Insolvency and restructuring: Cayman Islands Segregated Portfolio Companies (2022)

May 2020 marks the twenty second anniversary of the Cayman Islands segregated portfolio company ("SPC").[1] This article takes a look back at the SPC's first two decades and particularly the principles established by the courts concerning insolvent SPCs. These cases have posed some interesting and novel questions for the Cayman courts to resolve and the decisions have put flesh on the bones of the statutory provisions as regards the status, duties and powers of office holders appointed in connection with SPCs.

What is it?

An SPC is an exempted company that is permitted to create segregated portfolios in order to legally segregate the assets and liabilities of the portfolios from each other and from the general assets and liabilities of the SPC itself. The utilisation of these innovative legal structures has developed considerably since their first introduction in May 1998. Initially limited to use by licensed insurers, they are now popular investment vehicles employed across the spectrum of financial services offerings wherever there is a need to set up a statutory ring fencing of assets and liabilities. The SPC structure is widely used by investment funds, captive insurers, and in structured finance transactions.

Treatment in Insolvency Situations

Part XIV of the Cayman Companies Law (2020 Revision) (the "Law") provides for the establishment and operation of SPCs and their treatment in insolvency situations. Under the Law, the portfolios of an SPC do not constitute separate legal entities; however, in practical terms, they operate like separate limited liability companies and the assets and liabilities of each portfolio are ring fenced: with the effect that shareholders and creditors have recourse only to the assets of the particular portfolio to which their shares are allocated. Liabilities of one portfolio cannot be met by the assets of another; nor can they be met from the general assets of the SPC where this is prohibited in the articles of association (which is the usual position). When a portfolio is insolvent the Court may appoint a receiver to realise and distribute its assets. Official liquidators may only be appointed over the entire SPC. The effect of Part XIV is that the insolvency of one portfolio does not contaminate the other portfolios of an SPC. As shall be seen from the below survey of the cases, this principle has faced challenge, but has ultimately been upheld by the Cayman courts.

ABC Company (SPC) v J & Co. Ltd

In the matter of ABC Company (SPC) v J & Co. Ltd, the Court of Appeal reversed the Grand Court's decision not to strike out a petition to wind up ABC brought on the just and equitable grounds. The SPC had suspended the calculation of net asset value for several years and the payment of redemptions in a number of its portfolios. The investment manager was winding down the suspended portfolios so as to make distributions over time. The remaining portfolios (at least two thirds) were still trading normally, were accepting subscriptions and were paying redemptions in the usual way. Nevertheless, a petition to wind up the entire SPC was filed by a shareholder in one of the suspended portfolios on the grounds that the SPC had lost its substratum and that it was just and equitable that the SPC be wound up.

On appeal, the petitioner accepted that: (a) the Court had no jurisdiction under the Companies Law to wind up an individual portfolio; (b) the appointment of a receiver over a portfolio was only available if the assets attributable to that portfolio are or are unlikely to be insufficient to meet the liabilities of creditors to that portfolio (ie it is balance sheet insolvent) but not on a just and equitable basis; and (c) the only remedy was to seek to wind up the entire fund on the just and equitable grounds. Upon a review of the SPC's articles of association and offering documents, the Court of Appeal held that the petitioner had no realistic prospect of establishing that, as a result of the failure of certain segregated portfolios, the SPC had ceased to carry on business in accordance with the reasonable expectation of its shareholders nor was there any other basis upon which it was or could be said that the SPC as a whole had lost its substratum. This decision was the first case to affirm the proposition that the statutory segregation of an SPC's Portfolios will be upheld by the Cayman Courts.

The Axiom Portfolios

2012 and 2013 saw further welcome clarification of the status, duties and powers of receivers appointed over a portfolio. In the 2012 case of JP SPC 1 and JP SPC 4, winding up petitions were presented by the directors of two SPCs. A feeder SPC had six portfolios, one of which was the Axiom Legal Financing Fund ("Axiom") representing 74% of the SPCs' investors. Axiom's only assets were its shares in Axiom Legal Financing Fund Master SP, the master portfolio. The assets of the master portfolio were receivables from loans made to a number of English law firms conducting class actions. Allegations had been made concerning the activities of the Investment Manager of Axiom and the master portfolio. Initial analysis suggested that the value of the loans had been overstated and further investigations were necessary. Notwithstanding the principles confirmed in ABC, one of the investors originally sought to argue that despite the health of the other unaffected portfolios, the whole SPC should be wound up. The investor ultimately agreed that the appropriate course was for receivers to be appointed over the Axiom portfolios, and receivership orders were made.

