The Bailiwick of Jersey is a dependent territory of the English Crown but has no direct link with the United Kingdom parliament. Accordingly the Island enjoys complete autonomy in domestic and fiscal matters. The legal system is based on Norman Law and is practiced by qualified advocates before the Royal Court of Jersey.

With effect from 1 February 2006, the Companies (Jersey) Law 1991 (the 'Companies Law') as amended by the Companies (Amendment No 8) (Jersey) Law 2005 (the 'Amendment Law'), permits the establishment of cell companies in Jersey.

A cell company is a corporate vehicle that is permitted to segregate its assets and liabilities between different cells of itself, for different purposes, with the result that a creditor's recourse against the cell company is limited to whichever cell was transacted with.

Where a cell becomes insolvent, the remaining cells of the structure are not affected and continue to operate as normal.

A cell company may take any form that a conventional company may take pursuant to the Companies Law. It may, therefore, be a public or private company, a par value or no par value company or a guarantee company and it may be a limited liability or unlimited liability company.

There are 2 forms of Jersey cell company:

1. The Protected Cell Company ('PCC')
2. The Incorporated Cell Company ('ICC')

A cell company is created by application to the Registrar of Companies (the 'Registrar'). The Memorandum of the cell company must detail whether it is to be a PCC or an ICC.

Once established, a cell company may create cells, which must have the same directors, secretary and registered office as itself.

Cells are created by way of special resolution, which must assign the cell a name and set out the terms of that cell's Memorandum & Articles.

The administrative benefits of a cell company are significant. Once a cell company structure is in place, repeat transactions can be established in a much reduced timescale. This is particularly attractive in projects such as collective investment funds and securitisations, where negotiating transaction documents can be a complex and lengthy process, and where a successful initial structure will often lead to a demand for further, similar structures using the same key participants.

A framework can be established which includes all of the participants in the structure – such as administrators, managers, investment managers and custodians – and model agreements entered into governing the contractual roles of those participants. Regulatory consents can be obtained in advance for the structure, and then, as new cells are added, the level of regulatory scrutiny that will be required is much reduced, as the fundamental structure has already been agreed.

When particular transactions are envisaged – for example, adding a fund to invest in a specific country or sector, or a new vehicle to acquire receivables in the course of a securitisation – a cell can be created specifically to act in that defined role.

As the functionary agreements and regulatory consents have already been agreed with respect to the form of the transaction, a new cell can be added at a fraction of the cost and time that would be required were the structure to be established from scratch.

It will be possible with the JFSC's permission, for a foreign body corporate to change its status to a Jersey cell company as part of the process of redomiciliation to Jersey.

The incorporated cell company creates each cell as a separately incorporated Jersey Company. This is a substantive provision of the Law which should be recognised by foreign courts in the same way as the limited liability of traditional stand-alone companies. In this way an umbrella structure can still offer the full range of limited liability protections available under the Law at the level of the cell.

The cell of a PCC can invest in another cell of a PCC thus allowing the creation of further funds within an umbrella structure.

Reduced risk of cell company itself becoming insolvent.

Clear distinction between the cell company and the cells it creates (and as a result, clarification of the duties of the directors of cell companies).

Ability to have cells which create shares of no par value without reference to the shares of the cell company.

There is no statutory limitation upon the uses of cell companies. However, the JFSC will monitor their uses and issue guidance as to their preferred use if such is thought necessary.

1. Investment or mutual funds, where each cell can hold a separate class of assets

2. Property development companies, with individual properties held within separate cells

3. Asset financing

4. Special purpose vehicles for captive insurance

5. Group financing vehicles

6. Securitisation issues