Answer ... As noted in question 1.1, AIFs in Ireland will be authorised as one of two categories:

• retail investor AIFs (RIAIFs), which may be marketed to retail as well as institutional investors; or
• qualifying investor AIFs (QIAIFs), which may be marketed to qualifying investors.

RIAIFs and QIAIFs are used for the following investment strategies:

• hedge fund strategies;
• fund of funds strategies (eg, fund of hedge funds/private equity/private debt/real estate);
• real estate strategies;
• private debt strategies;
• master-feeder strategies;
• private equity strategies; and
• commodity strategies.

In addition, QIAIFs which are authorised by the Central Bank as loan origination QIAIFs are permitted to originate loans, subject to compliance with the requirements of the AIF Rulebook, and have proven popular for loan origination managers.

Answer ... The principal legal structures of RIAIFs and QIAIFs are set out below. Each of these fund vehicles (with the exception of investment limited partnerships (ILPs)) may be established as either a standalone entity or as an umbrella fund with separate sub-funds. ILPs cannot currently be established as umbrella funds.

The legal structures available in Ireland for AIFs are as follows.

Irish collective asset-management vehicles (ICAVs): ICAVs (formed) under the Irish Collective Asset-management Vehicles Act 2015, as amended, are corporate bodies. They have limited liability where the actual value of the paid-up share capital is at all times equal to the net asset value (NAV) of the ICAV. The assets of the ICAV belong exclusively to the ICAV and no shareholder has any interest in these assets.

Unit trusts: Unit trusts (established under the Unit Trusts Act 1990) are contractual arrangements created under a trust deed made between a management company and a depositary. Unit trusts do not have their own legal personality and contracts are entered into by the management company and, in certain cases, by the trustee. A unit represents an undivided beneficial interest in the assets of the unit trust.

Investment companies: Designated investment companies (formed under Part 24 of the Companies Act 2014, as amended) are public limited liability companies incorporated with variable capital (ie, the actual value of the paid-up share capital is equal at all times to the value of the NAV of the company). Shares issued do not represent a legal or beneficial interest in the company’s assets.

ILPs: ILPs (formed under the Investment Limited Partnerships Act 1994) are investment partnerships between one or more general partners and one or more limited partners, constituted by written agreements between the parties. A general partner is personally liable for the debts and obligations of the partnership and a limited partner contributes or undertakes to contribute a stated amount to the capital of the partnership. An ILP is a partnership of two or more persons having as its principal business the investment of its funds in property of all kinds and consisting of at least one general partner – ultimately liable for the ILP’s debts - and at least one limited partner. The general partner acts in a role roughly equivalent to that of a management company of a unit trust, common contractual fund (CCF) or corporate fund.

CCFs: CCFs (formed under the Investment Funds, Companies and Miscellaneous Provisions Act 2005) are funds constituted under contract law by means of a deed of constitution executed under seal by a management company. The CCF is an unincorporated body and does not have a legal personality, and therefore may act only through the management company. Participants in the CCF hold their participation as co-owners and each participant holds an undivided co-ownership interest as a ‘tenant in common’ with other participants.

Each of the legal structures detailed above is authorised and regulated by the Central Bank.

Answer ... ICAV: An ICAV is the structure of choice for a majority of AIFs established in Ireland. The ICAV was introduced as a bespoke vehicle designed for the funds industry. ICAVs offer the following advantages over other Irish fund structures:

• The ICAV legislation is distinct from Irish company legislation governing investment companies, some of which is not particularly relevant or appropriate for collective investment schemes. The ICAV structure protects investors and fund promoters from any inconveniences arising from changes to Irish company legislation.
• The Central Bank acts as both the registration and supervisory authority for the ICAV. The ICAV application process is administratively efficient for AIFs.
• In circumstances where amendments to the instrument of incorporation are required, prior approval of the investors will not be required, provided that the depositary certifies in writing that the relevant amendments do not prejudice the interests of the shareholders of the ICAV and the amendment does not require shareholder approval under Central Bank requirements.
• The directors of an ICAV can dispense with the general requirement to hold an annual general meeting, provided that they give the ICAV’s shareholders 60 days’ notice.
• ICAVs can be established as umbrella structures and benefit from statutory segregation of liability between sub-funds
• Irish company law requires that the accounts of all sub-funds of an umbrella-type public limited company (PLC) be included in the consolidated annual financial statements of that company. Separate financial statements for individual sub-funds of an umbrella ICAV may be prepared, which ensures that investors in a single sub-fund will receive only the information that is relevant to them. This reduces the cost and time spent by fund directors and their advisers in compiling and circulating financial statements.
• An ICAV can be treated as a partnership or a disregarded entity for US federal tax purposes, thus making it much more attractive to US taxable investors.
• An AIF ICAV may be structured as a single asset fund and is not subject to a statutory risk spreading requirement.

