Curacao hits the target again with the newly introduced Protected Cell Company (PCC), an ideal corporate formation to reduce risk and restructure the control of assets. The Curacao Protected Cell Company (PCC) is a company, within which you can create one or more cells, and whereby each cell is independent of the other cells (in other words, no leakage or cross-contamination between cells). This means problems such as losses or claims in one cell will not “leak to” or “contaminate” the other cells. In this new corporate structure, the assets and liabilities in each cell are legally separated from any other cells.
The PCC is created the same way as any other company—by executing a deed of incorporation in front of a civil notary in Curacao. The deed of incorporation should make mention of the fact that the company will be setting up a number of what are called “trust cells.” Each trust cell must have a name that distinguishes it from any other cell and the name of each cell must contain the term “trust”.
In essence, the PCC functions as a trustee that oversees a number of trust cells. The creation of trust cells means that the assets allocated to a particular cell are administered by the company, not for the company’s own benefit but for the benefit of the appointed beneficiaries of that particular trust cell. For this reason, the assets in the cells are legally separated from the assets of the company or any of the other cells.
Some of the characteristics and benefits of the PCC can be summarized as follows:
1. Centralization of control:
There is no need to create complex holding structures to separate risk and organize control; one company can be used to hold and control various assets types, such as real-estate, investment portfolios, businesses, assets (vehicles, boat, etc.). In addition, there is no need to create one company for each assets class.
2. Asset protection:
Creditors going after the assets held in one cell do not have recourse to go after the assets held in the other cells. If things go sour with the assets in one cell, this will not have an effect on the assets held in the other cells.
3. No leakage or cross-contamination:
Problems such as losses or claims in one cell cannot leak into or contaminate another cell.
4. Favorable tax treatment: Providing certain conditions are met, both the donation of assets to the trust cells and the distribution of assets from the trust cells can be arranged free of taxation.
5. Independence of disbursements: Only the income or profit of a particular cell should be taken into consideration to determine whether or not a disbursement can be made to the beneficiaries of that specific cell.
6. No Income Tax:
As long as the assets held in the cells are not used to conduct active trading or business, all income generated in the cells is free of taxation.
7. No new shares:
The flexibility of Curaçao financial laws facilitates expansion of the PCC. Each time a new cell is created, and also when a new beneficiary is appointed to an existing cell, there is no requirement for the PCC to issue new shares.
The creation of a PCC requires a regulatory consent from the Central Bank and one of the directors of the PCC must be an individual or trust company that is licensed by Central Bank. Furthermore, the board of directors of a PCC must maintain a register of all the beneficiaries of the various trust cells.
Families can use the PCC to structure and arrange the future well being of family members by allocating part of their estates to particular cells that are designated to provide for specific future purposes, such as education or a retirement fund. In summary, we can say that the PCC offers an ideal alternative to other, sometimes complex, structures of legal entities to manage and control private equity investments or to arrange for the protection of assets.
We believe a careful consideration by our clients of the benefits of PCC trust cells will make it worthwhile to visit us and set up a Curaçao PCC.
