not a director or associate falling within paragraph (3).

(7) Where a transaction is—

(a) voidable by virtue of this regulation; and

(b) valid by virtue of regulation 81(4) in relation to a party to a transaction who is not a director or associate falling within paragraph (3),

the court may make an order affirming, severing or setting aside the transaction on such terms as are just.

(8) For the purposes of this regulation, a person (“P”) is an associate of a director (“D”) in the following cases—

(a) if D is an individual, then P is—

(i) D's spouse, civil partner, child or stepchild;

(ii) D's employee; or

(iii) D's partner in a partnership;

(b) if D is a body corporate, then P is—

(i) a director of D;

(ii) a subsidiary undertaking of D;

(iii) a director of a subsidiary undertaking of D;

(9) In this regulation, “subsidiary undertaking” has the meaning given by section 1162 of the Companies Act 2006.

Inspection of directors' service contracts

90

(1) Where a protected cell company enters into a written contract of service with a director, the protected cell company must keep a copy of that contract and any variation to that contract.

(2) Where a protected cell company enters into an oral contract of service with a director, the protected cell company must keep a written memorandum setting out the terms of the contract and any variation to those terms.

(3) All copies and memoranda kept by a protected cell company in accordance with paragraph (1) or (2) must be kept at the same place, which must be either the protected cell company's registered office or any alternative inspection location notified to the FCA under regulation 67.

(4) Every copy and memorandum kept in accordance with paragraph (1) or (2) must be open to inspection by a person holding shares issued on behalf of the core of the protected cell company.

(5) If any such inspection is refused, the court may by order compel an immediate inspection of the copy or memorandum concerned.

(6) Every copy and memorandum kept in accordance with paragraph (1) or (2) must—

(a) be made available for inspection by the protected cell company at the protected cell company's annual general meeting; or

(b) if the protected cell company does not hold annual general meetings, be sent on request to any person holding shares issued on behalf of the core of the protected cell company before the end of a period of 10 days beginning with the day on which the request is received.

CHAPTER 9 — Shares and shareholders

SECTION 1 — Shares

Types of shares

91

(1) A protected cell company may issue voting shares on behalf of the core of the protected cell company.

(2) A protected cell company may issue non-voting shares on behalf of a part of the protected cell company.

(3) A protected cell company may issue more than one class of shares on behalf of a part of the protected cell company.

(4) A protected cell company may not issue shares other than in the ways described in paragraphs (1) to (3).

Nature of shares

92

(1) Only a share issued on behalf of the core of a protected cell company is to be treated as a share in the protected cell company.

(2) A share issued on behalf of a cell of a protected cell company is to be treated as a share in that cell.

(3) A share is personal property (or, in Scotland, moveable property) and is not in the nature of real estate (or heritage).

Rights attaching to shares

93

(1) The rights which attach to voting shares or a class of voting shares issued on behalf of the core are—

(a) the right, in accordance with the instrument of incorporation, to participate in or receive profits or income which are payable by the protected cell company on behalf of the core;

(b) the right, in accordance with the instrument of incorporation, to vote on a written resolution of shareholders (or shareholders of that class) or at any general meeting (or any relevant class meeting); and

(c) such other rights as may be provided for, in relation to voting shares (or voting shares of that class), in the protected cell company's instrument of incorporation.

(2) The rights which attach to a non-voting share or a class of non-voting shares issued on behalf of a part of the protected cell company are—

(a) the right, in accordance with the instrument of incorporation, to participate in or receive profits or income which are payable by the protected cell company on behalf of that part; and

(b) such other rights as may be provided for, in relation to non-voting shares (or non-voting shares of that class), in the protected cell company's instrument of incorporation.

(3) A share issued on behalf of a part of a protected cell company may not confer any rights in relation to another part of the protected cell company or the property held by the protected cell company on behalf of that other part.

Changes to rights attaching to shares

94

A right attaching to a share may only be varied with the consent of the person holding the share.

Amendments to the instrument of incorporation

95

(1) A protected cell company may only amend its instrument of incorporation if the proposed amendment is approved—

(a) by written resolution of the persons holding voting shares issued on behalf of the core of the protected cell company; or

(b) by a resolution passed in a general meeting by a simple majority of the total voting rights of those shareholders who are entitled to vote on the resolution at the meeting.

(2) But paragraph (1) does not prevent the protected cell company's instrument of incorporation requiring a higher majority or unanimity.

Prohibition on bearer shares

96

(1) A protected cell company may not issue a bearer share.

(2) A bearer share is a share evidenced by a share certificate, or by any other documentary evidence of title for which provision is made in the protected cell company's instrument of incorporation, which indicates—

(a) that the holder of the document is entitled to the shares specified in it; and

(b) that no entry will be made on the register of shareholders identifying the holder of those shares.

Compensation

97

A person is not debarred from obtaining damages or other compensation from a protected cell company by reason only of holding or having held shares issued on behalf of a part of the protected cell company.

Restraint and ratification by shareholders

98

(1) A person holding voting shares issued on behalf of the core of a protected cell company may bring proceedings to restrain the protected cell company from doing an act which would, but for regulation 81(1), be beyond the protected cell company's capacity.

(2) But no proceedings may be brought under paragraph (1) in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the protected cell company.

