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cell with which they have contracted, with no recourse to the assets of the ICC or other incorporated cells.

In the case of a PCC, creditors must first seek recourse against the assets

of the cell in respect of which they have transacted, and it is only once such assets have been exhausted that a right of recourse exists against the core assets. An exception to this exists in the case of a protected cell exclusively carrying on affiliated insurance business or reinsurance business, subject to certain conditions being satisfied.

Directors of a PCC are duty-bound to ensure that assets attributable to

each protected cell are kept separate from those of other protected cells and from non-cellular assets of the PCC. This duty includes ensuring that sufficient documentation is maintained to keep a cell’s assets and liabilities separate and distinct from other assets and liabilities.

In the case of an ICC, it is the directors of the ICC and the directors

of each incorporated cell, as applicable, who are required to ensure segregation of the assets and liabilities of each incorporated cell from the assets and liabilities of other incorporated cells and the ICC.

For the above reasons, Maltese law seeks to ensure that appropriate

notice to third parties is given of the status of the cell company and its cells. For instance, the law requires an ICC’s name to include the expression ‘Incorporated Cell Company’ or its abbreviation ‘ICC’.

BINDING AUTHORITY A protected cell transacts business through its PCC. It is therefore

essential for the PCC to put third parties on notice by identifying or specifying, in line with PCC legislation, the cell in respect of which that person is transacting. If the PCC is entering into a given transaction on its own behalf, it is obliged to notify the person with whom it transacts that it is a PCC.

In contrast, as a consequence of the separate legal personality of an

incorporated cell being distinct from that of its ICC, the latter does not have the power to enter into transactions on behalf of its incorporated cell solely by virtue of its position as an ICC.

AN ICC AND ITS CELLS There is no requirement for an ICC to take up shares in its incorporated

cells and the ICC Regulations make it clear that an incorporated cell is not a subsidiary of its ICC solely by virtue of the fact that it is an incorporated cell. The ICC Regulations do, however, make an exception to the provisions on single member companies in the Companies Act by allowing an ICC to be the only member of an incorporated cell. While it is possible for an incorporated cell to own shares in another incorporated cell of its ICC, in no case can an incorporated cell own shares in its ICC.


REDOMICILIATION OF ICCS The ICC Regulations envisage the incorporation of an ICC for any of

the purposes mentioned above with a view of establishing incorporated cells. However, the ICC Regulations also cater for those companies already in existence, whether registered in Malta or abroad, wishing to convert and/or redomicile to Malta and register as an ICC.

Redomiciliation takes place by application of existing regulations on company continuation and the ICC Regulations. Subject to certain conditions being satisfied, it is possible for a foreign body corporate carrying on business of insurance and being similar in nature to an ICC to be continued in Malta as an ICC together with its cells.

The ICC Regulations also envisage the possibility of a foreign body

corporate carrying on business of insurance and being similar in nature to a non-cellular company to be continued under the laws of Malta as an incorporated cell of an ICC.

TAXATION For income tax purposes, a cell of a cell company and that part of a cell company in which non-cellular assets are held are deemed to be separate and are therefore treated as separate companies.

Maltese companies are subject to a standard corporate rate of tax of 35

percent. Through the operation of the Maltese full imputation system, corporate tax paid is fully credited to shareholders on distribution of profits, and they are therefore not liable to payment of further tax in Malta on dividend income so received.

Recipients of dividends are entitled to claim refunds of company tax paid, resulting in a reduction in the effective tax burden on distributed profits from approximately 5 percent to 8 percent. Additionally, Malta boasts of an extensive tax treaty network concluded with EU and non-EU countries.

CONCLUDING REMARKS Some of Malta’s appealing factors include its comprehensive legal framework, fiscal advantages both at corporate and expatriate level, access to an efficient regulator and a highly skilled workforce fluent in both written and spoken English, making it an ideal jurisdiction.

As a member of the European Union, financial services companies

established in Malta and authorised to carry on business by the MFSA may avail themselves of passporting rights, effectively making Malta their gateway to the European Union.

Dr Angela Thorns is a lawyer and a partner at Dingli and Dingli Law Firm. She can be contacted at:

October 2011 | INTELLIGENT INSURER | 51

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