Regulations, 2010

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 18,586, 30 ta’ April, 2010 B 2265

Taqsima B

L.N. 243 of 2010

COMPANIES ACT

(CAP. 386)

Companies Act

(Cell Companies Carrying on Business of Insurance)

Regulations, 2010

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

Companies Act, the Minister of Finance, the Economy and

Investment, acting on the advice of the Malta Financial Services

Authority, has made the following regulations:-

The title of these regulations is the Companies Act (Cell Title.

Companies Carrying on Business of Insurance) Regulations, 2010.

(1)

In these regulations, unless the context otherwise Interpretation.

requires:-

"the Act" means the Companies Act;

"approved auditor" and "auditor" shall have the same meaning

assigned to them by article 21(10) of the Insurance Business Act;

"business of insurance" has the same meaning as is assigned to

it in article 2(1) of the Insurance Business Act, and shall include Cap. 403.

business of affiliated insurance pursuant to regulation 2 of the

Insurance Business (Companies Carrying on Business of Affiliated S.L. 403.11.

Insurance) Regulations, the business of insurance manager, as well as

the business of insurance broking under the Insurance Intermediaries Cap. 487.

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 a 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, 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 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

regulation 9(4);

"cellular dividend" means a dividend payable by a cell company

in respect of cell shares pursuant to the provisions of regulation 10(3);

"competent authority" means the body appointed under article 3

of the Insurance Business Act;

"insurance rule" has the same meaning as is assigned to it by

article 2 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 Cap.403.

Insurance Intermediaries Act, as the case may be, the provisions of Cap.487.

the Insurance Business Act and the Insurance 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 Name and

memorandum of

provisions of the Act, include the expression "Protected Cell Company" 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 Approval of the

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

authority

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

company.

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 or a company enrolled in the Managers’ List

or Brokers’ List in terms of the Insurance 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 rule, 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) 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

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

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

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

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

deliver to the Registrar for registration of the company’s

memorandum 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, 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

keep

(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), 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), 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) 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).

(1)

A cell company may, in respect of any of its cells, Cell shares and

create and issue shares ("cell shares") the proceeds of the issue of share capital.

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.

(1)

A cell company shall

(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 other than the rights referred to in this regulation and in

regulations 13 and 14.

(2) In every transaction entered into by a cell company, there

shall be implied, the following terms, namely 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 sub-regulation (2)(b) 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 sub-regulation (4)(b) 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 such assets are situated.

Without prejudice to regulations 12 and 14, cellular assets Recourse to

cellular assets

attributable to a cell of a cell company shall -

by 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)

Subject to the provisions of regulation 15, where Liability of

any liability arises which is attributable to a particular cell of a cell cellular assets.

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 sub-regulation (1)(a) 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 sub-regulation (1)(b);

(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 such assets are situated.

(1)

Notwithstanding the provisions of regulation 14,

where a cell exclusively carries on business of affiliated insurance or

business of reinsurance and provided that it is specifically permitted

by the memorandum and articles of association of the cell company,

the company may, by specific written agreement to that effect,

provide that only the cellular assets of that cell may be utilised to

satisfy the cellular liability of such cell

Provided that, where the business of the cell in question

relates to compulsory insurance, the cell company shall be obliged to

establish to the satisfaction of the competent authority sufficient

guarantees for the protection of insureds, policyholders, creditors or

other interested parties.

(2)

For the purposes of this regulation

"business of affiliated insurance" means the business of a cell

which carries on business of insurance or reinsurance restricted to

risks originating from

(a)

an undertaking being the sole holder of the cell

shares of the particular cell; or

(b)

undertakings in which the undertaking referred to

in sub-paragraph (i) holds a participating interest; or

(c)

an undertaking being the sole user of the particular

cell; or

(d)

undertakings which are the sole users of the

particular cell and in which the undertaking referred to in sub-

paragraph (iii) holds a participating interest;

"business of reinsurance" means the business of a cell which

carries on an activity consisting in accepting risks ceded by an

insurance undertaking or by another reinsurance undertaking; and

"compulsory insurance" means any insurance which a person is

required by law to have in effect.

(3) Specific written agreements entered into in terms of sub-

regulation (1) shall be operative as between the contracting parties,

and shall not be of prejudice or advantage to third parties.

(1)

It shall be lawful, subject to the provisions of sub- Transfer of

regulation (3), for the cellular assets attributable to any cell of a cell cellular

from cell

company, but not the non-cellular assets of a cell company, to be company.

transferred to another person, wherever resident or incorporated, and

whether or not a cell company.

(2) A transfer, pursuant to sub-regulation (1), 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 fourteen 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 of the competent authority, given in writing, shall be

required.

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

may, by an insurance rule, determine the procedure to be adopted for

the liquidation of a cell.

(1)

In relation to cells carrying on business of affiliated

insurance, a cell company shall not be required to make a contribution

to the Protection and Compensation Fund established under article 49

of the Insurance Business Act in terms of 7(2) of the Protection and

Compensation Fund Regulations and no payment of claims shall be

made out of the Fund in relation to such business.

(2) For the purposes of this regulation, "business of affiliated

insurance" has the same meaning as is assigned to it by regulation 15.

(1)

Any person who is aggrieved by a decision of the

competent authority -

(a)

to refuse to issue an approval for a company to be

constituted or formed as a cell company under regulation 5; or

(b)

for an existing company to be converted into a cell

company under regulation 5; or

(c)

to refuse to issue an approval to a cell company to

create one or more cells under regulation 8; or

(d)

to refuse to issue a cell transfer approval under

regulation 15,

may appeal against the decision to the Financial Services Tribunal.

(2) The provisions of article 21 of the Malta Financial Cap. 330.

Services Authority Act and article 57 of the Insurance Business Act Cap. 403.

and article 50 of the Insurance Intermediaries Act shall apply mutatis Cap. 487.

mutandis, as if the appeal has been made in terms of the Insurance

Business Act.

19. Cell companies and their cells shall comply with these Compliance by

regulations and any agreement incompatible with these regulations cell

and their cells

shall, to the extent of such incompatibility, be null and void.

with the

regulations.

(1)

Saving the provisions of sub-regulation (2), the Revocation and

Companies Act (Cell Companies Carrying on Business of Insurance) Savings.

Regulations, are hereby revoked.

(2)

Every authorisation, approval or order taken or

commenced thereunder, shall continue to be valid and in force, as if

such authorisation, approval or order were taken or commenced under

these regulations.

B

€0.56