- within Law Department Performance and Antitrust/Competition Law topic(s)
A significant change now permits Irish Qualifying Investor Alternative Investment Funds (QIAIFs) to grant guarantees in favour of third parties, simplifying fund finance structures across a range of transactions.
Background
Ireland transposed AIFMD II on 1 May 2026. Separately, the Central Bank of Ireland published its updated AIF Rulebook, which sets out the operational requirements for alternative investment funds authorised in Ireland, on 5 May 2026.
A key change introduced by the updated AIF Rulebook is that a QIAIF may now guarantee the obligations of third parties.
Previously, the AIF Rulebook provided that a QIAIF may not act as a guarantor in respect of a third party. For many years, this was broadly interpreted as prohibiting the giving of guarantees or security by a QIAIF in respect of the obligations of any party other than itself or a wholly owned or controlled subsidiary or limited partnership (LP).
Impact on subscription finance (master/feeder structures)
The former prohibition had significant practical consequences for subscription finance deals involving a master/feeder structure where the QIAIF acts as a feeder fund rather than the borrower. In those circumstances, the QIAIF could not give security directly to the lender. Instead, it was required to grant security to the borrower (or the intermediate fund into which it invests) to secure its obligations to the borrower (most commonly its obligations to fund uncalled capital to the borrower under subscription documents). The borrower would then assign its interests under that security in favour of the lender, a structure known as ‘cascading security’. While cascading security is a well-established and recognised market solution, it involves more documents and introduces complexity to deals, particularly where there are multiple layers of funds between the QIAIF feeder fund and the borrower in a master/feeder structure.
Impact on NAV and asset-level financings
The now historic prohibition could also affect NAV and asset level financings. For example, in property financing deals (which often involve an Irish QIAIF) it is common for security to be granted over the property and also by the Irish QIAIF over its shares or LP interests in the borrower vehicle holding the property. Where more than one Irish QIAIF holds the shares or LP interests in that property holding vehicle, the previous interpretation of the rule had restricted the ability of an Irish QIAIF to give security over its shares or LP interests directly to the lender.
Conclusion
The removal of the prohibition on the granting of third-party guarantees is a welcome development which aligns the Irish regulatory regime with other key fund jurisdictions and removes a structural constraint that has long added complexity to certain fund finance transactions. That said, ‘cascading security’ remains a well-established and flexible tool that will continue to be deployed in appropriate situations.
For more on the updated AIF Rulebook, see our Fund’s Group’s insights here: Central Bank publishes revised AIF Rulebook
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
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