(3) The following action by the directors of a protected cell company may only be ratified by a resolution of persons holding voting shares issued on behalf of the core of the protected cell company—

(a) action which would, but for regulation 81(1), be beyond the protected cell company's capacity;

(b) action which is within the protected cell company's capacity but is beyond the powers of the directors to bind the protected cell company or authorise others to do so.

(4) A resolution ratifying such action does not affect any liability incurred by the directors or any other person, and relief from any such liability requires agreement by a separate resolution of the persons holding voting shares issued on behalf of the core of the protected cell company.

Contravention of regulation 91(4) or 93(3)

99

(1) A provision, whether contained in the instrument of incorporation, a contract or otherwise, is void to the extent that it is inconsistent with regulation 91(4) or 93(3).

(2) An application of assets, or agreement to apply assets, in contravention of regulation 93(3) is void.

Nominal value

100

(1) A share issued on behalf of a part of a protected cell company must have a fixed nominal value.

(2) An allotment of a share that does not have a fixed nominal value is void.

(3) Shares issued on behalf of a part of a protected cell company may be denominated in any currency and different classes of shares may be denominated in different currencies.

Numbering of shares

101

(1) Each share issued on behalf of a part of protected cell company must be distinguished by its appropriate number, except in the following circumstances.

(2) A share issued on behalf of a part of a protected cell company need not have a distinguishing number provided—

(a) all the shares issued on behalf of that part are fully paid up and rank pari passu for all purposes; or

(b) all the shares issued on behalf of that part and belonging to the same class as that share are fully paid up and rank pari passu for all purposes.

Power of directors to allot shares

102

(1) The directors of a protected cell company may exercise any power of the protected cell company to—

(a) allot shares issued on behalf of a part of the protected cell company; or

(b) grant rights to subscribe for or to convert any security issued into such shares.

(2) Paragraph (1) applies except to the extent that the protected cell company's instrument of incorporation provides otherwise.

(3) A share may not be allotted at a discount to its nominal value.

(4) If a share issued on behalf of a part of a protected cell company is allotted in contravention of paragraph (3), the allottee is liable to pay to the protected cell company on behalf of that part an amount equal to the amount of the discount.

Sub-division or consolidation of shares

103

(1) A protected cell company may—

(a) sub-divide all or any of the shares issued on behalf of a part of the protected cell company into shares of a smaller nominal amount than the existing shares issued on behalf of that part; or

(b) consolidate and divide all or any of the shares issued on behalf of a part of the protected cell company into shares of a larger nominal amount than the existing shares issued on behalf of that part.

(2) In any sub-division, or consolidation and division, of shares, the proportion between the amount paid and the amount (if any) unpaid on each resulting share must be the same as it was in the case of the share from which that share is derived.

(3) A protected cell company may only exercise a power under paragraph (1) if—

(a) the protected cell company's instrument of incorporation does not contain provision prohibiting the sub-division, or consolidation and division; and

(b) the persons holding the shares affected by the sub-division, or consolidation and division, consent.

Redenomination of shares

104

(1) In this regulation, “redenomination” means converting shares from having a fixed nominal value in one currency to having a fixed nominal value in another currency.

(2) A protected cell company may redenominate the shares, or any class of shares, issued on behalf of a part of the protected cell company.

(3) Before carrying out such a redenomination, the protected cell company must—

(a) notify all of the persons holding the shares, or class of shares, issued on behalf of that part of the proposed redenomination; and

(b) obtain their consent to the redenomination.

(4) The conversion must be made at an appropriate spot rate of exchange specified in the notification.

(5) The rate must be either—

(a) a rate prevailing on a day specified in the notification; or

(b) a rate determined by taking the arithmetic mean of the rates prevailing on each consecutive day of a period specified in the notification.

(6) The day or period specified for the purposes of paragraph (5) must be within the period of 28 days ending on the day on which consent is given (or the last such day if consent is given by different persons on different days).

(7) The notification may make the proposed redenomination subject to conditions which must be met before the redenomination takes effect.

(8) Redenomination in accordance with this regulation takes effect—

(a) on the day on which consent is given (or the last such day if consent is given by different persons on different days); or

(b) on such later date as may be determined in accordance with the notification.

(9) But consent to a notification is deemed to be withdrawn if the redenomination to which it relates has not taken effect by the end of the period of 28 days beginning on the day on which consent is given (or the last such day if consent is given by different persons on different days).

(10) A protected cell company's instrument of incorporation may prohibit or restrict the power conferred by this regulation.

Redenomination: supplementary

105

(1) Where a share is redenominated, the new nominal value of that share is equal to—

$$r A N$where—“r” is the appropriate spot rate of exchange for converting the old nominal value to the new nominal value;“A” is the sum total of the old nominal values of all the shares subject to redenomination;“N” is the total number of shares being redenominated.$

(2) A redenomination of shares does not affect—

(a) the rights and obligations of persons holding shares under the protected cell company's instrument of incorporation, including in particular—

(i) the entitlement to dividends (including the entitlement to dividends in a particular currency);

(ii) voting rights;

(iii) any liability in respect of amounts unpaid on shares; or

(b) any restrictions affecting such persons under the instrument of incorporation.