The Axiom receivers subsequently returned to the Grand Court to seek directions clarifying their duties and powers so as to bolster an (ultimately successful) application for their recognition in England under the English Cross Border Insolvency Regulations 2006 (the "Regulations") which have their roots in the UNCITRAL model law on Cross Border Insolvency. Ordinarily, receivers in their traditional role do not qualify for such recognition, but the Regulations take a substance-over-form approach, and require an assessment of the actual status, duties and powers of the officeholder and thus whether relief is available. Further hurdles to the application were that SPCs as a concept are unknown under English law, consequently so too are receiverships of individual portfolios, and there has yet to be an onshore bankruptcy case recognising the segregation principle which SPCs embody.

There is one bankruptcy case from 2007, In re Refco Inc (06-5786-bk(L)), which is a US decision relating to the Sphinx group and which is sometimes referred to as a case showing that the US courts are unlikely to recognise the segregation principle. Here the US Court of Appeal considered an appeal by the Liquidators of the Sphinx Managed Futures Fund SPC. The Liquidators challenged the validity of a settlement agreement previously agreed by Sphinx where US$263 million was paid in contravention of the segregation principle, and argued that the US bankruptcy court ought to have considered Cayman law before approving the settlement, which would have led to a different result. The US Court of Appeals, however, determined that because the Liquidators now stood in the shoes of the Sphinx board, which had approved the agreement, they were precluded from pursuing the appeal (as Sphinx itself would be). The US Court of Appeal therefore concluded that it did not need to decide any issues of Cayman Islands law and affirmed the underlying order. So, although reported as cutting across the segregation principle of SPCs, in our view the Sphinx decision does not provide any guidance as to the likely approach of the US courts with respect to the segregation principle as the US court simply declined to consider any provisions of Cayman law.

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Interestingly, and following on from the recognition of the Axiom receivers in the UK, the Cayman Court has for the first time itself recognised receivers of a foreign segregated account (the Bermudian equivalent to the segregated portfolio) in the 2019 decision of In the Matter of Silk Road Funds Ltd.[2]

In In the Matter of JP SPC 1 and JP SPC 4 (known as Axiom)[3] the Court removed certain doubts as to what powers would be available to the receivers of portfolios. The decision considered and compared in significant detail the statutory powers available to, and duties owed by, receivers appointed over a portfolio on the one hand and the powers and duties of liquidators of a Cayman company on the other; and the decision has consequently provided a useful, detailed, and thorough exploration of this area.

Statutory Powers Available under Part XIV of the Law

  • Section 224(3) - A receiver appointed over a portfolio is tasked with the "orderly closing down of the business of or attributable to" the portfolio and the distribution of its assets to entitled persons.
  • Section 226(1) - A receiver is conferred with a general power to do all such things as may be necessary to complete that task, and has all the functions and powers of an SPC's directors in respect of the portfolio's business and assets.
  • Section 226(6)(b) - The receiver may attend SPC board meetings, and he may vote at board meetings on matters concerning the SPC's general assets where creditors of the portfolio over which he is appointed have an interest in those general assets.
  • Section 226(3) - A receiver is deemed to be an agent of the SPC and "shall not incur personal liability except to the extent that he is fraudulent, reckless, negligent, or acts in bad faith".
  • Section 226(2) - A receiver may apply to Court for directions in relation to the extent of or exercise of his functions or powers.
  • Section 226(5) - An automatic stay of proceedings against the SPC in relation to a portfolio comes into force as soon as an application for a receivership order is made and any would be litigants are compelled to seek the Court's permission to commence any claims.
  • Section 228 - Finally, a receiver's remuneration and expenses are payable only from the assets of the portfolio over which he is appointed.

The case confirmed that the receiver of a portfolio will be considered as possessing duties akin to those of a liquidator of a Cayman company, and, for most purposes, a receiver is to be attributed with the appropriate powers of a liquidator (confined in their application to the portfolio and its assets, shareholders or creditors). In particular the following practical points emerge:

(a) It is now clear that a receiver may be granted any of the powers usually conferred on liquidators by Part V of the Law, with appropriate modifications, to suit the particular circumstances of the receivership. Such powers range from the ability to conduct investigations into the affairs of the portfolio and the ability to seek to unravel transactions on the basis that they are a preference, an undervalue transaction, or constitute fraudulent trading.

(b) It is notable in the Axiom case that the Grand Court granted the receivers all the powers of liquidators exercisable under part I (exercisable with sanction) and part II (exercisable without sanction) of the Third Schedule to the Law. Such powers, particularly those exercisable with sanction, are considerable and include the power to carry on the business of the portfolio, to compromise any claims with creditors or shareholders, to deal with or sell portfolio assets, to obtain credit, and to engage staff, attorneys, or other professional advisors.

