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The District of
Columbia (DC) is expected to become the first
US
domicile to introduce incorporated cell company (ICC)
legislation by the end of the year.
The move
will expand on DC’s existing protected cell legislation, which
has allowed cells to be incorporated as distinct legal
entities since being amended in 2004.
The current
legislation does not allow cells to transact with each other,
but under the proposed ICC legislation cells will be permitted
to transact with incorporated or unincorporated cells.
The new law
will also clarify and facilitates the conversion of cells into
fully-fledged captives and vice-versa, and provides
participants with greater flexibility in the way they operate
their segregated accounts, according to Sheppard.
Jersey had leapfrogged DC in
February 2006 by expanding on the principle of cells operating
as distinct legal entities with the creation of the more
flexible ICC.
But although
Jersey was the first domicile
to create the ICC definition, DC will be the first to develop
and market the structure specifically to the captive insurance
sector, Sheppard said.
The move will certainly set DC
apart from other onshore domiciles in the
US.
“DC is always trying to be on
the cutting edge of captive regulation. In order to
distinguish yourself and attract business you have to come up
with something that is unique, and we want to offer something
in DC that may not be available on other US domiciles,”
According to Sheppard, leading
figures in the legal world believe that making improvements to
existing cell legislation onshore will encourage offshore cell
captives to redomesticate.
And should DC’s ICC law prove
attractive and draw more captive business to the domicile,
Sheppard expects competitors such as
Nevada,
Montana and
South Carolina to
follow suit by developing similar legislation.
“I wouldn’t be surprised if
once our ICC law is passed, other domiciles do the same
thing,” he says.
DC has licensed four PCCs since
2004 and, given the option, all of them chose to form cells as
legally incorporated entities.
“No-one in DC is doing
unincorporated cells any more. People want the feeling that
the cell is a legal entity and that their assets are separate
from the other assets in the PCC. People are interested in the
concept, so we are trying to make it even more popular by
giving them more options,” said Sheppard.
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