Insurance) Regulations, 2004

L.N. 218 of 2004

COMPANIES ACT

(CAP. 386)

Companies Act (Cell Companies Carrying on Business of

Insurance) Regulations, 2004

IN exercise of the powers conferred by article 84A of the

Companies Act, the Prime Minister and Minister of Finance, after

consultation with the Malta Financial Services Authority, has made the

following regulations>-

(1) The title of these regulations is the Companies Act

(Cell Companies Carrying on Business of Insurance) Regulations, 2004.

(2) These regulations shall come into force on the 1 st July,

2004.

(1)

In these regulations, unless the context otherwise

requires -

“the Act” means the Companies Act<

“approved auditor” and “auditor” shall have the same meaning

assigned to them by subarticle (10) of article 21 of the Insurance

Business Act<

“business of insurance” has the same meaning as is assigned

to it in subarticle (1) of article 2 of the Insurance Business Act,

and shall include business of affiliated insurance pursuant to

regulation 2 of the Insurance Business (Companies Carrying on

Business of Affiliated Insurance) Regulations, 2003, the business

of insurance manager, as well as the business of insurance broking

under the Insurance Brokers and Other Intermediaries Act<

“cell” means a cell created by a cell company for the purpose

of segregating and protecting the cellular assets of the company in

the manner provided by these regulations and includes a reference

to segregated accounts, compartments or units within a company

having multiple accounts, compartments or units, by whatever

name designated, and the word “cellular” shall be interpreted and

applied accordingly<

“cell company” is a company formed or constituted as such

or converted into a cell company and creating within itself one or

more cells for the purposes of segregating and protecting the cellular

assets of the company in accordance with the provisions of these

regulations, and in relation to the business of insurance manager,

as well as the business of insurance broking, reference to

“company” shall include reference to a partnership en commandite

or similar or equivalent body corporate, which has its capital

divided into shares<

“cell shares” means shares created and issued by a cell

company in respect of one of its cells pursuant to the provisions of

regulation 10 of these regulations, the proceeds of the issue of

which (the “cell share capital”) shall be comprised in the cellular

assets attributable to that cell<

“cell share capital” means the proceeds of issue of cell shares<

“cell transfer approval” means an approval of the competent

authority under regulation 15 of these regulations approving the

transfer of the cellular assets attributable to any cell of a cell

company to another person<

“cellular assets” of a cell company means the assets of the

company attributable to any cell of the company pursuant to sub-

regulation (4) of regulation 9 of these regulations<

“cellular dividend” means a dividend payable by a cell

company in respect of cell shares pursuant to the provisions of

sub-regulation (3) of regulation 10 of these regulations<

“competent authority” means the Malta Financial Services

Authority appointed under article 3 of the Insurance Business Act<

“ insurance directive” means a directive in respect of the

business of insurance issued by the competent authority in terms

of subarticle (3) of article 4 of the Insurance Business Act<

“non-cellular assets” of a cell company comprise the assets

of the company which are not cellular assets,

(2) Words and expressions which are also used in the Act

shall, in these regulations, have the same meanings as in the Act.

(1) Subject to the provisions of these regulations>

(a) a company may be formed or constituted as a cell

company to carry on business of insurance< or

(b) a company carrying on business of insurance may be

converted, if so authorised by its memorandum and articles of

association, into a cell company.

(2) Notwithstanding that a cell company may have created

one or more cells>

(a)

a cell company is a single legal person< and

(b) the creation by a cell company of a cell does not create,

in respect of that cell, a legal person separate from the company>

Provided that, in so far as the provisions of the Act are

inconsistent with the provisions of the Insurance Business Act and

the Insurance Brokers and Other Intermediaries Act, as the case may

be, the provisions of the Insurance Business Act and the Insurance

Brokers and Other Intermediaries Act shall prevail and the provisions

of the Act shall, to the extent of the inconsistency, not apply to a

cell company.