Unit trust: Unit trusts are very well known and regularly utilised regulated fund vehicles in Ireland. Unit trusts offer the following benefits to investment managers from a structuring perspective:

• The Central Bank acts as both the registration and supervisory authority for the unit trust. The process of establishing a unit trust is administratively efficient for AIFs and involves a single application to the Central Bank.
• Unit trusts do not require a separate board of directors. The AIF manager (AIFM) or management company which is a party to the trust deed is responsible for the management of the unit trust, which offers the opportunity to limit the costs associated with operating a separate board of directors.
• In circumstances where amendments to the trust deed are required, prior approval of the investors is not required, provided that the trustee of the unit trust certifies in writing that the relevant amendments:
• • do not prejudice the interests of the unitholders of the unit trust; and
  • do not require unitholder approval under Central Bank requirements.
• Unit trusts are not required to hold an annual general meeting.
• Separate financial statements for individual sub-funds of an umbrella unit trust may be prepared. This ensures that investors in a single sub-fund will receive only the information that is relevant to them. This reduces the cost and time spent by fund directors and their advisers in compiling and circulating financial statements. In addition, it is possible to have sub-funds with different accounting dates, thereby allowing investment managers to align reporting dates with investor requirements.
• Unit trusts can be established as umbrella structures and have segregation of liability between sub-funds.
• A unit trust may be structured as a single asset fund and is not subject to a statutory risk-spreading requirement.
• Unit trusts are very familiar to particular investor types (eg, Japanese investors)

Unit trusts must prepare unaudited semi-annual financial statements in each calendar year, which is a small added administrative burden; however, this does not apply in the case of ICAVs or investment companies.

Investment companies – PLCs: Prior to the introduction of the ICAV, investment companies were the only regulated corporate type structure available in Ireland. Since the ICAV was introduced, investment companies have been very infrequently used as the legal structure for AIFs. Designated investment companies share some of the same features as ICAVs, but there are some fundamental and importance differences which make the designated investment company less attractive for investment managers looking to establish and AIF in Ireland. Some of the features applicable to designated investment companies are as follows:

• They can be established as umbrella structures and benefit from statutory segregation of liability between sub-funds.
• They are subject to a statutory obligation to spread investment risk.
• Shareholder approval is required for any change to the constitutional documentation applicable to a designated investment company, regardless of materiality.
• They must hold an annual general meeting each year, which cannot be dispensed with.
• They cannot prepare separate financial statements at a sub-fund level.
• They cannot be treated as a partnership or a disregarded entity for US federal tax purposes.
• They are subject to Irish company legislation, some provisions of which are not particularly relevant or appropriate for investment funds.

CCFs: The CCF is a tax-transparent contractual arrangement – similar to the structures in other European jurisdictions – which enables the assets held on behalf of investors to be managed through a single pool in proportion to the assets or cash subscribed to the pool.

One of the most important differences between a CCF and the other fund structures available in Ireland is that the CCF is tax transparent. As a result, for investors, this means that they are treated as if they directly own a share of all underlying investments held by the CCF proportionate to their investment in the CCF. This tax-transparent feature allows for greater economies of scale that make the CCF of particular interest to pension funds and other asset pooling vehicles.

CCFs are, however, limited in the types of investors that can invest in them. The investors in CCFs must themselves be institutional.

ILPs: AIFs can also be established as ILPs under the Investment Limited Partnerships Act, 1994. The main advantage of an ILP is that the ILP does not have an independent legal existence in the way that a company or corporate entity does. All of the assets and liabilities belong jointly to the individual limited partners in the proportions agreed in the partnership deed. Similarly, the profits are owned by the limited partners.

ILPs are not currently used regularly in Ireland, but it is hoped that proposed amendments to the Investment Limited Partnerships Act, 1994 will make ILPs more attractive to investment managers in future.

Answer ... See question 2.3.

Answer ... Since the introduction of the ICAV in 2015, the majority of AIFs – regardless of their investment strategy – have been structured as ICAVs. In certain limited circumstances, unit trusts and ILPs have been utilised, but the ICAV has become the preferred vehicle for AIFs in Ireland.

Answer ... Yes, an Irish AIF must have an Irish authorised administrator. However, it is possible for the administrator to delegate certain elements of the administration process outside of the jurisdiction, subject to compliance with the requirements of the Central Bank. The Central Bank is responsible for the authorisation, regulation and supervision of administrators in Ireland under the domestic Investment Intermediaries Act 1995 regime. Fund administration activities include:

• calculation of NAV;
• preparation of periodic reports;
• calculation and payment of distributions;
• payment of expenses; and
• maintenance of a fund’s financial books and records.

