Segregated Portfolio Company Agreement

The Commission`s power to grant a company permission to register as a proportional PPU is generally granted between 24 and 72 hours and, in the case of a public fund, between seven and fourteen working days. A company can convert a “standard-“-exempt company into SPC into: unlike most developed financial markets, there is no legal structure similar to separate holding companies in South Africa. On the contrary, these companies, known locally as cell companies, are companies of different share categories, each class being issued to another cell holder. The separation of assets and liabilities known as ring-fencing is achieved through contractual agreements and, given the absence of a legal structure, there is a theoretical risk that creditors may, under the agreed agreement, charge taxes from cells other than their debtors. However, such a precedent has not yet been created. SPCs have several potential functions. They are often used in the formation of collective investments as funds of funds and in the creation of insurance companies in captivity (usually a variant of a “tenant-a-captive”). They are sometimes used as investment companies (usually where each portfolio holds a single ship or aircraft) and can also be used for the issuance of bonds on the capital markets. A CPS, like any other company in the Cayman Islands, can be dissolved voluntarily or through the courts. However, as the Court of Appeal explained in ABC Company (SPC) /J-Co. Ltd., such a liquidation is only possible for the ASP as a whole; The liquidation of a single portfolio is not possible. On the other hand, the Tribunal may issue a bankruptcy order for a single portfolio, but (as also explained by the Court of Appeal) can issue such an injunction only on the basis that the assets associated with it are not sufficient or are probably not sufficient to meet the creditors` requirements on that portfolio; there is no jurisdiction to issue such an injunction for any other reason, such as just and just reason. A bankruptcy order may be issued at the request of the SPC, its directors, a CPS creditor with respect to the portfolio in question, a holder of shares issued by the relevant portfolio or CIMA, if the SPC is authorized or regulated by CIMA.

However, such an order cannot be made in the event of the dissolution of the PSD. Cayman SPC`s is a popular vehicle for investment fund use, particularly for multi-class funds, where one or more portfolios use leverage, short selling and other tools that could result in large third-party debts as part of their investment strategy. In the past, multi-ranking funds have tried to prevent liabilities from spreading from one class to another by creating commercial subsidiaries that invest the class assets (similar to a separate portfolio in an SPC) that participate in such a strategy.