(3) For this purpose, the protected cell company's instrument of incorporation is deemed to include the terms on which the shares were allotted or held.

(4) Subject to paragraph (2), references to the old nominal value of the shares in any agreement, statement, deed, instrument or document, are (unless the context otherwise requires) to be read after the resolution takes effect as references to the new nominal value of the shares.

Acquisition and redemption of shares issued by a cell

106

(1) Where a protected cell company issues a share on behalf of a cell, the protected cell company may not acquire or redeem the share on behalf of the core or any other cell.

(2) Where a cell is not a member of a group of cells, a share issued by the protected cell company on behalf of the cell may only be acquired or redeemed by the protected cell company on behalf of the cell if the following conditions are satisfied—

(a) the acquisition or redemption is funded by assets held by the protected cell company on behalf of the cell; and

(b) where the protected cell company has a liability to an undertaking arising under a contract made between the undertaking and the protected cell company acting on behalf of the cell, the undertaking has consented to the acquisition or redemption (whether in the contract or otherwise).

(3) Where a cell (“the relevant cell”) is a member of a group of cells, a share issued by the protected cell company on behalf of the relevant cell may only be acquired or redeemed by the protected cell company on behalf of the relevant cell if the following conditions are satisfied —

(a) the acquisition or redemption is funded by assets held by the protected cell company on behalf of the relevant cell;

(b) the protected cell company will, immediately after the acquisition or redemption, hold sufficient assets on behalf of the relevant cell to enable the protected cell company to give effect to any enforceable arrangements made between the relevant cell and any other cell; and

(c) where the protected cell company has a liability to an undertaking arising under a contract made between the undertaking and the protected cell company acting on behalf of a cell in that group of cells, the undertaking has consented to the acquisition or redemption (whether in the contract or otherwise).

(4) The protected cell company may redeem or acquire a share for less than the share's nominal value.

(5) Where a protected cell company acquires or redeems a share issued on behalf of a cell, the protected cell company must cancel that share.

Acquisition and redemption of shares issued by the core

107

(1) Where a protected cell company issues a share on behalf of the core, the protected cell company—

(a) may not acquire or redeem the share on behalf of a cell; and

(b) may only acquire or redeem the share on behalf of the core if—

(i) the protected cell company has no cells; and

(ii) immediately after the acquisition or redemption, there is at least one voting share issued by the protected cell company on behalf of the core.

(2) But paragraph (1)(b)(ii) does not apply if the FCA has decided to strike the protected cell company off its register under regulation 180.

(3) Where a protected cell company acquires or redeems a share issued on behalf of the core, the protected cell company must cancel that share.

Consequences of unlawful acquisition or redemption

108

(1) This regulation applies to an acquisition or redemption of a share issued on behalf of a part of a protected cell company which—

(a) is funded by the protected cell company from assets held on behalf of a part (“part A”) of the protected cell company (which may either be the part on behalf of which the share was issued or another part); and

(b) is in contravention of regulation 106 or 107.

(2) If at the time of the acquisition or redemption the person holding the share knew or had reasonable grounds for believing that it was acquired or redeemed in contravention of regulation 106 or 107, the person is liable—

(a) to repay the amount for which the share was acquired or redeemed; or

(b) in the case of an acquisition or redemption made otherwise than in cash, to pay the protected cell company a sum equal to the value of assets provided by the protected cell company for the acquisition or redemption at that time.

(3) This regulation is without prejudice to any obligation imposed apart from this regulation on a person to repay an amount to the protected cell company in respect of an acquisition or redemption which was made unlawfully.

(4) A payment made to a protected cell company in accordance with paragraph (2) must be held by the protected cell company on behalf of part A.

(5) Where a person satisfies in full an obligation to make a payment to the protected cell company under paragraph (2) then—

(a) any cancellation of the share under regulation 106(5) or 107(3) is deemed to have no effect; and

(b) the person is deemed to hold the share which was acquired or redeemed as if no acquisition or redemption took place.

Penalty for contravention of this Section

109

(1) If a protected cell company contravenes any of the provisions of this Section it commits an offence.

(2) A person guilty of an offence under paragraph (1) is liable—

(a) on conviction on indictment, to a fine;

(b) on summary conviction—

(i) in England and Wales, to a fine;

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

110

(1) A protected cell company must prepare share certificates in accordance with this regulation except where—

(a) the protected cell company's instrument of incorporation states that share certificates will not be issued and contains provisions as to other procedures for evidencing a person's entitlement to shares; or

(b) a person has indicated to the protected cell company in writing that the person does not wish to receive a share certificate.

(2) A protected cell company must prepare share certificates in respect of—

(a) any new shares issued on behalf of the core or a cell;

(b) shares transferred by a transferor to the transferee;

(d) shares for which a certificate has already been issued but where it appears to the protected cell company that the share certificate needs to be replaced as a result of it having been lost, stolen, destroyed or having become damaged or worn out.

(3) A protected cell company must ensure that share certificates prepared in accordance with paragraph (1) are ready for delivery before the end of a period of 2 months beginning with the following day—

(a) in a case falling within sub-paragraph (a) of paragraph (2), the day on which the shares were issued;

(b) in a case falling within sub-paragraph (b) or (c) of paragraph (2), the day on which the transfer documents (within the meaning given by regulation 120) are received by the protected cell company;

(c) in a case falling within (d) of paragraph (2), the day on which it first appears to the protected cell company that the share certificate needs to be replaced.

