Is it a joint venture? Protected cell entity
Some jurisdictions permit the formation of so called ‘protected cell’ entities. Essentially these are entities which have a number of ‘cells’, with the assets and liabilities of each cell being completely ring-fenced in other words the creditors of a particular cell have recourse only to the assets of that cell. In addition to the cells, each one of which has its own capital, there is a so-called ‘core’, whose shareholders may manage the activities of the cells on behalf of their owners. Diagrammatically, the structure can be portrayed as follows An original intention of this structure was to allow a fund-manager (who would hold the core shares) to run a number of independent funds (whose investors would hold the shares in the particular cell(s) concerned), with the incorporation of a single legal entity, as compared to the traditional position where each managed fund, and the management company, would be a separate legal entity, with all the attendant administrative costs and burdens.
Such a structure may give the superficial appearance of being a joint activity, but this is not the case. In most cases, it is extremely unlikely to be appropriate for an entity to regard an investment in a cell as a joint venture (or an associate). This is because the ‘ring-fencing’ of the assets and liabilities of each cell means that there is a direct linkage between the reporting entity and one or more particular cells, rather than that the reporting entity has some share of the profits or losses of the cell entity as a whole. The most likely conclusion is that each cell is a special purpose entity (SPE) of another entity.