(1) The name of a cell company shall, without prejudice to

the provisions of the Act, include the expression “ Protected Cell

Company” or “PCC”.

(2) The memorandum and articles of association of a cell

company shall state that it is a cell company.

(3) A company shall not be deemed to be a cell company

until it has complied with the provisions of this regulation.

(4) Each cell of a cell company shall have its own distinct

name or designation.

(5) In addition to, and without prejudice to article 6 of the

Act, a cell company shall also indicate in a suitable manner in all its

business letters and forms that it is a cell company.

(1) A company may not be formed or constituted as a cell

competent authority

company, and an existing company may not be converted into a cell

company, except in accordance with the terms and conditions of the

written approval of the competent authority which shall only be granted

in the case of a company which will, when formed or constituted, be

authorised or, when converted, is a company authorised in terms of

article 7 of the Insurance Business Act to carry on business of insurance

and authorised in terms of article 13 of the said Act to carry on business

of insurance manager, or a company enrolled in the Brokers List in

terms of the Insurance Brokers and Other Intermediaries Act.

(2) A company authorised to carry on business of re-

insurance or affiliated insurance may be formed or constituted as a cell

company or may be converted into a cell company in terms of these

regulations.

(3) For the purposes of these regulations, the competent

authority may, by an insurance directive, from time to time, specify or

restrict the classes of insurance a cell company may carry on, and the

class or classes of persons, for, or in relation to whom, a cell may be

created by a cell company.

(4) The competent authority may, from time to time, in such

a manner as it deems appropriate>

(a) vary or revoke any term or condition subject to which

an approval under sub-regulation (1) of this regulation was granted<

and

(b) impose any new term or condition in relation to any

such approval.

An application for the approval of the competent authority Application for

approval of the

for the formation or constitution of a company as a cell company, for competent

the conversion of an existing company into a cell company or for the authority.

creation of a new cell shall be made to the competent authority in such

form and manner, and shall be accompanied by such documents and

information verified in such manner, as the competent authority may,

from time to time, determine.

A person wishing to form or constitute a company as a cell Formation,

constitution or

company, or convert an existing company into a cell company shall conversion of a

deliver to the Registrar for registration the company’s memorandum company as a cell

company.

and articles, or a copy of the resolution amending the company’s

memorandum or articles, as the case may be.

Subject to the prior written approval of the competent authority, Creation of cells.

a cell company may create one or more cells for the purposes of

segregating and protecting cellular assets in the manner provided by

these regulations.

(1) The assets of a cell company shall be either cellular assets

or non-cellular assets.

(2) It shall be the duty of the directors of a cell company to

(a) cellular assets separate and separately identifiable from

non-cellular assets<

(b) cellular assets attributable to each cell separate and

separately identifiable from cellular assets attributable to other cells<

and

(c) separate records, accounts, statements and other

documents as may be necessary to evidence the assets and liabilities

of each cell as distinct and separate from the assets and liabilities

of other cells in the same company.

(3) The cellular assets of a cell company comprise the assets

of the company attributable to the cells of the company.

(4)

The assets attributable to a cell of a cell company

comprise>

(a) assets represented by the proceeds of cell share capital

and reserves attributable to the cell< and

(b) all other assets attributable to the cell.

(5) For the purposes of sub-regulation (4) of this regulation,

the expression “reserves” includes retained earnings, capital reserves

and share premiums.

(6) The non-cellular assets of a cell company comprise the

assets of the company which are not cellular assets.

(7) Notwithstanding the provisions of sub-regulation (2) of

this regulation, the directors of a cell company may cause or permit

cellular assets and non-cellular assets to be held by a company, the

shares and capital interests of which may be cellular assets or non-

cellular assets, or a combination of both.

(8) The duty imposed by sub-regulation (2) of this regulation

is not breached by reason only that the directors of a cell company

cause or permit cellular assets or non-cellular assets, or a combination

of both, to be collectively invested or collectively managed by an

investment manager, provided that the assets in question remain

separately identifiable in accordance with sub-regulation (2) of this

regulation.

