By Ilze Els, Senior Manager, Corporate, Guernsey
Family offices are increasingly turning to cell companies to optimise their investment strategies. Originating in Guernsey in the 1990s, cell companies are structures allowing for the segregation of assets and liabilities within a single legal entity—a feat achieved by creating individual “cells,” each with its own distinct portfolio of assets and liabilities.
Since its earliest days three decades ago, the cell company structure has become a favoured choice of sophisticated investors and family offices thanks to its unparalleled speed, efficiency, and flexibility.
In this article, we’ll explore the top three reasons family offices use cell companies and how they might benefit your family office.
What are cell companies?
Cell companies are unique corporate structures that segregate assets and liabilities into distinct “cells” within a single legal entity. This segregation provides significant advantages in risk management, operational efficiency, and flexibility, particularly for family offices and investment firms.
There are two primary types of cell companies: Protected Cell Companies (PCCs) and Incorporated Cell Companies (ICCs).
Protected Cell Companies (PCCs)
Protected Cell Companies (PCCs) segregate assets and liabilities within distinct cells, each operating independently under the umbrella of a single legal entity. Within a PCC, the assets of one cell are legally protected from the liabilities of other cells within the same company.
This structure is particularly beneficial for managing diverse investment portfolios because it allows each cell to pursue different investment strategies without risking the assets of other cells. The PCC was first introduced in Guernsey in 1997, where legislation provided a robust legal framework, allowing cell companies to gain traction and facilitate their adoption by other jurisdictions.
Incorporated Cell Companies (ICCs)
Incorporated Cell Companies (ICCs) take the concept of asset and liability segregation a step further by establishing each cell as a separate legal entity. Unlike PCCs, where the cells share the legal umbrella of the core company, ICCs treat each cell as an independent company with its own legal status. Each cell can enter into contracts, retain assets, and be held liable for its debts independently of the other cells and the core company.
The ICC structure was also pioneered in Guernsey, with relevant legislation that came into effect in 2006. ICCs provide additional protection and flexibility, as each cell’s legal independence further mitigates the risk of cross-cell contagion. This structure is particularly useful for more complex investment strategies and situations requiring legal independence for regulatory or commercial reasons.
The top 3 advantages of cell companies for family offices
1. Speed
One of the primary advantages of using a cell company structure is the speed of capitalising on investment opportunities. Unlike traditional company structures where setting up a new entity can be time-consuming, a new cell can be created swiftly within an existing PCC or ICC, allowing family offices to respond quickly to emerging opportunities.
2. Efficiency
Cell companies offer cost efficiencies that are particularly attractive to family offices managing diverse portfolios. The common infrastructure of a cell company—including a single company secretary, administrator, and board of directors—reduces administrative overhead.
This shared structure also brings efficiencies in accounting, tax reporting, and regulatory compliance across all cells. Such efficiencies are crucial for family offices aiming to optimise their operational costs while maintaining high levels of governance and oversight.
3. Flexibility
The flexibility of cell companies is another significant draw for family offices. This structure allows for the segregation of assets according to risk profiles or ownership stakes, facilitating tailored investment strategies. Family offices can manage and enjoy required assets more effectively, and succession planning becomes simpler.
Different assets and beneficial interests can be apportioned between cells to segregate entitlements while preserving the advantages of a pooled framework. This flexibility is invaluable for managing a family’s wealth and ensuring smooth intergenerational transfers.
IQ-EQ stands out in the market for our deep expertise in cell company structures. Contact our team of qualified and experienced professionals to learn how to maximise the benefits of your family office.
About the author
Ilze is a Senior Manager, Corporate, based in Guernsey. Ilze is a professional with extensive experience in finance, law, and fiduciary services. Holding a business and law degree and a postgraduate qualification in South African tax law, Ilze is also a Certified Financial Planner (CFP) with a postgraduate qualification in financial planning. She has been recognized as one of the e-private client Crown Dependencies NextGen leaders in 2024.
