The Jersey Royal Court has confirmed that the cell of a protected cell company incorporated under the Companies (Jersey) Law 1991 has the right to enter into arrangements with its members.
In the matter of Ashburton Global Funds PCC, it was decided by the court that a cell of a PCC can be the subject of an application to seek the approval of the Royal Court for a scheme of arrangement; and can bring such an application in its own right.
Ogier, which provides legal and fiduciary and administrative services, commented on the decision, which arose at the first stage of two schemes of arrangement concerning cells of Ashburton Global Funds PCC, known as Dollar International Equity Fund PC and Sterling International Equity Fund PC.
Dollar and Sterling wanted to pool their ¬assets as a SICAV incorporated in Luxembourg, but were unsure if they could do so.
Although Ashburton Global Funds PCC joined in the applications, the court held that the cells could themselves enter the arrangement and bring the application in their own right.
The potential issue that the court had to consider was that an article of the law stated that a cell of a protected cell company is not a body corporate and has no legal identity separate from that of its cell company.
Ogier commented that the court was content that the lack of corporate personality or separate identity of the cell did not affect the ability of a cell to be treated as a company for the purposes of the scheme of arrangement provisions contained in the law.
It noted that in any event, a cell has its own board, memorandum and articles of association; has its own cellular assets and liabilities; and can be wound up under the law independently of its cell company.
“The court also held that for the purposes of convening the court meetings for each scheme, holders of management shares in each cell (which had no economic interest in the assets of the respective cell and no ability to vote) did not constitute a separate class for the purposes of convening meetings to consider the schemes,” said Ogier.
Ogier concluded that the case has led to the clarification of protected cells to be treated as companies.
However, the firm added that the decision did not alter the position generally that a protected cell does not have corporate capacity, and accordingly, it cannot contract in its own right and would not have title to sue a third party.
