Sovereign (UK) Ltd was recently approached by lawyers involved in the sports industry to discuss the possibility of setting up a special kind of company – an Incorporated Cell Company (ICC) – in Guernsey to facilitate the establishment of a novel type of structure.
A small number of seasoned sportspersons (including coaches) were interested in providing financial support to emerging athletes, notably rugby players and cyclists. Specifically, young sportspeople who have demonstrated the requisite talent, ability and desire to become professionals in their sport but who, not being signed to major clubs or teams and lacking sufficient private resources, were struggling to reach the next level.
Each cell within the ICC will be used to receive a loan from an investor, most of whom will be current or former professional athletes that wish to put a portion of their wealth back into sport and who will also be able to assist in the development of the athletes they are supporting through mentoring and encouragement.
If the young athletes achieve success and gain professional status together with an acceptable level of remuneration, the financial support provided through the ICC will then be returned by the athlete, thus generating a return to the relevant cell.
The Guernsey ICC is a particularly suitable structure for the proposed initiative because it is based on the same principles as the more familiar Protected Cell Company (PCC) structure – the ability to establish any number of separate cells and the provision for the segregation of assets within those cells and limited recourse of creditors to specified pools of assets rather than to all of the assets of the company.
But unlike a PCC, each incorporated cell of an ICC is a separately registered legal entity with its own memorandum and articles of incorporation, its own company registration number and its own board of directors. This provides greater flexibility in relation to the ability to convert, migrate and amalgamate incorporated cells, as well as strengthening the segregation of each incorporated cell’s assets and liabilities.
Like a PCC, the consent of the GFSC is required for the formation of an ICC. The formation of an incorporated cell also requires a special resolution of the shareholders of the ICC that it will form part of, as well as registration of the incorporated cell with the Guernsey Registry.
Guernsey law requires a board of directors to be appointed for each incorporated cell, a service which Sovereign in Guernsey can provide. Each cell of an ICC must also have the same registered office. Again, Sovereign Guernsey can provide this service, together with company secretarial, administration, accounting and compliance services. These services will also ensure an appropriate level of economic substance.
The profits of each incorporated cell should not be exposed to any local taxation in Guernsey and, because there will be no pooling of funds between cells, it is unlikely that the structure could be considered as a Collective Investment Scheme. This means both the ICC and individual incorporated cells should be relieved from being regulated as a fund. As a result, the time that it will take to incorporate the ICC should be brief – generally within a month – and the first year fee and ongoing annual charges will be highly competitive.
For any further information on Guernsey ICCs, please contact Simon Denton at Sdenton@SovereignGroup.com or by telephone to +44 (0)7887 991649 / +44 (0)20 7389 0555. Simon was once a professional squash player, still cycles internationally and is a qualified rugby referee, hence his strategic interest with the sports industry.