(4) Certificates need to be prepared in the circumstances referred to in sub-paragraphs (c) and (d) of paragraph (2) only if the protected cell company has received—

(a) a request for a new certificate;

(b) the old certificate (if there is one);

(d) such reasonable sum as the protected cell company may require in respect of the expenses incurred by it in complying with the request.

111

(1) Each share certificate prepared by a protected cell company must state—

(a) whether the shares are issued on behalf of the core or a cell of the protected cell company;

(b) if the shares are issued on behalf of a cell, the name or number of the cell;

(d) the number of shares to which title is evidenced by the share certificate;

(e) where the share belongs to a particular class of shares, the class of shares to which title is evidenced by the share certificate;

(f) any restrictions on the transferability of the shares; and

(g) the name of the holder.

(2) Where, in respect of any class of shares, the rights that attach to shares of that class are expressed in two denominations, the reference in sub-paragraph (d) of paragraph (1) to the number of shares is a reference to—

$$N + n p$where—N is the relevant number of the larger denomination shares of the class in question;n is the relevant number of the smaller denomination shares of the class in question;p is the number of smaller denomination shares of the class in question that are equivalent to one larger denomination share of that class.$

Evidence of title

112

A share certificate specifying any shares held by a person is, unless the contrary is shown, sufficient evidence of that person's title to the shares provided the share certificate is—

(a) issued under the common seal of the protected cell company;

(b) in England and Wales, and Northern Ireland, authenticated in accordance with regulation 66; or

(c) in Scotland, subscribed by the protected cell company in accordance with the Requirements of Writing (Scotland) Act 1995 .

SECTION 4 — Register of shareholders

The register of shareholders

113

(1) A protected cell company must keep a register of persons who hold shares issued by the protected cell company.

(2) The register of shareholders is, unless the contrary is shown, evidence of any matter which is recorded in the register in accordance with this Part.

(3) A protected cell company must exercise all due diligence and take all reasonable steps to ensure that the information contained in the register is complete and up to date.

Contents of the register

114

(1) The register must be divided into separate parts for shares issued on behalf of the core and each of the cells of the protected cell company.

(2) A protected cell company must enter into the appropriate part of the register the names of all the persons holding shares issued on behalf of the core and each of the cells of the protected cell company.

(3) Against each entry of a person's name into a part of the register, the protected cell company must indicate—

(a) the person's address;

(b) the date the entry was made in the register; and

(c) in relation to the part of the register in question, a statement of the aggregate number of shares held by that person, distinguishing the share by its number (if it has one) and, if the share belongs to a particular class of shares, by its class.

(4) Where the aggregate number of shares includes shares to which there are attached rights expressed in two denominations, the aggregate number of shares is to be taken to be—

$$N + n p$where—N is the relevant number of larger denomination shares of that class;n is the relevant number of smaller domination shares of that class; andp is the number of smaller denomination shares of that class that are equivalent to one larger denomination share of that class.$

(5) Where all the shares issued on behalf of the core of a protected cell company are held by one person, then—

(a) that fact must be recorded in the register; and

(b) the FCA must be notified of that fact.

(6) In the case of a protected cell company registered in England and Wales, or Northern Ireland, notice given to the protected cell company of any trust of shares (whether express, implied or constructive) is not to be recorded on the register.

Location

115

The register of shareholders of a protected cell company must be kept available for inspection at its registered office or an alternative inspection location notified to the FCA in accordance with regulation 67.

Index

116

(1) A protected cell company must keep an index of the names of the persons holding shares issued by the protected cell company.

(2) The index must contain cross-references to all of the entries of that person's name in the register.

(3) The index must be kept at the same place as the register.

(4) Where a protected cell company amends the register, the index must be updated before the end of a period of 14 days beginning with the day the register is amended.

Inspection

117

(1) The register of shareholders and the index must be open to the inspection of any person holding a share issued by a protected cell company.

(2) A protected cell company must, on the request of a person holding a share issued by the protected cell company, send the shareholder a copy of all of the entries in the register which relate to that shareholder.

(3) If the copy can be sent electronically, the copy must be sent free of charge.

(4) If an inspection required under this regulation is refused, or a copy so requested is not sent, the High Court or, in Scotland, the Court of Session may by order compel an immediate inspection of the register and index, or direct that the copy requested by the shareholder be sent.

Power of court to rectify the register

118

(1) An application to the High Court or, in Scotland, the Court of Session may be made under this regulation if—

(a) the name of a person is, without sufficient cause, entered into or omitted from a part of the register of shareholders;

(b) default is made as to the details contained in any entry on the register in respect of a person's holding of shares; or

(c) default is made or unnecessary delay takes place in amending the register so as to reflect the fact that a person has ceased to be a shareholder.

(2) An application may be made by the protected cell company, a shareholder or by the person aggrieved.

(3) On such an application, the court may—

(a) refuse the application;

(b) order rectification of the register; or

(c) decide any question necessary or expedient to be decided for rectification of the register of shareholders including, in particular, any question relating to the right of a person who is a party to the application to have the person's name entered in or omitted from the register.