(c) More generally, the Court confirmed that the basic duty of a receiver appointed over a portfolio is to collect in and realise the assets of the portfolio and to make distributions in accordance with the statutory regime, with any surplus being returned to shareholders (which is the fundamental duty of a liquidator of a Cayman company), to exercise any necessary corporate powers to fulfil their duties, to convene meetings of creditors and/or shareholders, and even to promote a scheme of arrangement.

(d) A receiver of a portfolio is considered by the Court, to have power to commence legal proceedings on two grounds. Firstly, on the ground that this is a power exercisable under part I of the Third Schedule to the Law. Secondly, on the basis of the proper construction of Part XIV, the Court considered that whilst a portfolio's assets are segregated from the assets of other portfolios and the general assets of the SPC, the portfolio's assets are nonetheless "company assets", and the receivers, in displacing the SPC's directors in respect of the particular portfolio's assets and business, and being deemed an agent of the SPC, are entitled to bring proceedings in name of the SPC in respect of and on behalf of the portfolio over which they are appointed.

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In subsequent proceedings to wind up the investment manager of the Axiom portfolios (Re Tangerine Investment Management Limited April 2013 1 CILR 375 it was argued that the Axiom receivers were not entitled to appear on another creditor's petition to wind up Tangerine, on the basis that a portfolio had no separate legal identity to its SPC, and any debt would therefore be owed only to the SPC. The Grand Court firmly rejected these arguments. Despite the Axiom portfolios lacking separate legal personality, the Court considered that the receivers had sufficient standing to be heard. Its reasoning relied on the significant statutory powers afforded to, and duties owed by, the receivers, and particularly their effective displacement of the portfolios' directors' functions and powers as regards the particular portfolios, the fact that there was no liquidator appointed over the Axiom SPCs (who would have had standing to appear in the proceedings on the opposing creditor's analysis), and also that the nature of the receivers' powers was such that they could procure the SPC to act (such as in respect to the commencement of legal proceedings). Interestingly, in Tangerine, the Court went on to appoint one of the receivers jointly with the opposing creditors' choice of appointee as an official liquidator of the Axiom portfolios' former investment manager.

In the case of Calibre SPC, a case concerning the winding up of an entire SPC and its two portfolios on the insolvency basis, the Grand Court provided guidance as to which requirements of the Companies Winding Up Rules ("CWR") would apply as regards the individual portfolios (as technically only the SPC itself would be caught by the requirements of the CWR). This was helpful as the Law does not address the finer administrative details of what needs to be done in the liquidation of a portfolio. The Grand Court clarified that liquidators were to perform their statutory obligations contained in the Law (and thus the CWR), in respect of each Portfolio separately. This meant, amongst other things, that each portfolio would require separate certificates of solvency, liquidation committees, reporting and accounting, and that there would need to be an appropriate apportionment of expenses, including liquidation fees, between the SPC and its individual portfolios.

In In the Matter of Primary Development Fund (Cayman) SPC 2016 2 CILR 143, which related to the discharge of a receivership order, the Grand Court considered what options are available to receivers when a segragated portfolio has exhausted its assets though the remuneration of receivers and no assets are available for distribution to the creditors. Section 227(3) of the Law provides that "the Court may direct that any payment made by the receiver to any creditor of the company in respect of that segregated portfolio shall be deemed full satisfaction of the liabilities of the company to that creditor in respect of that segregated portfolio". However, where no payment, or only an offer of payment (which was not accepted) was made to the creditors, the Court was unable to make such a direction. The Court advised that in these circumstances the receivers could terminate the segregated portfolio under section 228A(1) of the Law which provides that where a segregated portfolio has no segregated portfolio assets or liabilities the SPC may, by resolution of the directors (or other authority provided for in the articles of association) terminate the segregated portfolio. The 'or' in this provision is to be construed disjunctively so that it is not necessary for both conditions to be satisfied.