(1) A cell company may, in respect of any of its cells, create Cell shares and

share capital.

and issue shares (“cell shares”) the proceeds of the issue of which (“cell

share capital”) shall be comprised in the cellular assets attributable to

the cell in respect of which the cell shares were issued.

(2) The proceeds of the issue of shares, other than cell shares

created and issued by a cell company, shall be comprised in the non-

cellular assets of the company.

(3) A cell company may pay a dividend (a “cellular

dividend”) in respect of cell shares.

(4) Cellular dividends may be paid in respect of cell shares

by reference only to the cellular assets and liabilities, or the profits

attributable to the cell in respect of which the cell shares were issued<

and accordingly, in determining whether or not profits are available for

the purposes of paying a cellular dividend, no account shall be taken of -

(a) the profits and losses, or the assets and liabilities,

attributable to any other cell of the company< or

(b) non-cellular profits and losses, or non-cellular assets and

liabilities.

(5) Unless the context otherwise requires, references to

shares in the Act include references to cell shares.

Company to inform

(1) A cell company shall>

persons they are

dealing with cell

company.

(a) inform, in writing, any person with whom it transacts

business of insurance that it is a cell company< and

(b) for the purposes of that transaction, identify or specify

the cell in respect of which that person is transacting, unless that

transaction is not a transaction in respect of a particular cell.

(1) A creditor of a cell company shall not have any rights Position of

creditors.

other than the rights referred to in this regulation and in regulations 13

and 14 of these regulations.

(2) There shall be implied (except in so far as the same is

expressly excluded in writing) in every transaction entered into by a

cell company the following terms that -

(a) no party shall seek, whether in any proceedings or by

any other means whatsoever, to make or attempt to use any cellular

assets attributable to any cell of the company to satisfy a liability

not attributable to that cell< and

(b) if any party succeeds by any means whatsoever in using

any cellular assets attributable to any cell of the company to satisfy

a liability not attributable to that cell, that party shall be liable to

the company to pay a sum equal to the value of the benefit thereby

obtained by him.

(3) Any asset or sum recovered by a cell company under

the implied term set out in paragraph (b) of sub-regulation (2) of this

regulation or by any other means whatsoever in the events referred to

in that paragraph shall, after the deduction or payment of any costs of

recovery, be applied by the company so as to compensate the cell

affected.

(4) In the event of an executive warrant being issued or

enforced on any cellular assets attributable to a cell of a cell company

in respect of a liability not attributable to that cell, and in so far as such

assets or compensation in respect thereof cannot otherwise be restored

to the cell affected, the company shall -

(a) cause or procure its auditor, acting as expert and not as

arbitrator, to certify the value of the assets lost by the cell affected<

and

(b) transfer or pay to the cell affected, from the cellular or

non-cellular assets to which the liability was attributable, assets or

sums sufficient to restore to the cell affected the value of the assets

lost.

(5) Where under paragraph (b) of sub-regulation (4) of this

regulation a cell company is obliged to make a transfer or payment

from cellular assets attributable to a cell of the company, and those

assets are insufficient, the company shall so far as possible make up the

deficiency from its non-cellular assets.

(6) This regulation shall apply to cellular and non-cellular

assets of a cell company wherever situated.

Without prejudice to regulations 12 and 14, cellular assets Recourse

assets by

attributable to a cell of a cell company shall -

creditors.

(a) only be available to the creditors of the company who

are creditors in respect of that cell and who are thereby entitled, in

conformity with these regulations, to have recourse to the cellular

assets attributable to that cell<

(b) be absolutely protected from the creditors of the

company who are not creditors in respect of that cell and who

accordingly are not entitled to have recourse to the cellular assets

attributable to that cell.