General

119

(1) Shares issued by a protected cell company are transferable in accordance with the protected cell company's instrument of incorporation.

(2) Where a person holding shares issued by a protected cell company transfers those shares to another person (the “transferee”), legal title to those shares only passes to the transferee when the transferee is registered as the owner of those shares by the protected cell company.

(3) The instrument of incorporation of a protected cell company may contain provision as to share transfers in respect of any matter for which provision is not made by this Part.

Meaning of “transfer documents”

120

(1) In this Section, “transfer documents” means—

(a) one or more of the documents falling within Category 1;

(b) one or more of the documents falling within Category 2; and

(i) the right of the transferor to transfer the shares in question; or

(ii) the eligibility of the transferee to acquire the shares in question.

(2) The following documents fall within Category 1—

(a) a stock transfer form within the meaning of the Stock Transfer Act 1963 or the Stock Transfer Act (Northern Ireland) 1963 which complies with the requirements of the relevant Act as to the execution and contents of a stock transfer;

(b) an order made by the court under regulation 175 (application for court order sanctioning transfer scheme) or 177 (effect of court order sanctioning transfer scheme) for the transfer of shares;

(c) any other instrument of transfer as is authorised by, and completed and executed in accordance with, any requirement in the protected cell company's instrument of incorporation;

(3) The following documents fall within Category 2—

(a) a share certificate relating to the shares in question;

(b) if the shares in question fall within sub-paragraph (a) or (b) of regulation 110(1), such evidence of title to those shares as is required by the protected cell company's instrument of incorporation.

Transfers

121

(1) A protected cell company may not register a transfer of shares unless—

(a) the transfer documents relating to the transfer have been delivered to the protected cell company; or

(b) title to the shares has been transmitted by operation of law.

(2) Where transfer documents relating to a share transfer are delivered to a protected cell company, the protected cell company must amend the register of shareholders and index accordingly.

(3) But a protected cell company may refuse to register a transfer of shares where—

(a) a person holding shares issued on behalf of a part of the protected cell company is required to hold less or more than a specified number of shares issued on behalf of that part and the transfer would result in the transferor or transferee breaching that requirement;

(b) the transfer would contravene a provision of the protected cell company's instrument of incorporation or a provision of law (including any law that is for the time being in force in a country or territory outside of the United Kingdom); or

(c) the transferee fails to provide the protected cell company with such evidence as the protected cell company may reasonably require to satisfy the protected cell company that the transferee is a qualified investor within the meaning given by regulation 10.

(4) A protected cell company—

(a) may only refuse to register a transfer pursuant to sub-paragraph (a) or (b) of paragraph (3) during the period of 21 days commencing with the date the transfer documents are delivered to the protected cell company; and

(b) must give the transferee written notice of a refusal to register a transfer of shares, unless the giving of such a notice would contravene a provision of law (including any law that is for the time being in force in a country or territory outside of the United Kingdom).

(5) A transfer of shares by the personal representative of a deceased person is valid as if the personal representative had been the holder of the deceased person's shares at the time of the execution of the instrument of transfer.

Certification of transfer

122

(1) Where, in respect of a transfer of shares, a protected cell company certifies that it has received the transfer documents, that certification is to be taken as a representation by the protected cell company to any person acting in reliance on the certification that there has been produced to the protected cell company sufficient evidence to show that the transferor has title to the shares in the absence of proof to the contrary.

(2) A certification is made by a protected cell company if the instrument of transfer—

(a) bears the words “ certificate lodged” or words to the like effect; and

(b) is signed by a person acting under authority (whether express or implied) given by the protected cell company to issue and sign such certificates.

(3) But a certificate is not to be taken as a representation that the transferor has any title to the shares in question.

(4) Where a person acts in reliance on a false certification by a protected cell company which is made negligently or fraudulently, the protected cell company is liable to pay that person out of assets held by the protected cell company on behalf of the core any damages that the person has sustained.

Joint shareholdings

123

On the death of any one of the joint holders of a share, the survivors are to be the only persons recognised by the protected cell company as having any title to or any interest in those shares.

SECTION 6 — Distributions

Meaning of “distribution”

124

In regulations 125 and 126, “distribution” means every description of a distribution of an asset to a shareholder, except for the redemption or acquisition of shares held by that shareholder in accordance with regulation 106 or 107.

Distributions to holders of shares in a cell

125

(1) This regulation applies where a protected cell company makes a distribution to a person holding a share issued by the protected cell company on behalf of a cell.

(2) Where the cell is not a member of a group of cells, the protected cell company may only make the distribution if the following conditions are satisfied—

(a) the distribution is made from assets held by the protected cell company on behalf of the cell; and

(b) where the protected cell company has a liability to an undertaking arising under a contract made between the undertaking and the protected cell company acting on behalf of the cell, the undertaking has consented to the distribution (whether in the contract or otherwise).

(3) Where the cell (“the relevant cell”) is a member of a group of cells, the protected cell company may only make the distribution if the following conditions are satisfied—

(a) the distribution is made from assets held by the protected cell company on behalf of the relevant cell;

(b) the protected cell company will, immediately after the distribution, hold sufficient assets on behalf of the relevant cell to enable the protected cell company to give effect to any enforceable arrangements made between the relevant cell and any other cell; and

(c) where the protected cell company has a liability to an undertaking arising under a contract made between the undertaking and the protected cell company acting on behalf of a cell in that group of cells, the undertaking has consented to the distribution (whether in the contract or otherwise).

