Liechtenstein is one of the smallest countries in Europe. The country has a population size close to 38 thousand people. The city is landlocked between two notable countries, namely Switzerland and Austria. In 2013, Liechtenstein won the notable Solar Super State prize for its investments in photovoltaic power generation units in an effort to conserve energy and is well known as european financial hub.
Protected Cell Company
PCC or Protected Cell company is an organizational form of an already registered corporation. What a PCC law does is essentially separate a corporation into legal segments. Regulations that apply to a Protected Cell legal entity allow the business owners to enjoy multiple corporate benefits. However, any laws concerning the core structure of the company take precedence over laws applied to a PCC.
How Does PCC Differ from Other Corporate Structures?
There are multiple differences between a PCC and a regular corporation, some of the significant ones are mentioned below:
Distribution of Assets – Unlike a standard corporation, the assets in a PCC are allocated directly to each segment of the legal entity. Each segment’s assets are treated independently from the other. Core assets are the ones that are allocated to the corporation as a whole and can be used by any other segment as desired.
Area of business – Each segment of a PCC can perform its business activities independently from others. However, the area of business should not contradict the purpose of a PCC. Legal segments of a PCC do not have a personality of their own. Hence corporate communication with external parties takes place through authorized PCC representatives. While performing a business, each segment should adhere to the laws concerning the legal structure of the core entity. The company may be structured as a limited liability firm, public limited corporation or any other type of company.
Liability issues –One of the major advantages and often the sole purpose of defining a Protected Cell Company is to share limited liability with third parties incase of default. If for any given reason, a segment of a PCC is not able to fulfill its obligation towards a third party, only the assets allocated to that particular segment will be subordinated to pay-off the filed claim. When there is no contractual obligation that binds a PCC segment and the third party, then only core assets are available to payoff the company liabilities. This limited liability benefit can only be availed by a PCC if they disclose their legal structure the other party before entering into a contract.
Shareholders value –If a PCC is structured as a Public Limited Company, and the articles of incorporation allow the distribution of shares, the shares are distributed based on each segment. A segmented shareholder has the voting rights for that particular segment only.
PCCs in Liechtenstein
Since Liechtenstein is a relatively small country with limited financial resources at its disposal, many corporate laws are derived from external regulators. The country,however, has managed to define the terms of PCC as per their own user experience, and common corporate structures.
PCCs in Liechtenstein do not have any tax regulations of their own. In fact, the taxes of a PCC are filed as per the corporate structure of the company. It is vital to explain here that a corporate structure is defined in the articles of incorporation while a legal form like PCC is merely a subdivision of the same company. Since individual segments do not have a personality of their own, there is only one tax filed for a PCC in Liechtenstein.
As far as the stamp duties are concerned, each PCC can only file a single exemption of CHF 1 Million which applies to the whole organization.
Future Outlook of PCCs in Liechtenstein
Protected Cell Legal structure has proven to be quite fruitful for corporations in Liechtenstein. It has allowed the government to set up sustainable investment structures that help attract foreign investments. One of the major roles PCCs have played in the financial markets is to help regulators monitor Deferred Tax Assessments more carefully. Certain segments of the financial markets are still not allowed to introduce a PCC structure. The government feels that PCCs need to be tried and tested first before they can be fully rolled out into Liechtenstein’s economy.