The concept and basic structure
The first PCC legislation was enacted in Guernsey in 1997 with the sole intention of providing a secure vehicle for umbrella investment funds (an investment fund with a variety of sub-fund options). Before the creation of PCCs umbrella investment funds would normally provide for separate classes of shares within their articles. That action, however, simply created divisions designed for separate accounting for each sub-fund: it did not create legally distinct sub-funds. This meant that if a particular sub-fund was insolvent, the creditors could pursue a claim against the assets held in other sub-funds, which placed umbrella funds in a disadvantageous position compared to umbrella unit trusts. They had the advantage of the ability to create a separate trust for each 'sub-trust' which provided a legal firewall from the other sub-trusts in the event of a sub-trust insolvency. The purpose of a PCC was to provide a similar structure for umbrella investment funds. Effectively, each cell has a separate legal identity. The assets of each cell are not liable for the debts of any other cell. In practice, there is also a core cell, designed to hold the identity of the parent but usually very little in the way of assets.
Other uses for PCCs
Once the vehicle's status became recognised as effective for this purpose it began to attract interest from other similarly segmented service enterprises. These days PCCs are used for a growing list of enterprises not limited to the insurance and funds sectors. More traditionally, PCCs are used for:
Life assurance. Useful for separating the assets of different areas of the business e.g.
As the uses for PCCs multiplied, several jurisdictions followed Guernsey in enacting PCC legislation - Cayman Islands, Bermuda, Jersey, Mauritius, Gibraltar, St Vincent & The Grenadines and the Isle of Man. Some of these jurisdictions have clearly defined the purposes for which a PCC may be used: others have added clauses to their legislation which allow PCCs to be used for 'carrying on finance business'. That fairly loose definition is the key to providing future opportunities for creative enterprises to use PCCs for hitherto unexplored purposes.