Distributions to holders of shares in the core

126

(1) This regulation applies where a protected cell company makes a distribution to a person holding a share issued by the protected cell company on behalf of the core.

(2) The distribution may only be made if the protected cell company has no cells.

(3) The distribution must be made from assets held by the protected cell company on behalf of the core.

Persons holding investments in different parts of the protected cell company

127

(1) This regulation applies where—

(a) a person (“P”) holds investments issued on behalf of number of different parts of a protected cell company;

(b) those investments include shares issued on behalf of a part of the protected cell company; and

(c) the protected cell company makes a distribution to P in P's capacity as the holder of shares issued on behalf of that part of the protected cell company.

(2) Regulations 125 and 126 apply to the distribution as if the only investment held by P were the shares issued on behalf of that part of the protected cell company.

Consequences of unlawful distribution

128

(1) This regulation applies to a distribution, or a part of a distribution, which is made by a protected cell company—

(a) from assets held on behalf of a part (“part A”) of the protected cell company;

(b) to a person holding a share issued by the protected cell company on behalf of a part of a protected cell company (either part A or another part); and

(2) If at the time of the distribution the person knows or has reasonable grounds for believing that it is made in contravention of regulation 125 or 126, the person is liable—

(a) to repay the distribution (or that part of it, as the case may be) to the protected cell company; or

(b) in the case of a distribution made otherwise than in cash, to pay the protected cell company a sum equal to the value of the distribution (or part of it) at that time.

(3) This regulation is without prejudice to any obligation imposed apart from this regulation on a person to repay a distribution which was made unlawfully to that person.

(4) A payment made to a protected cell company in accordance with paragraph (2) must be held by the protected cell company on behalf of part A.

SECTION 7 — Annual General Meetings

Requirement to hold an annual general meeting

129

(1) A protected cell company must hold annual general meetings in accordance with this regulation unless the protected cell company elects to dispense with annual general meetings in accordance with regulation 130.

(2) A protected cell company must hold its first annual general meeting before the end of a period of 18 months beginning with the date it is first authorised to carry out the activity specified in article 13A (transformer vehicles: insurance risk transformation) of the Regulated Activities Order.

(3) A protected cell company must hold an annual general meeting in each calendar year after the year in which it holds its first annual general meeting, provided no more than 15 months elapse between the date of one annual general meeting and the date of the next annual general meeting.

Election to dispense with annual general meetings

130

(1) The directors of a protected cell company may elect to dispense with the holding of annual general meetings by giving 60 days' written notice to all persons holding shares issued on behalf of the core of the protected cell company.

(2) Where the directors of a protected cell company elect to dispense with annual general meetings, they may terminate that election by giving written notice to all persons holding shares issued on behalf of the core of the protected cell company.

(3) An election has effect for the year in which it is made and all subsequent years, but does not affect any liability already incurred by reason of default in holding an annual general meeting.

(4) Where an election is terminated—

(a) the protected cell company must hold an annual general meeting within a period of 12 months beginning with the date on which the notice of termination is given; and

(b) paragraph (3) of regulation 129 applies with the reference to “first annual general meeting” being treated as a reference to the annual general meeting held in accordance with sub-paragraph (a) of this paragraph.

SECTION 8 — Miscellaneous

Holding companies and subsidiaries: prohibition on shareholdings

131

(1) A protected cell company may not hold shares in a company which is the protected cell company's holding company (within the meaning given by section 1159 of the Companies Act 2006).

(2) An allotment or transfer of shares issued on behalf of the core or a cell of a protected cell company to a subsidiary (within the meaning given by section 1159 of the Companies Act 2006) of a protected cell company is void.

Contracts between the protected cell company and shareholders

132

A contract between a protected cell company and a person must be in writing or recorded in the minutes of the protected cell company where—

(a) that person holds all the shares issued on behalf of the core of the protected cell company; and

(b) the contract does not relate to the current business of the protected cell company or was concluded under unusual conditions.

Information on capital subscribed

133

(1) If the protected cell company's instrument of incorporation specifies an amount of authorised capital in relation to any part of the protected cell company, the protected cell company must notify the FCA of the amount of capital subscribed in relation to that part, unless an increase in the capital subscribed necessitates an amendment to the instrument of incorporation.

(2) The information referred to in paragraph (1) must be provided at least once a year.

CHAPTER 10 — Shareholder resolutions

Application

134

The provisions of this Chapter apply—

(a) to the persons holding voting shares issued on behalf of the core of the protected cell company; and

(b) with any necessary modifications, to the persons holding a class of such shares.

Resolutions

135

(1) A resolution of the persons holding voting shares issued on behalf of the core of a protected cell company must be passed—

(a) as a written resolution in accordance with regulation 137 (written resolutions); or

(b) at a general meeting (see regulations 138 to 144).