Finally, Re Centaur Litigation Unit Series 1 Ltd[4] concerned substantial intermingling of assets between the segregated portfolios of Centaur Litigation SPC ("CLSPC"), an entity which formed part of a litigation funding business. CLSPC was involved in a substantial fraud involving a Ponzi scheme and the misappropriation of approximately US$27 million. CLSP held five segregated portfolios and on applying the "cash is king" principle (i.e. tracing the cash from investors through each of the funds and on to the investments) there were a broad range of investment returns depending on the portfolio to which the investor subscribed (from 1% to 55% of the value of the principal investment). This was due to the fact that the funds invested in the later series were not used to fund legal cases, but were misappropriated by management or used to prop up the Ponzi scheme. The investors had thought, based on the Offering Memorandum and Master Memorandum, that they were investing, together with the other segregated portfolios, in a 'master portfolio' of cases. The Liquidation Committee of CLSPC argued that the JOLs should honour the intention expressed in these documents, despite the fact that no master portfolio could have existed under Cayman Law, or did in fact exist, and should notionally pool the proceeds of all cases funded by CLSPC and allocate them pro rata across the five segregated portfolios. The Court held that it could not give effect to the 'master portfolio' structure because:

(a) Under Cayman Law segregated portfolios under and SPC are not permitted to invest in, hold shares in or loan money to one another (s216(1) of the Law);

(b) If assets are transferred between segregated portfolios, or between segregated portfolios and the general assets of the company, it must be for full value (s219(6)(c) of the Law).

and that in any event a pari passu distribution among the segregated portfolios would not be the fairest approach in the circumstances. The Court held that there was no sufficient justification to depart from the "cash is king" approach to the distribution model.

The above review illustrates that Cayman Islands jurisprudence in respect of SPCs has developed significantly, providing greater certainty in the treatment of SPCs and their portfolios in insolvency situations, which will be of great assistance to practitioners and their clients deriving benefits from the SPC structure. However, some interesting questions remain as do possible differences in treatment between receivers appointed over portfolios and liquidators appointed over Cayman companies. These are considered below.

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SPCs and Litigation Funding

Axiom made it clear that receivers appointed over portfolios, like a liquidator, possess the power to bring legal proceedings in the name of the SPC on behalf of the portfolio over which they are appointed. Liquidators have the benefit of seeking litigation funding from creditors (or, less commonly but increasingly, from unrelated third parties[5] in the business of providing litigation funding) to assist their recovery efforts; but a receiver's ability to obtain funding from third parties is less clear. Confronting any recipient of third party litigation funding in the Cayman Islands is the problem of whether these arrangements can be attacked as falling foul of the archaic, but still applicable, doctrines of maintenance or champerty. The former is the assistance or encouragement of proceedings by someone who has no interest in the proceedings or any motive recognised by the law as justifying interference; and champerty is an aggravated form of maintenance, whereby the assistance is provided in exchange for a share of any fruits of the action. Should a litigation funding contract be found to involve maintenance or champerty it is treated as contrary to public policy and unenforceable. Creditors providing a fighting fund for a liquidator need not fear falling foul of the doctrines (provided that they do not seek to usurp the liquidator's control of the action) as they are considered to have a legitimate interest in actions which may have the effect of swelling the size of the liquidation pot for ultimate distribution. The difficulty arises when the proposed litigation funder is an unrelated party.

An exception or safe haven has developed over time which protects liquidators and other office holders from the application of the doctrine of champerty. It provides that a liquidator is able to sell legal claims belonging to the entity in liquidation to unrelated third parties for a share of the recoveries of the litigation[6]. The exception has been rationalised by the English courts to arise as a result of the liquidator's statutory empowerment to sell an insolvent entity's assets coupled with their duty to realise the assets comprised in the insolvent's estate.[7] It is plainly arguable that the receiver of a portfolio ought to benefit from this safe haven in the same way as liquidators may - on the basis, as established in Axiom, that a receiver possesses an almost identical duty to realise the portfolio's assets and statutory power to sell those assets. However, the issue has yet to be tackled by the Cayman courts.

The critical issue is whether the funding agreement has a tendency to corrupt public justice, undermined the integrity of the litigation process or gave rise to a risk of abuse. The features which are likely to be significant, include:

"(a) the extent to which the funder controlled the litigation…(b) the ability of the funder to terminate the agreement at will…(c) the level of communication between the funded party and the lawyer…(d) the prejudice likely to be suffered by the defendant if the claim failed…(e) the extent to which the funded party was provided with information about... the litigation…(f) the amount of profit the funder stood to make…(g) whether or not the funder was a professional funder and/or was regulated." [8]

Test for Insolvency

The test for the appointment of a receiver over a portfolio is in effect a balance sheet insolvency test:- an order may be made where the assets attributable to that portfolio are or are likely[9] to be insufficient to discharge the claims of creditors in respect of that portfolio. In contrast, the insolvency test applied to any Cayman Islands' company on an application for its winding up is the traditional cash flow test:- can the company meet its debts as they fall due? A receiver could therefore be appointed over a portfolio which would otherwise be considered solvent were it an individual company. In Axiom the portfolios were not insolvent on a cash-flow basis, but they were likely to be insolvent as a result of imminent future lending obligations, and so, because of the lower insolvency threshold, the Axiom portfolios were able to be put into receivership. The reasoning behind this apparent difference in treatment is unexplained[10]; but the wider gateway may perhaps go some way to mitigating the fact that a shareholder in a portfolio is not entitled to petition to wind up a portfolio on the just and equitable ground.

