A Cayman Islands exempted company can be registered as a Segregated Portfolio Company (SPC) under the Cayman Islands Companies Act (Revised) (Companies Act). Registration can occur at incorporation or later.
An SPC remains a single legal entity but may create distinct segregated portfolios (Portfolios), with statutory ring-fencing ensuring that the assets and liabilities of each Portfolio are protected from those of other Portfolios and the general assets of the company.
Anything not specifically allocated to a Portfolio forms part of the company’s general assets.
Key Benefits of SPCs
Unlike traditional share classes, an SPC formally segregates assets and liabilities, preventing the need for limited recourse contracting. The statutory ring-fencing provides robust protection, ensuring third parties are bound by asset segregation rather than relying solely on contractual agreements.
Liability Treatment
- The liabilities of one Portfolio cannot be met using the assets of another Portfolio.
- General SPC liabilities cannot be satisfied from Portfolio assets.
- General assets can be used to meet Portfolio liabilities, provided that Portfolio-specific assets are insufficient — unless restricted by the company’s Articles of Association (Articles).
Shares, Classes, Dividends & Distributions
Each Portfolio operates independently regarding shares, dividends, and redemptions:
- Shares can be issued within Portfolios or specific classes within a Portfolio.
- Dividend distributions & redemptions are calculated only against the balance sheet of the relevant Portfolio.
- Payments must originate from Portfolio-specific assets, ensuring financial separation.
Segregation of Assets
SPCs follow strict protocols to prevent errors in asset allocation:
- Directors must maintain separation between general assets and Portfolio assets.
- Transfers between Portfolios or between a Portfolio and general assets must occur at full value.
Contracting & Legal Protections
- Contracts must specify the relevant Portfolio.
- No court has challenged the validity of Cayman Islands SPC asset segregation.
- Other jurisdictions, including BVI (SPC) and Guernsey (PCC), have adopted similar frameworks.
- Additional legal safeguards may include:
- Limited recourse provisions
- Strategically placed SPVs
- Cayman contract law & jurisdiction clauses
Directors’ Duties & Liabilities
SPC directors must:
- Ensure contracts reference the correct Portfolio.
- Properly attribute assets and liabilities across Portfolios and general assets.
- Follow English common law duties—acting honestly, in good faith, and for a proper purpose.
If an incorrect attribution occurs, remedial mechanisms exist within the Companies Act, preventing personal liability.
Uses of SPCs
SPCs are commonly used for:
- Hedge funds
- Alternative investment companies
- Private equity funds
- Captive insurance companies
- Fund platforms
Converting to an SPC
Any Cayman exempted company in good standing with the Registrar can apply to convert into an SPC.
Next Steps: Exploring SPCs for Your Business
Segregated Portfolio Companies provide a robust and flexible structuring tool for businesses requiring clear asset separation, liability protection, and operational efficiency. Whether used for investment funds, insurance vehicles, or structured finance, SPCs offer statutory ring-fencing that ensures financial integrity across distinct portfolios.
For companies considering structuring options, SPCs can be a strategic choice, offering legal certainty, streamlined governance, and adaptability within the Cayman Islands’ well-established financial ecosystem.
If you’re exploring the potential of an SPC, professional guidance ensures smooth registration and compliance. Contact your usual relationship manager at Marbury or info@marburys.com to discuss how an SPC can align with your business goals.
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