(2) For the purposes of this Chapter—

(a) a resolution may be properly moved at a meeting unless—

(i) it would, if passed, be ineffective (whether by reason of inconsistency with an enactment, the protected cell company's instrument of incorporation or otherwise);

(ii) it is defamatory of any person; or

(iii) it is frivolous or vexatious;

(b) a resolution, notice or any other document may be sent in hard copy form or electronic form;

(c) where a resolution must be sent to more than one person, the same copy may be sent to some or all of those persons in turn; and

(d) where a request or a document which is sent to a protected cell company must be authenticated, the request or document must be authenticated in accordance with section 1146 (requirement of authentication) of the Companies Act 2006 (which applies for these purposes with the reference to a company's articles in subsection (4) being treated as a reference to the protected cell company's instrument of incorporation).

Shareholders acting informally (the Duomatic principle)

136

(1) Any enactment or rule of law relating to a matter specified in paragraph (3) applies to voting shares issued on behalf of the core of the protected cell company as it applies to shares issued by a company registered under the Companies Act 2006.

(2) Nothing in this Chapter affects an enactment or rule of law relating to a matter specified in paragraph (3).

(3) The matters mentioned in paragraphs (1) and (2) are—

(a) things done by the shareholders otherwise than by passing a resolution;

(b) circumstances in which a shareholders' resolution is or is not treated as having been passed;

Written resolutions

137

(1) The following persons may propose a written resolution—

(a) the directors of the protected cell company;

(b) a person holding voting shares issued on behalf of the core of the protected cell company.

(2) A written resolution must state a period of time, beginning with the circulation date, after which it will lapse.

(3) Where the directors propose a written resolution, the protected cell company must send the resolution to all of the shareholders eligible to vote on it.

(4) Where a shareholder proposes a written resolution, the protected cell company must send the resolution to all the shareholders eligible to vote on it, provided that—

(a) the written resolution may properly be moved at a meeting of shareholders; and

(b) the protected cell company has received requests to do so from persons representing not less than 5% of the total voting rights of those shareholders who are eligible to vote on the written resolution.

(5) The requests referred to in paragraph (4)(b) must identify the resolution and must be authenticated by the person or persons making it.

(6) The person proposing the written resolution may also require the protected cell company to circulate with the written resolution a statement of not more than 1,000 words on the subject matter of the resolution.

(7) A person is deemed to have agreed to a written resolution where the protected cell company receives an authenticated document—

(a) identifying the resolution to which it relates; and

(b) indicating the person's agreement to the resolution.

(8) Agreement to a written resolution may not be revoked.

(9) A written resolution must be passed—

(a) by a simple majority of the total voting rights of those shareholders who would be entitled to vote on the resolution on the date it is sent or submitted to the shareholders (or if copies are sent or submitted on different days, on the first of those days); and

(b) before the resolution lapses.

(10) But paragraph (9)(a) does not prevent the protected cell company's instrument of incorporation requiring a higher majority or unanimity.

Calling a shareholders' meeting

138

(1) The directors of a protected cell company may call a general meeting.

(2) The persons holding voting shares issued on behalf of the core of a protected cell company may require the directors to call a general meeting.

(3) The directors are required to call a general meeting once the protected cell company has received requests to do so from persons representing at least 5% of the voting shares issued on behalf of the core of the protected cell company.

(4) A request—

(a) must state the general nature of the business to be dealt with at the meeting; and

(b) may include the text of a resolution that may properly be moved and is intended to be moved at the meeting.

(5) A request must be authenticated by the person or persons making it.

Directors' duty to call meetings required by members

139

(1) Directors required under regulation 138(3) to call a general meeting must—

(a) call the meeting before the end of a period of 21 days beginning with the date on which they become subject to the requirement; and

(b) hold the meeting before the end of a period of 28 days beginning with the date of the notice convening the meeting.

(2) If the requests received by the protected cell company identify a resolution to be moved at the meeting, notice of the meeting must include notice of the resolution.

(3) The business that may be dealt with at the meeting includes a resolution of which notice is given in accordance with this regulation.

Notice required of meeting

140

(1) A general meeting must be called by notice of at least 14 days.

(2) Paragraph (1) does not apply where—

(a) the protected cell company's instrument of incorporation requires a longer period; or

(b) the meeting is an adjourned meeting.

(3) Notice must be sent to—

(a) every shareholder who is entitled to vote at the meeting;

(b) any person who is entitled to a voting share in consequence of the death or bankruptcy of the person holding the voting share, provided the protected cell company has been notified of such an entitlement; and

(4) In sub-paragraph (b) of paragraph (3), the reference to bankruptcy includes—

(a) the sequestration of the estate of a person; or

(b) a person's estate being the subject of a protected trust deed (within the meaning of the Bankruptcy (Scotland) Act 2016).

(5) Paragraph (3) has effect subject to—

(a) any enactment; or

(b) any provision of the protected cell company's instrument of incorporation.

(6) The notice must state—

(a) the time and date of the meeting;

(b) the place of the meeting; and

Accidental failure to give notice of resolution or meeting

141

(1) Where a protected cell company gives notice of a general meeting or a resolution to be moved at a general meeting, an accidental failure to give notice to a person is to be disregarded for the purposes of determining whether notice of the meeting or resolution (as the case may be) is duly given.

(2) Paragraph (1) has effect subject to any provision of the protected cell company's instrument of incorporation.