Answer ... One of the means through which the Alternative Investment Fund Managers Directive (AIFMD) Framework achieves greater levels of investor protection is by requiring the appointment of a depositary to carry out specific functions – including the monitoring of cash flows and safekeeping of assets, as well as general regulatory oversight responsibilities – and imposing stringent liability provisions on depositaries. The AIFMD requires every AIFM to ensure that:

• for each AIF it manages, a single depositary has been appointed; and
• the appointment is formalised in a written contract regulating at least the flow of information necessary to enable the depositary to perform its functions.

In this context, every Irish AIF must appoint a depositary located in Ireland as required by the AIFMD Framework and Regulation 22 of the AIFM Regulations.

A depositary must be one of the following:

• a credit institution;
• an investment firm subject to EU capital adequacy requirements and authorised under the Markets in Financial Instruments Directive; or
• another category of institution subject to prudential regulation and ongoing supervision.

Under the AIFMD, the depositary has restitution liability throughout the custody network for financial instruments lost while in custody, and has or will have more prescriptive duties relating to daily monitoring of all cash flows, reconciliations and verifications, due diligence and risk assessments, segregation arrangements and sub-custody oversight.

Answer ... Yes, an AIF from another jurisdiction can migrate inwards and redomicile to Ireland.

Corporate AIFs from certain jurisdictions can redomicile to Ireland subject to the appropriate process being undertaken. In the context of a corporate type AIF redomiciling to Ireland, the Central Bank has issued guidance on the practical steps involved in the redomiciliation process for both corporate funds and unit trusts.

Redomiciliation is often a more efficient process than engaging in a cross-border merger, as it dispenses with the need to set up a new fund and it does not involve the sale or transfer of assets, shares or investors. In addition, by utilising the migration process, investment managers can preserve track records which have been built up over many years.

A foreign investment company which is an AIF wishing to redomicile to Ireland will need to undertake a number of steps, including the following:

• The AIF will need to have identified an AIFM that will be responsible for the application for redomiciliation to the Central Bank.
• The constitutional and offering documentation will need to be revised and updated to ensure that they are in compliance with the requirements of the AIFMD Framework and the AIF Rulebook;
• Agreements with a local administrator and depositary in Ireland will need to be prepared and agreed.
• Other service provider agreements will need to be prepared which comply with the requirements of the AIFMD Framework.
• The directors of the AIF will need to undertake the Central Bank’s fitness and probity process, which involves the submission of an individual questionnaire to the Central Bank for review.
• A shareholder meeting will need to be convened to consider the proposed redomiciliation and the amended documentation applicable to the AIF after conclusion of the proposed redomiciliation.
• A director of the migrating AIF must make a statutory declaration confirming that the migrating AIF is solvent and that all necessary consents for both migration to Ireland and conversion to an ICAV (where relevant) have been obtained.
• A director of the migrating AIF must make a declaration of solvency of the migrating AIF, accompanied by a report of an independent auditor

If the migrating AIF is going to become a designated investment company, then the migrating AIF must apply to the Irish Companies Registration Office (CRO) to be registered as an investment company by way of continuation. The process of registering as a designated investment company with the CRO is undertaken simultaneously with the process of becoming authorised by the Central Bank as an AIF.

A migrating AIF wishing to redomicile to Ireland as an ICAV must apply directly to the Central Bank to be registered as an ICAV by way of continuation. The migrating AIF will also need to obtain the appropriate authorisation from the Central Bank. The ICAV Act 2015 provides for migration and conversion in a single streamlined process, rather than a separate redomiciliation and conversion process.

For AIFs which are structured as unit trusts and which are proposing to redomicile to Ireland, the process is relatively straightforward. As part of the redomiciliation process, a migrating unit trust is not required to go through any registration process with the CRO or the Central Bank in advance. Unit trusts which are authorised or registered in another jurisdiction and are subject to regulatory supervision or oversight in that jurisdiction must provide the following documentation:

• a certified copy of the certificate of registration or equivalent certificate or document issued with respect to the unit trust issued by the relevant local competent authority; and
• confirmation from the local competent authority that there is no reason why the unit trust cannot redomicile to Ireland. If this is not possible, a letter from a local legal counsel confirming this fact should be provided to the Central Bank.

All of the offering documentation and constitutional documents applicable to the migrating unit trust must comply with the requirements of the AIFM Regulations and the AIF Rulebook, and be submitted to the Central Bank together with the relevant material contracts as part of the migration process.