There are two broad categories of regulated investment funds in Ireland. The first category comprises undertakings for collective investment in transferable securities ("UCITS"). UCITS are subject to the regulations in Ireland implementing the EU's UCITS Directive.
The second category essentially comprises all non-UCITS funds, which are defined as alternative investment funds ("AIFs").
This briefing sets out the main steps involved in establishing a UCITS in Ireland.
Umbrella or Single Fund and Classes of Shares
A UCITS may be established in Ireland as a single fund or as an umbrella fund comprising one or more sub-funds, each with a different investment objective and policy. UCITS are typically established as umbrella funds and the segregation of liability between sub-funds is achieved either by law (as is the case for an investment company or ICAV) or by contract. Each sub-fund may comprise different classes of units or shares. Typically, classes of units or shares are issued to allow for different fee arrangements, different subscription amounts and/or different currencies within the same sub-fund.
Legal Structure
UCITS can take one of four forms: investment companies, unit trusts, common contractual funds ("CCFs") and Irish collective asset-management vehicles ("ICAVs"). Various factors determine the choice of fund structure, the principal ones being the potential distribution channels for the UCITS and the profile and location of prospective investors.
A comparison of the different legal structures is set out in the table below.
| ICAV | Investment Company | Unit Trust | CCF | |
|---|---|---|---|---|
| Structure |
A corporate entity with a similar structure to the SICAV or OEIC |
A variable capital investment company incorporated as a public limited company |
A unit trust constituted by a trust deed entered into between a management company and a trustee |
An unincorporated body constituted under contract by a deed of constitution between a management company and a depositary |
| Single stand-alone fund or umbrella fund |
Yes |
Yes |
Yes |
Yes |
| Separate legal personality |
Yes |
Yes |
No |
No |
| Board responsible for management |
Board of directors of ICAV |
Board of directors of investment company |
Board of directors of management company |
Board of directors of management company |
| Segregation of liability |
By law |
By law |
By contract |
By contract |
| Other notable features |
Meets the U.S. "check the box" taxation rules. Not subject to many of the types of rules applicable to Irish public limited companies which apply to investment companies. |
Unlike the other structures opposite, is subject to a statutory obligation to diversify risk. |
Tax transparent; unitholders are treated for tax purposes as if they directly own a share of the underlying investments. Investment in CCFs is limited to institutional investors. |
Board of Directors
A UCITS that is established as an investment company or an ICAV is required to have a minimum of two Irish resident directors appointed to its board and the board must comprise at least three directors. The size of a UCITS board depends on the requirements of the promoter, however, boards typically comprise four or more directors
The Central Bank must approve all appointments to the board of directors in advance but will only do so once it is satisfied that a proposed director meets its fitness and probity standards. These standards require that the proposed director is fit and proper in terms of: (i) competence and capability; (ii) honesty, integrity, fairness and ethical behaviour; and (iii) financial soundness. Directors are also subject to the Central Bank's individual accountability framework.
A letter of appointment must be put in place with each director setting out the terms of their engagement. The Central Bank must also be notified of all resignations from a board of directors.
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.