Remedies for Portfolio Shareholders

Where a shareholder of a company is able to demonstrate that it would be just and equitable that a company be wound up, the court has jurisdiction to grant ‘unfair prejudice’ type relief under section 95(3) of the Law (discussed above). The ABC case has confirmed that it is not possible to appoint a liquidator or receiver over an individual portfolio on just and equitable grounds, even if such grounds exist and this therefore leaves stakeholders without any ability to seek the alternative remedies that would be available to a shareholder of a company where grounds to wind up exist. Again, in our view there does not appear to be any basis for this distinction and this may well be the subject of future legislative reform.

Schemes of Arrangement

Like any Cayman company, SPCs can enter into a scheme of arrangement on behalf of the entire company.[11] A scheme is a court supervised compromise made between a company and its creditors and/or members whereby an arrangement can be made binding on such persons provided that certain safeguards are met. Schemes are commonly used in the Cayman Islands but it remains unclear whether a portfolio would have standing to enter into a scheme in its own right or whether an SPC could enter into a scheme on behalf of one or more of its portfolios. Interestingly, the cell of a Jersey 'Protected Cell Company' (similar to an SPC) has been found by the Royal Court in Jersey to possess such standing, although unlike in Cayman, the relevant Jersey company statute provides that a protected cell is to be treated, for all purposes, as if it were a company and it can be liquidated independently of its cell company (See Re Ashburton Global Funds PCC January 2014). In Cayman it is probable, under Axiom principles, that an SPC could enter into a scheme on behalf of one or more of its portfolios (which was the position in Jersey prior to the Royal Court's decision in Ashburton).

Conclusion

SPCs are a firmly established in the Cayman Islands, and the jurisprudence over the last 22 years indicates that the segregation principle will be upheld, and that receivers of insolvent portfolios are to be considered as possessing the standing and powers of a liquidator, as regards their portfolio and it's affairs. There has yet to be any substantial onshore test or confirmation of the SPC segregation principle; and there is still no certainty in relation to the legality of third party funding of receivers of a portfolio to bring claims on behalf of the portfolio. However, the past few years have provided answers on the treatment of portfolios when there has been a substantial intermingling of assets and in relation to the discharge of a receivership order.

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[1] A number of years after the creation of the SPC, in 2015, section 5 of the Insurance (Amendment) Law 2013 was implemented, providing for subsidiary companies held by a portfolio in regulated structures established to carry on insurance business without the need for a separate licence. This development provided flexibility in managing the risk element in insurance.

[2] Unreported, published on 30 May 2019

[3] 2013 (1) CILR 330

[4] unreported 28 November 2017

[5] A Company and A Funder FSD 68 of 2017 (NSJ) 2017 2 CILR 710

[6] (Seear v Lawson (1880) 15 Ch D 426 and more recently in Norglen Ltd v Reeds Rains Prudential [1998] 1 All ER 218 HL and ANC Ltd v Clark Goldring & Page Ltd 2000 The Times 31 May)

[7] In ICP Feeder Fund & ICP Master Fund (Unreported 4 April 2014), the Cayman Court reviewed the applicable principles regarding litigation funding for liquidators and re-affirmed that the position in the Cayman Islands was the same as in England.

[8] A Company and A Funder FSD 68 of 2017 (NSJ) 2017 2 CILR 710

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[9] Although there are no Cayman authorities on this issue, we consider that the degree of probability necessary to satisfy this test is likely to be 'more probable than not' following Re AA Mutual International Insurance Co Ltd [2004] EWHC 2430 (Ch).

[10] The test for the appointment of a receiver over a portfolio is similar to the English test for the appointment of an administrator under the Insolvency Act 1986, where an administrator may be appointed if the company in question 'is or is likely' to become unable to pay its debts and the administration order is reasonably likely to achieve the stated purpose of the administration. The rationale for the wider gateway in the case of administrators arguably stems from the fact that administration (which is the UK equivalent of the US Chapter 11) is intended to give a company breathing space and allow for the possibility that a corporate rescue, scheme of arrangement, or an otherwise more advantageous outcome can be achieved for creditors should the company eventually be wound up. There would not appear to be any similar justification justifying the broader gateway afforded to portfolios as the process of administration does not exist in the Cayman Islands.

[11] The Court sanction a scheme of arrangement for the Sphinx Group, for the compromise of investor claims which included a number of SPCs on 22 November 2013.

FAQs

What is a Cayman segregated portfolio company? ›

Under Cayman Islands law an SPC is a legal corporate entity with full capacity to undertake any object or purpose subject to any restrictions imposed on the SPC in its Memorandum of Association (“Memorandum”).

What is the purpose of a segregated portfolio company? ›

A Segregated Portfolio Company (SPC) is a company limited by shares. The SPC may create up to ten segregated portfolios for the purpose of segregating the assets and liabilities of the company, held within or on behalf of a segregated portfolio from other assets and liabilities of the company.

What does segregated portfolio mean? ›

Segregated Portfolio: The term 'segregated portfolio' shall mean a portfolio, comprising of debt or money market instrument affected by a credit event, that has been segregated in a mutual fund scheme. 2. Main Portfolio: The term 'main portfolio' shall mean the scheme portfolio excluding the segregated portfolio.

What is SPC investment? ›

An SPC is a single corporate legal entity that benefits from the statutory segregation of assets and liabilities between segregated portfolios established within the same company.

What is an exempted segregated portfolio company Cayman? ›

(i) Under Cayman Companies Act, an SPC is an exempted company which has been registered as a segregated portfolio company. It has full capacity to undertake any object or purpose subject to any restrictions imposed on the SPC in its Memorandum of Association (“Memorandum”).

What is a Cayman exempted company? ›

An "exempted company" under The Companies Law of the Cayman Islands (the “Companies Law”) is one whose objects are to be carried out mainly outside the Cayman Islands.

What is the exit option for investors from segregated portfolio? ›

While no redemption or subscription would be allowed in the segregated portfolio, fund houses would need to list units of this portfolio on exchanges to facilitate exit. They would also need to enable transfer of such units on receipt of requests.

Is a portfolio a legal entity? ›

As a Portfolio is not a separate legal entity, distinct from the SPC itself or from any other Portfolio, the general case law stipulating that a company may not purchase shares in itself applies so that a Portfolio it is not able to invest into another Portfolio of the same SPC.

What is segregated mandate? ›

A segregated mandate is a fund run exclusively for a client, typically an institution (such as SJP or True Potential). But asset managers typically earn far lower fees on segregated mandates than for pooled funds. At NextWealth we call this 'wealth managers as manufacturers'.

Is SPC a private company? ›

SPC was incorporated as a public listed company in 1912, and Ardmona opened in 1921. SPC Ardmona was bought by Coca-Cola Amatil in 2005 for A$520 million. It sold it in 2019 for A$40 million to Shepparton Partners Collective.

What type of entity is an SPC? ›

The Segregated Portfolio Company (SPC) is a single legal entity within which may be established various segregated portfolios. The assets and liabilities of each segregated portfolio are legally separate from those of the other segregated portfolios.

When a segregated portfolio can be created? ›

Segregated portfolio can be created in a mutual fund scheme by an asset management company in case of a credit event, which includes downgrade to below investment grade and subsequent downgrades in credit rating by a Sebi-registered credit rating agency, as per the regulator's circular issued in December 2018.

Can I withdraw money from segregated funds? ›

Yes, you can cash out of your segregated fund. Segregated funds are individual insurance contracts that invest in one or more underlying assets, such as a mutual fund but unlike mutual funds, segregated funds provide a guarantee to protect part of the money you invest.

Are segregated funds guaranteed? ›

A segregated fund is an investment that's similar to a mutual fund. The main difference is that it offers a guarantee upon death and sometimes at fund maturity.

How is segregated portfolio taxed? ›

As such, the cost of acquisition of units in the segregated portfolio is nil. For FT investors, the entire receipts from segregated portfolios are taxable as capital gains. Meanwhile, cost of acquisition for main portfolio remains at original purchase NAV.

What is segregated portfolio in mutual fund? ›

If an issuer of a bond held in the portfolio of a mutual fund scheme fails to pay the interest or the principle on time or sees a downgrade to below investment grade, then the NAV of scheme drops. Then, the fund house carves out this infected portion, into a segregated portfolio.

What is segregated mutual fund? ›

A segregated fund is an investment pool structured as a deferred variable annuity and used by insurance companies to offer both capital appreciation and death benefits to policyholders.

What is an umbrella fund investopedia? ›

An umbrella fund is a collective investment scheme that exists as a single legal entity but has several distinct sub-funds which, in effect, are traded as individual investment funds.

Why do companies incorporate in Cayman Islands? ›

The Caymans have become a popular tax haven among the American elite and large multinational corporations because there is no corporate or income tax on money earned outside of its territory. 1 This includes interest or dividends earned on investments, making the Caymans especially popular among hedge fund managers.

What is an exempt company? ›

Organizations organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational, or other specified purposes and that meet certain other requirements are tax exempt under Internal Revenue Code Section 501(c)(3).

How many companies are registered in the Cayman Islands? ›

The Cayman Islands began developing into a major international financial centre in the 1960's, and now has over 100,000 companies registered with the Registry of Companies.

How do you calculate the cost of segregated portfolio? ›

Let us suppose a fund that you had bought at a NAV of Rs 10 grew to Rs 100 (at the time of segregation) and was segregated as Rs 90 (main portfolio) and Rs 10 (segregated portfolio). Then the cost of the segregated portfolio will be 10% of Rs 10 NAV cost – which is Re 1 – and the cost of main portfolio would be Rs 9.

Are Segregated funds taxable? ›

A segregated fund is deemed to be a trust for tax purposes. The investment policy of each fund is to allocate its income and capital gains and losses realized in the year to policyholders, so that no income tax will be payable by the fund (after taking into account any applicable losses of the fund).

What will be the NAV of the segregated portfolio be disclosed? ›

iv The NAV of both segregated and main portfolio shall be disclosed from the day of the credit event / Actual Default. v All existing investors in the scheme as on the day of the credit event / actual default date will be allotted equal number of units in the segregated portfolio as held in the main portfolio.

Are portfolio companies considered subsidiaries? ›

More Definitions of Portfolio Company

Portfolio Companies do not include Subsidiaries. Portfolio Company means an entity in which an investment fiduciary has made or considered an investment on behalf of the investment fund.

How do you check a company's portfolio? ›

How to Monitor Your Stock Portfolio?
  1. Analyze the Quarterly Results of the Company. ...
  2. Keep Tabs on Any Corporate Announcements. ...
  3. Be Aware of Any Changes in the Shareholding Pattern. ...
  4. Check the Credit Rating of The Company. ...
  5. Track the Stock Price. ...
  6. Assess the Promoter's Pledge of Shares.
11 Jul 2020

How do portfolio companies work? ›

A portfolio company is a term used to describe a company in which investors own equity in a company or buy out a company. The goal of the investor is to increase the value of the portfolio company and earn a return on their initial investment.

What is a disadvantage of segregated funds? ›

3 disadvantages of segregated funds

Higher fees – Segregated funds usually have higher management expense ratios (MERs) than mutual funds. This is to cover the cost of the insurance features. Penalties for early withdrawals – You may have to pay a penalty if you cash out your investment before the maturity date.

Can segregated funds be transferred? ›

First, segregated funds and mutual funds are two separate types of investment products, not accounts. Because of this, there is no way to directly transfer funds from one to the other without selling the investment first.

What is the difference between pooled and segregated funds? ›

What's the difference? Segregated investments are owned by you, the investor, directly. Pooled investments are owned jointly by many investors whose money has been “pooled” together.

Is SPC Chinese owned? ›

It is the only Chinese state-owned corporation that operates in the production of agriculture, animal husbandry and fisheries. To give the brand a consumer face in this new market, SPC has appointed Ye Yiqian, a well-known celebrity, singer and actress, as its brand ambassador for China.

Is an SPC a fund? ›

<content type="text">In ABC Company v J & Co Ltd, ABC was an open ended investment fund structured as a segregated portfolio company (“SPC”). Under Cayman Islands law, a company registered as an SPC may create segregated portfolios so as to segregate the assets and liabilities of one portfolio from other portfolios.

Where is SPC based? ›

SPC is a proud manufacturer of fruit and vegetables, based in the Goulburn Valley Region of Victoria, Australia. SPC is committed to the important role it plays in the Australian economy and manufacturing industry. We are proud that 90% of our ingredients are grown right here in Australia.

What is an SPC in private equity? ›

A segregated portfolio company (or SPC), sometimes referred to as a protected cell company, is a company which segregates the assets and liabilities of different classes (or sometimes series) of shares from each other and from the general assets of the SPC.

Is an SPC an LLC? ›

Also, of course, an SPC is a type of LLC, and hence generally not a per se corporation for tax purposes. The business reasons for using SPCs in structured finance transactions are humble: administrative conve- nience and cost savings.

How do protected cell companies work? ›

What is a Protected Cell Company? A PCC is an insurance vehicle whereby multiple 'cells' are connected to a core; creating a single legal entity. A 'cell' is an insurance facility that can be rented by a single company to underwrite its specific risks – a form of risk retention vehicle.

Which is better segregated funds or mutual funds? ›

Guarantees: Mutual funds offer no guarantees. You can lose some or all of your investment if the fund performs poorly. Segregated funds usually offer a guarantee that 75 to 100 percent of the principal will be returned if you hold them to the Maturity Guarantee date, which is typically 10 years.

Are segregated funds liquid? ›

The pros of segregated funds are that they often have principal investment guarantees up to 100%, have the option to lock your gains, offer creditor protection, and come with a death benefit. On the flipside, the cons are that they often have higher fees, lower return, and aren't very liquid.

What's the difference between segregated funds and mutual funds? ›

A segregated fund policy is similar – like mutual funds, there's a pooling of investments. But unlike mutual funds, a segregated fund policy includes insurance guarantees that can protect much or even all your original investment.

What is segregated portfolio in mutual fund? ›

If an issuer of a bond held in the portfolio of a mutual fund scheme fails to pay the interest or the principle on time or sees a downgrade to below investment grade, then the NAV of scheme drops. Then, the fund house carves out this infected portion, into a segregated portfolio.

What is segregated mutual fund? ›

A segregated fund is an investment pool structured as a deferred variable annuity and used by insurance companies to offer both capital appreciation and death benefits to policyholders.

Is SPC a corporation? ›

Spc Corporation was founded in 1986. The Company's line of business includes the assembling, breaking up, sorting, and wholesale distribution of scrap and waste materials.

What is a master feeder structure in a hedge fund? ›

A master-feeder structure is a device commonly used by hedge funds to pool taxable and tax-exempt capital raised from investors in the United States and overseas into a master fund. Separate investment vehicles, otherwise known as feeders, are established for each group of investors.

What is a disadvantage of segregated funds? ›

3 disadvantages of segregated funds

Higher fees – Segregated funds usually have higher management expense ratios (MERs) than mutual funds. This is to cover the cost of the insurance features. Penalties for early withdrawals – You may have to pay a penalty if you cash out your investment before the maturity date.

Can I withdraw money from segregated funds? ›

Yes, you can cash out of your segregated fund. Segregated funds are individual insurance contracts that invest in one or more underlying assets, such as a mutual fund but unlike mutual funds, segregated funds provide a guarantee to protect part of the money you invest.

What is the exit option for investors from the segregated portfolio? ›

In case you have segregated mutual fund units in your portfolio, you can exit them directly through your holdings on Kite: Note : 1. The segregated mutual fund will not show up in the Kite marketwatch search results.

Are segregated funds good? ›

As an investment solution, segregated funds help to grow your savings. But, as an insurance product, they also help to protect those savings – as well as your loved ones, your estate and your business.

Why are they called segregated funds? ›

The name derives from the fact that funds are held separate from the general assets of the company. Seg funds guarantee all or most of your principal investment upon maturity or death. Mutual funds generally have no guarantees at all.

Are segregated funds guaranteed? ›

A segregated fund is an investment that's similar to a mutual fund. The main difference is that it offers a guarantee upon death and sometimes at fund maturity.

Is SPC a private company? ›

SPC was incorporated as a public listed company in 1912, and Ardmona opened in 1921. SPC Ardmona was bought by Coca-Cola Amatil in 2005 for A$520 million. It sold it in 2019 for A$40 million to Shepparton Partners Collective.

What type of business is SPC? ›

The Social Purpose Corporation (SPC) , originally called the Flexible Purpose Corporation in California, is a type of for-profit entity in some U.S. states that enables corporations to pursue a specific social or environmental purpose in addition to profit-maximizing goals.

When a segregated portfolio can be created? ›

Segregated portfolio can be created in a mutual fund scheme by an asset management company in case of a credit event, which includes downgrade to below investment grade and subsequent downgrades in credit rating by a Sebi-registered credit rating agency, as per the regulator's circular issued in December 2018.

What is the difference between a feeder fund and a fund of fund? ›

A feeder fund is a type of investment fund that does the majority of its investments through a master fund, using a master feeder relationship. It is similar to a strategy called fund of funds, but the main difference is that the master fund does all the investing.

What is the difference between master and feeder fund? ›

In simple words, a feeder fund invests in master funds. It transfers money to a master fund and is not actually allowed to invest in any security. The master fund, on the other hand, will use the pool of money collected from its branch of feeder funds to buy securities and generate returns.

What is an umbrella structure? ›

An umbrella fund allows a fund to create compartments such that each sub-fund can provide different investment strategies or rights to investors. Umbrella structures provide the. added benefit of keeping liabilities. separate between sub-funds.

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