Protected Cell Companies - Labuan Structures

A Labuan protected cell company (PCC) may be incorporated as a Labuan company or converted from an existing Labuan company. A Labuan PCC is a limited liability company with a legal entity that has the ability to form “cells”.

The cells of a Labuan PCC may comprise:

A core for holding non-cell assets or general assets; and
Any number of cells with the intention of segregating and protecting the assets of each respective cell

Neither the core nor the individual cells created are separate legal entities but nonetheless, each cell is legally separated from any other cell and each has sufficient attributes to carry on business independently under the “umbrella” of the Labuan PCC.

Uses of Labuan PCC

A Labuan PCC has the ability to hold assets or investments divided into a number of classes to cater to the different objectives of different individual investors, while at the same time preserving the independence of each cell.

A Labuan PCC shall only conduct:

Labuan captive insurance business, on such terms as provided under Part VII of the Labuan Financial Services and Securities (Amendment) Act 2022 (Act A1654) (LFSSA);
Labuan captive takaful business, on such terms as provided under Part VII of the Labuan Islamic Financial Services and Securities (Amendment) Act 2022 (Act A1655) (LIFSSA); or
Business as a mutual fund as defined under Part III of the LFSSA; and
Business as an Islamic mutual fund as defined under Part IV of the LIFSSA.

Regulatory Requirements
Fees

Regulatory Requirements
1. Capital Requirements

The following lists the capital requirements of a Labuan captive insurance/takaful business:
Capital requirement unimpaired by losses of RM500,000 applies to the Labuan PCC as a whole.
Cells are required to remain solvent at all times as specified in the Guidelines on the Establishment of Labuan Protected Cell Companies.
The establishment of working funds for cells may be achieved through the issuance of cell shares by the Labuan PCC.

A Labuan PCC undertaking mutual funds/Islamic mutual funds must have sufficient capital/working funds that commensurate or are in accordance with its operations and activities.

2. Corporate Governance and Compliance to Labuan Laws

A Labuan PCC and its cell(s) shall observe all statutory requirements under any relevant laws, policies and/or guidelines issued by Labuan FSA or the jurisdictions in which it has operations, including corporate governance and market conduct as a minimum requirement and commensurate with the nature and complexity of its operations from time to time.

The board and senior management of a Labuan PCC shall:
Be responsible to ensure compliance with the regulatory and corporate governance requirements at all times
Keep the funds for cell assets separate from the general assets; and
Keep the cell assets and liabilities attributable to each cell separate from other cells.

3. Reporting Requirements

A Labuan PCC is required to:
Submit an audited consolidated financial statement of the Labuan PCC and its cell(s) within six (6) months after the close of each financial year
Prepare separate sets of financial statements for each cell, which shall be made available for inspection or examination by Labuan FSA; and
Submit other statistics and information as may be required by Labuan FSA from time to time.
Notwithstanding the above, for a Labuan PCC undertaking mutual fund or Islamic mutual fund activities, a copy of the cell’s financial statements should also be extended to each of the investors of the respective cells.

4. Auditor

A Labuan PCC shall appoint an approved auditor who shall be responsible for auditing its financial statements.
Fees

Annual and Conversion Fee
A Labuan PCC is required to pay the following annual fees to Labuan FSA on or before 15 January of each year.
Type of fees
Amount
Insurance and Takaful
On the general assets of the Labuan PCC (core)
RM30,000
USD9,500
On each cell
RM10,000
USD3,000
Mutual Funds and Islamic Mutual Funds
On the general assets of the Labuan PCC (core)
RM5,000
USD1,500
On each cell
RM2,000
USD600
Any Labuan company that wishes to convert into a Labuan PCC is required to pay a conversion fee of RM650.

Regulatory Requirements
1. Capital Requirements

The following lists the capital requirements of a Labuan captive insurance/takaful business:

Capital requirement unimpaired by losses of RM500,000 applies to the Labuan PCC as a whole.
Cells are required to remain solvent at all times as specified in the Guidelines on the Establishment of Labuan Protected Cell Companies.
The establishment of working funds for cells may be achieved through the issuance of cell shares by the Labuan PCC.

A Labuan PCC undertaking mutual funds/Islamic mutual funds must have sufficient capital/working funds that commensurate or are in accordance with its operations and activities.

2. Corporate Governance and Compliance to Labuan Laws

A Labuan PCC and its cell(s) shall observe all statutory requirements under any relevant laws, policies and/or guidelines issued by Labuan FSA or the jurisdictions in which it has operations, including corporate governance and market conduct as a minimum requirement and commensurate with the nature and complexity of its operations from time to time.

The board and senior management of a Labuan PCC shall:

Be responsible to ensure compliance with the regulatory and corporate governance requirements at all times
Keep the funds for cell assets separate from the general assets; and
Keep the cell assets and liabilities attributable to each cell separate from other cells.

3. Reporting Requirements

A Labuan PCC is required to:

Submit an audited consolidated financial statement of the Labuan PCC and its cell(s) within six (6) months after the close of each financial year
Prepare separate sets of financial statements for each cell, which shall be made available for inspection or examination by Labuan FSA; and
Submit other statistics and information as may be required by Labuan FSA from time to time.
Notwithstanding the above, for a Labuan PCC undertaking mutual fund or Islamic mutual fund activities, a copy of the cell’s financial statements should also be extended to each of the investors of the respective cells.

4. Auditor

A Labuan PCC shall appoint an approved auditor who shall be responsible for auditing its financial statements.
Fees
Annual and Conversion Fee
A Labuan PCC is required to pay the following annual fees to Labuan FSA on or before 15 January of each year.
Type of fees
Amount
Insurance and Takaful
On the general assets of the Labuan PCC (core)
USD9,500
On each cell
USD3,000
Mutual Funds and Islamic Mutual Funds
On the general assets of the Labuan PCC (core)
USD1,500
On each cell
USD600
Any Labuan company that wishes to convert into a Labuan PCC is required to pay a conversion fee of USD100.

Governing Legislation, Related Guidelines and Circulars

For the latest governing legislation, related guidelines and circulars, please go to labuanfsa.gov.my

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FAQs

1. What is Labuan banking?
Labuan banking means the business of receiving deposits on current accounts, deposit accounts, savings accounts, and includes the investment banking business, Labuan financial business, Islamic banking business and such other transactions and terms and conditions as specified by Labuan FSA in any currency including Malaysian Ringgit where permitted by Bank Negara Malaysia.
2. What is investment banking?
Investment banking means the business of providing credit facilities and consultancy and advisory services relating to corporate and investment matters, including making investments on behalf of any person. Other activities include undertaking foreign exchange transactions, interest rate swaps, dealings in derivative instruments or derivative financial instruments or any other similar risk management activities.
3. What is Islamic banking?
Islamic banking is defined as a banking business that is in accordance with Shariah principles.
4. Who may apply for Labuan banking licence?
Organisations that meet the following minimum criteria may apply for a Labuan banking licence:
Must be a bank or financial institution
Possesses a sound track record
Accorded a good credit rating by acceptable rating agencies
Supervised by a competent regulatory authority; and
Conforms to generally accepted standards of international banking practices or the Bank for International Settlements (BIS).
5. What is the minimum working minimum fund for an investment bank?
RM10 million or its equivalent in any other currency.