(1) Where any liability arises which is attributable to a Liability of cellular

assets.

particular cell of a cell company-

(a) the cellular assets attributable to that cell shall be

primarily used to satisfy the liability<

(b) the company’s non-cellular assets shall be secondarily

used to satisfy the liability, provided that the cellular assets

attributable to the relevant cell have been exhausted< and

(c) any cellular assets not attributable to the relevant cell

shall not be used to satisfy the liability.

(2) Any liability not attributable to a particular cell of a cell

company shall be the liability solely of the company’s non-cellular

assets.

(3) Notwithstanding the above provisions of this regulation-

(a) the liabilities under paragraph (a) of sub-regulation (1)

of this regulation of the cellular assets attributable to a particular

cell of a cell company shall abate rateably until the value of the

aggregate liabilities equals the value of those assets except that

the provisions of this paragraph shall be disregarded in assessing

the existence and extent of any secondary liability under paragraph

(b) of sub-regulation (1) of this regulation<

(b) the liabilities of the company’s non-cellular assets shall

abate rateably until the value of the aggregate liabilities equals the

value of those assets.

(4) This regulation shall apply to the cellular or non-cellular

assets of the company wherever situated.

(1) It shall be lawful, subject to the provisions of sub-

regulation (3) of this regulation, for the cellular assets attributable to

any cell of a cell company, but not the non-cellular assets of a cell

company, to be transferred to another person, wherever resident or

incorporated, and whether or not a cell company.

(2) A transfer, pursuant to sub-regulation (1) of this

regulation, of cellular assets attributable to a cell of a cell company

shall not of itself entitle creditors of that company to have recourse to

the other assets of the person to whom the cellular assets were transferred.

(3) No transfer of the cellular assets attributable to a cell of

a cell company may be made except with the specific written approval

of the competent authority (a “cell transfer approval”).

(4) The competent authority shall not issue a cell transfer

approval in relation to a cell of a cell company unless the company

proves to the satisfaction of the competent authority that the creditors

of the cell company entitled to have recourse to the cellular assets

attributable to the cell, consent to the transfer.

(5) The company shall deliver to the Registrar a copy of the

cell transfer approval for registration within 14 days from the date of

issue of the cell transfer approval.

(6) The competent authority may subject a cell transfer

approval to such conditions as it may from time to time deem fit to

impose, including conditions as to the discharging of claims of creditors

entitled to have recourse to the cellular assets attributable to the cell in

relation to which the order is sought.

(7) The competent authority may issue a cell transfer

approval in relation to a cell of a cell company notwithstanding that a

liquidator has been appointed to act in respect of the company or the

company has passed a resolution for voluntary winding up>

Provided that, the company proves to the satisfaction of the

competent authority that the transfer would not unfairly prejudice

creditors or other third parties.

(8) Notwithstanding the provisions of this regulation, a cell

company may make payments or transfers from the cellular assets

attributable to any cell of the company to a person entitled to have

recourse to those cellular assets.

(9) A cell company shall not require a cell transfer approval

to invest, and change investment of, cellular assets, or otherwise to make

payments or transfers from cellular assets in the ordinary course of the

company’s business.

(1) In the event of the liquidation of a cell, the prior consent Liquidation of cells.

of the competent authority, given in writing, shall be required.

(2) For the purpose of this regulation, the competent

authority may, by an insurance directive, determine the procedure to be

adopted for the liquidation of a cell.

(1) Any person who is aggrieved by a decision of the Appeals.

competent authority -

(a) to refuse to issue an approval for a company to be

constituted or formed as a cell company under regulation 5 of these

regulations< or

(b) for an existing company to be converted into a cell

company under regulation 5 of these regulations< or

(c) to refuse to issue an approval to a cell company to create

one or more cells under regulation 8 of these regulations< or

(d) to refuse to issue a cell transfer approval under regulation

15 of these regulations,

may appeal against the decision to the Financial Services Tribunal.

(2) The provisions of article 21 of the Malta Financial

Services Authority Act and article 57 of the Insurance Business Act Cap.330.

shall apply mutatis mutandis, as if the appeal has been made in terms of

the Insurance Business Act.