The Risk Transformation Regulations 2017

SECTION 6 Distributions

Meaning of “distribution”

124.  In regulations 125 and 126, “distribution” means every description of a distribution of an asset to a shareholder, except for the redemption or acquisition of shares held by that shareholder in accordance with regulation 106 or 107.

Distributions to holders of shares in a cell

125.—(1) This regulation applies where a protected cell company makes a distribution to a person holding a share issued by the protected cell company on behalf of a cell.

(2) Where the cell is not a member of a group of cells, the protected cell company may only make the distribution if the following conditions are satisfied—

(a) the distribution is made from assets held by the protected cell company on behalf of the cell; and

(b) where the protected cell company has a liability to an undertaking arising under a contract made between the undertaking and the protected cell company acting on behalf of the cell, the undertaking has consented to the distribution (whether in the contract or otherwise).

(3) Where the cell (“the relevant cell”) is a member of a group of cells, the protected cell company may only make the distribution if the following conditions are satisfied—

(a) the distribution is made from assets held by the protected cell company on behalf of the relevant cell;

(b) the protected cell company will, immediately after the distribution, hold sufficient assets on behalf of the relevant cell to enable the protected cell company to give effect to any enforceable arrangements made between the relevant cell and any other cell; and

(c) where the protected cell company has a liability to an undertaking arising under a contract made between the undertaking and the protected cell company acting on behalf of a cell in that group of cells, the undertaking has consented to the distribution (whether in the contract or otherwise).

Distributions to holders of shares in the core

126.—(1) This regulation applies where a protected cell company makes a distribution to a person holding a share issued by the protected cell company on behalf of the core.

(2) The distribution may only be made if the protected cell company has no cells.

(3) The distribution must be made from assets held by the protected cell company on behalf of the core.

Persons holding investments in different parts of the protected cell company

127.—(1) This regulation applies where—

(a) a person (“P”) holds investments issued on behalf of number of different parts of a protected cell company;

(b) those investments include shares issued on behalf of a part of the protected cell company; and

(c) the protected cell company makes a distribution to P in P’s capacity as the holder of shares issued on behalf of that part of the protected cell company.

(2) Regulations 125 and 126 apply to the distribution as if the only investment held by P were the shares issued on behalf of that part of the protected cell company.

Consequences of unlawful distribution

128.—(1) This regulation applies to a distribution, or a part of a distribution, which is made by a protected cell company—

(a) from assets held on behalf of a part (“part A”) of the protected cell company;

(b) to a person holding a share issued by the protected cell company on behalf of a part of a protected cell company (either part A or another part); and

(c) in contravention of regulation 125 or 126.

(2) If at the time of the distribution the person knows or has reasonable grounds for believing that it is made in contravention of regulation 125 or 126, the person is liable—

(a) to repay the distribution (or that part of it, as the case may be) to the protected cell company; or

(b) in the case of a distribution made otherwise than in cash, to pay the protected cell company a sum equal to the value of the distribution (or part of it) at that time.

(3) This regulation is without prejudice to any obligation imposed apart from this regulation on a person to repay a distribution which was made unlawfully to that person.

(4) A payment made to a protected cell company in accordance with paragraph (2) must be held by the protected cell company on behalf of part A.