Ireland: Irish Collective Asset-Management Vehicle Bill Published

The Irish government has published a final draft ICAV ("Irish Collective Asset-management Vehicle") Bill (the "Bill") which, once enacted, will allow the incorporation of a new, tax efficient and innovative corporate structure for Irish investment funds.

Formal enactment of the Bill is expected to occur in Q3 or Q4 of 2014 and the Central Bank of Ireland ("CBI") has committed to authorising the first ICAVs shortly thereafter allowing asset managers to make use of the ICAV structure before the end of the year.

Initial industry feedback estimates that hundreds of ICAVs will be formed in the initial phases representing billions of euros. As a result, it will immediately become one of the most popular legal forms for Irish funds.

What is an ICAV?

The ICAV will sit alongside the existing public limited company ("Irish plc") structure, which has been the most successful and popular of the existing Irish fund structures to date. It will also complement other available legal forms of Irish regulated funds which include the unit trust, limited partnership and the common contractual fund ("CCF") and can be used in conjunction with these funds as master-feeders or parallel fund structures. Like other regulated fund structures, the ICAV will be established by way of a filing with the CBI and can seek authorisation as either a UCITS or alternative investment fund ("AIF") structure.

Who can use the ICAV?

The ICAV will be available to both new and existing structures, as an Irish plc will be able to convert to an ICAV following the Bill's implementation. Eligible offshore funds also have the option to migrate to Ireland and be established as an ICAV by way of continuation.

Advantages of the ICAV

The principal advantage to an investment fund established as an ICAV is that it will have its own specific legislative code and will not be impacted by amendments to certain pieces of European and Irish company legislation which are targeted at ordinary companies rather than investment funds, but which currently impact on Irish plcs. This should result in a more straightforward set of legal rules applicable to an ICAV, with resulting lower administration costs.

In addition, the Irish plc is currently considered to be a "per se corporation" for US tax purposes. As a result, a "check-the-box" election for US tax purposes is not available in respect of an Irish plc and, accordingly, it is generally treated as a separate entity for US tax purposes. A key advantage of the ICAV is that it will not automatically be considered a corporation for US tax purposes.  Instead it will be possible to make an election under US "check-the-box" tax rules in respect of the ICAV, in order for it to be classified as a partnership or disregarded entity.  It is understood that this feature of the ICAV should enhance the attractiveness of Irish funds to US investors and managers who, to date, have traditionally established Irish funds as unit trusts in order to achieve this result.  In this regard, it is considered that the ICAV may be regarded as a more suitable fund vehicle than a unit trust by certain investors and managers.

Notable features of the ICAV

An ICAV may be established as either a single fund or as an umbrella structure with a number of sub-funds and share classes. The Bill specifically provides for robust segregation of liability between sub-funds in umbrella structures.

The Bill allows for the preparation of separate sub-fund accounts for an ICAV. This will be a very important feature for managed accounts and large multi-manager structures as currently Irish plcs have to produce one set of accounts for the entire umbrella which mandates a single year-end date and the ability of investors in one sub-fund to receive financial details for investors in others.

The ICAV is not subject to the principle of risk spreading (unlike the Irish plc which must spread investment risk) which will facilitate single asset deals, e.g. single property holdings or exposure to a single issuer.

In the case of changes to the ICAV's instrument of incorporation ("IOI") there will be no requirement to obtain prior investor approval where the depositary certifies that changes to the IOI do not prejudice the interests of investors (similar to the requirements relating to changes to the trust deed of a unit trust).

To reduce the administrative burden on funds, directors of an open-ended ICAV are permitted to elect to dispense with the holding of an annual general meeting ("AGM") by giving written notice to all of the ICAV's shareholders. There is a safeguard in that shareholders holding 10% or greater of shares can demand an AGM.

Below is a comparison table of the key features of ICAVs and PLCs.

Key Features

ICAV

Irish plc

Availability as UCITS

Yes

Yes

Availability as AIFs

(AIFMD compliant)

Yes

Yes

Availability as a segregated

umbrella

Yes

Yes

Ability to "check-the-box" for

US tax purposes

Yes

No

Outside of scope of Irish
Companies Act

Yes

No

Risk spreading requirement

No

Yes

Shareholder approval required

for every change to constitutional

document

No

Yes

Ability to dispense with the

requirement to hold an annual

general meeting

Yes

No

Ability to prepare separate accounts

at sub-fund level

Yes

No

Required to have the aim of spreading

investment risk

No

Yes

Ability to issue equity and debt to investors

Yes

Restricted

Conversion of Irish plc to ICAV

The Bill allows an Irish plc to convert to ICAV status by way of continuation. In order to do so a filing will be required to be made with the CBI including the Irish plc's current and intended constitutional documents together with a statutory declaration of a director confirming, amongst other matters, the solvency of the Irish plc and consenting to the proposed conversion.

Redomiciliations

The Bill also allows for the registration of an eligible migrating company with the CBI as an ICAV by way of continuation (i.e. keeping its performance track record).   

Irish Tax Treatment of the ICAV

The ICAV will constitute an investment undertaking for Irish tax purposes and will be subject to the same gross roll-up regime that currently applies to existing Irish investment funds, AIFs and UCITS.  Broadly, this means that any profits and gains of the ICAV will be exempt from tax in Ireland subject to certain conditions.  It should be noted that Irish authorised funds established as CCFs and limited partnerships are, in fact, subject to a different Irish tax regime, in that they are regarded as "tax transparent" and are not taxable at the fund level, but rather, the income and gains of the fund are attributable to the investors.

There may be further changes required to the Irish tax legislation (including the Irish Taxes Consolidation Act 1997 as amended and the Stamp Duties Consolidation Act 1999) to deal with certain ancillary items, including ensuring that the conversions, mergers and re-domiciliations referenced in the Bill can occur in a tax neutral manner.  These changes should be included in the Finance Act later in the year.

What next?

The final step is the formal consideration of the Bill by the Irish Houses of Parliament and, once approved, the signing into law by the President which is expected before the end of 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Peter Stapleton
Stephen Carty
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions