SUMMARY OF THE STRUCTURE OF A PROTECTED CELL COMPANY

Formation

1. A Protected Cell Company (“PCC”) may create one or more cells for the purpose of segregating and protecting cellular

assets in the manner provided by the Protected Cell Companies Act 2001. The structure allows third party entities or people to own or use a cell within the PCC for the purposes of underwriting insurance portfolios, without the results of that portfolio affecting or being affected by the profitability in other cells within the PCC.

2. The PCC is a whole legal entity, so the Gibraltar Financial Services Commission considers the PCC’s solvency

requirement as a whole, rather than for each of its component cells. This enables the cell owner to avoid the relatively high Minimum Guarantee Fund requirements imposed on a stand-alone company. Although, each cell does not have a

separate corporate legal identity, accounts are prepared for each cell and dividends can be paid to cell owners separately.

3. The directors of a PCC have a duty:

 _{To keep cellular assets separate from non-cellular assets; and}

 _{To keep cellular assets attributable to a specific cell separate from cellular assets that are attributable to other} cells.

4. A person wishing to incorporate a company as a PCC shall make an application to the Registrar for the registration of the company's memorandum and articles in accordance with the Gibraltar Companies Act, the provisions of which shall apply accordingly.

Shares

5. A PCC may, in respect of any of its cells, create and issue non-voting redeemable preference shares. The proceeds from the issue become cellular assets attributable to the cell. The proceeds of the issue of shares other than cell shares created and issued by a PCC shall be comprised in the company's non-cellular assets. A PCC may pay a dividend in respect of cell shares.

6. A PCC or a holder of cell shares in a cell of a PCC may apply to the Court for an order authorising the company to reduce the cell share capital:

 Where the applicant is the company, of any of the company's cells; or

 _{Where the applicant is the holder of cell shares, of the cell in which the cell shares are held.}

7. An order of the Court authorising the reduction of cell share capital shall be deemed to be substituted for the corresponding part of the PCC’s memorandum, and shall have effect as if originally contained therein.

Loss and Disputes

8. In the case of loss or damage which is attributable to a particular cell of a PCC and is caused by fraud, the loss or damage shall be the liability solely of the company’s non-cellular assets, without prejudice to any liability of any person other than the company.

9. In the event of any dispute as to:

 Whether any right is or is not in respect of a particular cell;

 _{Whether any creditor is or is not a creditor in respect of a particular cell;}  _{Whether any liability is or is not attributable to a particular cell; or}

 _{The amount to which any liability is limited.}

10. The Court, on the application of the PCC, may issue a declaration in respect of the matter in dispute.

11. If a PCC fails to inform a person that they are transacting as part of a PCC, or fails to specify the cell in which a person is transacting in, then either the directors will incur personal liability to that person in respect of their transactions, or the directors shall have a right of indemnity against the non-cellular assets of the company (unless they acted in a fraudulent, reckless or negligent way).

Receivership Orders

12. If in relation to a PCC the Court is satisfied:

 That the cellular assets attributable to a particular cell of the company are or are likely to be insufficient to meet the claims of creditors in respect of that cell;

 That the making of an administration order in respect of that cell would not be appropriate.

13. The Court may make an order under this section (a “receivership order”) in respect of that cell. 14. A receivership order:

 _{May not be made if}

– A liquidator has been appointed to act in respect of the PCC; or – The PCC has passed a resolution for voluntary winding up;  _{May be made in respect of a cell subject to an administration order;}

 _{Shall cease to be of effect upon the appointment of a liquidator to act in respect of the PCC, but without prejudice} to prior acts.

15. Any person dealing with the receiver in good faith is not concerned to enquire whether the receiver is acting within his powers.

16. The Court will not discharge a receivership order unless it appears to the Court that the purpose for which the order was made has been achieved, substantially achieved or is incapable of achievement.

Administration Orders

17. If in relation to a PCC the Court is satisfied:

 _{That the cellular assets attributable to a particular cell of the company are or are likely to be insufficient to} discharge the claims of creditors in respect of that cell; or

 _{That the company’s cellular assets and non-cellular assets are or are likely to be insufficient to discharge the} liabilities of the company.

18. The Court may make an order under this section (an “administration order”) in respect of that cell in respect of that

company.

19. An administration order may be made in respect of one or more cells.

20. During the period of operation of an administration order:  _{In respect of a cell of a protected cell company:}

attributable to the cell; and

– The administrator shall be deemed a director of the company in respect of the company’s non-cellular assets, unless there are no creditors of the company in respect of that cell entitled to have recourse to the non-cellular assets.