1 Regulatory Framework
1.1 What legislation governs the establishment and operation of Alternative Investment Funds?
Irish Funds Legislation that governs the establishment and operation of Irish AIFs authorised by the Central Bank of Ireland (the "Central Bank") is set out in question 1.3. Additionally, Irish AIFs structured as European long-term investment funds ("ELTIFs") are impacted operationally by Regulation (EU) No 2015/760 (the "European Long-term Investment Funds Regulation").
The governing legislation of Irish AIFs not subject to authorisation by the Central Bank depends on the legal form of those AIFs, e.g. the Companies Act, 2014 will apply to corporate AIFs not established as investment companies with variable capital.
All Irish AIFs are impacted operationally by:
- the European Communities (Alternative Investment Fund Managers) Regulations 2013 (S.I. 257 of 2013) (the "Irish AIFM Regulations"), which transposed Directive 2011/61/ EU (the "AIFM Directive") into Irish law; and
- Commission Delegated Regulations and Commission Implementing Regulations adopted by the EU Commission in specified areas in order to ensure that the AIFM Directive is implemented consistently across the EU, the principal one of which is the Commission Delegated Regulation (EU) No 231/2013 supplementing the AIFM Directive with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision (the "Commission Delegated Regulation").
1.2 Are managers or advisers to Alternative Investment Funds required to be licensed, authorised or regulated by a regulatory body?
Irish AIFMs managing Irish AIFs established under Irish Funds Legislation are required to be authorised under the Irish AIFM Regulations. However, an Irish registered AIFM may manage an Irish AIF marketed to qualifying investors (a "QIAIF") for a two-year start-up period during which the Central Bank will not require that it have an authorised AIFM. After the start-up period, an authorised AIFM must be appointed.
Non-Irish EU AIFMs managing Irish AIFs are required to be authorised in their home jurisdiction and to have availed of the passporting provisions pursuant to Article 33 of the AIFM Directive.
Although non-EU AIFMs currently have no passporting rights under the AIFM Directive and will not have such rights until such time as they are extended to non-EU AIFMs by the European Commission, non-EU AIFMs may avail of transition benefits allowed by the Central Bank for such entities and consequently may manage an Irish QIAIF provided they are designated by the QIAIF as the AIFM and certain rules as set out in question 1.8 are complied with. However, in such circumstances, the non-EU AIFM must be approved by the Central Bank to act as an investment manager of Irish authorised collective investment schemes (see below). An Irish AIF constituting a collective investment scheme authorised and supervised by the Central Bank under Irish Funds Legislation and marketed to retail investors (a "RIAIF") must have an authorised AIFM. Consequently, a non-EU AIFM cannot avail itself of the transition benefits allowed by the Central Bank as referred to above and manage a RIAIF on the basis that it is designated by the RIAIF as the non-EU AIFM.
Non-AIFM Irish Management Companies/General Partners
RIAIFs and QIAIFs, depending on their legal form, may be required to appoint a management company/general partner to carry out the management of those AIFs. Where such a management company/ general partner is not the AIFM, it must be approved by the Central Bank and meet the requirements relating to such entities as set out in the Central Bank's AIF Rulebook (the "AIF Rulebook"), e.g.:
- a minimum capital requirement of at least EUR 125,000 or one quarter of its total expenditure taken from the most recent audited accounts (whichever is higher);
- organisational requirements such as the appointment of a compliance officer who must be located in the State, policies and systems to identify, control and monitor risk, accounting policies and procedures, maintenance of records, etc.; and
- adequate management resources.
Investment managers or sub-investment managers which are one of the following entities will not usually be subject to an additional regulatory review process by the Central Bank:
- UCITS management companies;
- MiFID investment firms;
- EU credit institutions; and
- externally appointed AIFMs.
Investment managers which are not one of the entities listed above may only be appointed where (i) a Memorandum of Understanding ("MoU") is in place between the Central Bank and the competent authority in the home jurisdiction of the investment manager, and (ii) the Central Bank has approved the investment manager following receipt of a completed Investment Manager Clearance Form.
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Previously published in the International Comparative Legal Guide