Procedure at general meetings

142

(1) A person holding voting shares issued on behalf of the core of a protected cell company may be elected to chair a general meeting by a resolution passed by the persons holding voting shares, subject to any provision of the protected cell company's instrument of incorporation.

(2) On a vote on a resolution at a meeting on a show of hands, a declaration by the person chairing the meeting that the resolution—

(a) has or has not passed; or

(b) has passed with a particular majority,

is conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favour of or against the resolution.

(3) An entry in respect of such a declaration in minutes of the meeting recorded in accordance with regulation 145 is also conclusive evidence of that fact without such proof.

(4) Where a resolution is passed at an adjourned meeting of shareholders, the resolution is for all purposes to be treated as having been passed on the date on which it was in fact passed, and is not to be deemed passed on any earlier date.

Representation of corporations

143

(1) If a corporation holds voting shares issued on behalf of the core of a protected cell company, the corporation may authorise a person to act as its representative at any meeting of shareholders.

(2) The representative is entitled to exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual holding those voting shares.

Proxies

144

(1) A person holding voting shares issued on behalf of the core of a protected cell company is entitled to appoint a proxy to exercise all or any of the person's rights to attend, speak at, chair and vote at a general meeting.

(2) But a proxy must vote in accordance with any instructions given by the person appointing the proxy.

(3) Termination of a person's authority to act as a proxy does not affect—

(a) the validity of anything the proxy does as chair of the meeting;

(b) a vote given by the proxy,

unless the protected cell company receives notice of termination before the commencement of the meeting.

(4) Paragraph (3) has effect subject to any provision of the protected cell company's instrument of incorporation which requires notice of termination to be received by the protected cell company at a time which is earlier than the commencement of the meeting.

(5) But a provision of the protected cell company's instrument of incorporation is void insofar as it requires the appointment of a proxy or the termination of such an appointment to be notified to the protected cell company earlier than 48 hours before the time for holding the meeting or adjourned meeting.

(6) In calculating the period of 48 hours mentioned in paragraph (5), no account is to be taken of any part of a day that is not a working day.

Records of meetings

145

(1) A protected cell company must keep records comprising—

(a) copies of all resolutions passed at general meetings (including meetings of a sole shareholder); and

(b) minutes of all proceedings at such meetings.

(2) The records must be kept for at least ten years from the date of the resolution or meeting (as the case may be).

(3) Where there is a record of a written resolution, the requirements of this Chapter as to the passing of the resolution are deemed to be complied with unless the contrary is proved.

(4) The minutes of proceedings at a meeting, if purporting to be signed by the chair of the meeting or the chair of the next meeting, are evidence (in Scotland, sufficient evidence) of the proceedings at the meeting.

(5) Where there is a record of proceedings at a meeting, then, until the contrary is proved—

(a) the meeting is deemed duly held and convened;

(b) all proceedings at the meeting are deemed to have duly taken place; and

Inspection of records

146

(1) The records referred to in regulation 145 must be kept available for inspection at the protected cell company's registered office or an alternative inspection location notified to the FCA in accordance with regulation 67.

(2) A person holding voting shares issued on behalf of the core of the protected cell company may—

(a) inspect the records without charge; and

(b) require a copy of any of the records on payment of a fee (which may not exceed the administrative cost to the protected cell company of providing the copy).

CHAPTER 11 — Debentures (debt securities)

Debentures

147

A protected cell company may only issue debentures on behalf of a part of the protected cell company.

Transfers by a cell to a debenture holder

148

(1) This regulation applies where a protected cell company transfers an asset held by the protected cell company to the holder of a debenture issued on behalf of a cell in full or partial satisfaction of any indebtedness arising under or acknowledged by the debenture.

(2) Where the cell is not a member of a group of cells, the protected cell company may only transfer the asset if the following conditions are satisfied—

(a) the asset is held by the protected cell company on behalf of the cell; and

(b) where the protected cell company has a liability to an undertaking arising under a contract made between the undertaking and the protected cell company acting on behalf of the cell, the undertaking has consented to the transfer (whether in the contract or otherwise).

(3) Where the cell (“the relevant cell”) is a member of a group of cells, the protected cell company may only transfer the asset if the following conditions are satisfied—

(a) the asset is held by the protected cell company on behalf of the relevant cell;

(b) the protected cell company will, immediately after the transfer, hold sufficient assets on behalf of the relevant cell to enable the protected cell company to give effect to any enforceable arrangements made between the relevant cell and any other cell; and

(c) where the protected cell company has a liability to an undertaking arising under a contract made between the undertaking and the protected cell company acting on behalf of a cell in that group of cells, the undertaking has consented to the transfer (whether in the contract or otherwise).

Consequences of unlawful transfer

149

(1) This regulation applies to a transfer, or a part of a transfer, which is made by a protected cell company—

(a) from assets held on behalf of a part (“part A”) of the protected cell company;

(b) to a person holding a debenture issued by the protected cell company on behalf of a part of a protected cell company (either part A or another part); and

(2) If at the time of the transfer the person knows or has reasonable grounds for believing that it is made in contravention of regulation 148, the person is liable—

(a) to repay the amount transferred (or that part of it, as the case may be) to the protected cell company; or

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