On 9 September 2025, the Central Bank of Ireland (Central Bank)
published a public consultation (CP162) setting out significant
changes it proposes to make to its AIF Rulebook, with a specific
focus being placed on changes impacting the Qualifying Investor
Alternative Investment Fund (QIAIF) and the Loan Originating QIAIF
(L-QIAIF), (Rulebook Consultation).
With 125 separate consultation questions, this is the largest
overhaul of the AIF Rulebook since its original publication in July
2013 and presents an opportunity for Ireland to become a leader in
the private funds area. Having already delivered a market leading
European Long-Term Investment Fund (ELTIF) regime, the Central Bank
has now turned its attention to overhauling its QIAIF regime by
ensuring that it addresses the needs of private fund general
partners and limited partners alike.
The Rulebook Consultation has been published following a period of
intense consultation between representatives from the Irish funds
industry and the Central Bank and against the backdrop of the
upcoming transposition of Directive (EU) 2024/927 (and its ancillary regulations
and technical standards) (collectively AIFMD II). The Rulebook
Consultation also follows on from the publication by the Irish
government of the Funds Sector 2030 Review in October 2024, which
included a specific recommendation that the Central Bank review and
update the AIF Rulebook and associated requirements that impact on
the establishment of private asset funds in Ireland.
What are the main changes being consulted on?
The Rulebook Consultation is extensive and if all the areas
which have been identified as part of this process are changed, as
expected, the updates will represent a significant overhaul of the
existing private funds regulatory regime in Ireland.
Following a review of the AIF Rulebook, certain requirements in the
AIF Rulebook have been identified by the Central Bank in the
Rulebook Consultation as areas which could benefit from targeted
improvements, in order to bring Irish private funds regulatory
rules more into line with international best practice for private
funds.
We have set out below an overview of the most material changes
which are proposed in the Rulebook Consultation, together with some
commentary on the impact of the change, as well as details on other
miscellaneous updates proposed to the AIF Rulebook.
Alignment of loan origination rules with AIFMD II
It is proposed that the L-QIAIF chapter of the AIF Rulebook will
be deleted in its entirety and in its place, QIAIFs wishing to
originate loans or loan-originating QIAIFs (being those QIAIFs
whose investment strategy is mainly to originate loans; or for
which the notional value of loans originated by the QIAIF exceeds
50% of the QIAIF's net assets), will need to comply with the
requirements of AIFMD II, which is required to be transposed into
Irish Law by 16 April 2026. These amendments are also intended to
support the broader objective under the EU Commission's Savings
and Investment Union of promoting private asset and credit
investments.
This creates a level playing field for Irish loan-origination
QIAIFs which will no longer be subject to domestic gold plating and
will have far greater flexibility in terms of the investments that
can be made within the relevant funds, both in terms of asset and
borrower type.
Importantly, the Central Bank will also permit non-EU alternative
investment fund managers (AIFMs) to manage closed-ended loan
originating QIAIFs. This is an important development as previously
the management of L-QIAIFs was limited to authorised EEA AIFMs.
Investment through subsidiaries and intermediary investment vehicles
In relation to wholly owned subsidiaries of QIAIFs, the Central
Bank proposes to remove a number of onerous and ancillary
requirements regarding the operation of Irish and non-Irish
subsidiaries, including the requirement to have a majority of
directors from the fund board on the board of the subsidiary and
the requirement for the QIAIF to be party to material contracts
entered into by the subsidiary. The Central Bank proposes now only
to require that there is a provision in the constitutional document
of the wholly-owned subsidiary, which stipulates that the
subsidiary will act in a manner consistent with the investment
objective and policy of the QIAIF. The Central Bank will no longer
require that its prior approval be obtained in connection with the
establishment of such wholly-owned subsidiaries which provides
greater flexibility for managers.
In relation to all other non-wholly owned subsidiaries and
acquisition vehicles, the Central Bank proposes to place enhanced
responsibility on the AIFM as part of its due diligence obligations
to ensure that the appropriate oversight is in place in relation to
the establishment and operation of such entities rather than
imposing specific requirements on the underlying vehicle.
These changes will be particularly helpful for funds which use
intermediary investment vehicles and co-investment structures.
Removal of the general restriction on QIAIFs granting loans / acting as a guarantor for third party
It is proposed that the general restriction on granting loans
and acting as a guarantor for third parties will be deleted in its
entirety. This will better align the QIAIF rules with AIFMD II and
the ELTIF Regulations. Updates in early 2025 to soften the
requirements in respect of a QIAIFs ability to guarantee the
indebtedness of third parties were not seen as sufficiently
flexible and continued to represent a hinderance to fund financing
arrangements in certain cases. The changes contemplated by the
consultation will remove those obstacles.
This is a significant development and will be particularly helpful
for fund financing arrangements to better facilitate cross
collateralisation, which in turn could reduce financing costs for
QIAIFs.
Changes to the significant influence requirements
QIAIFs are currently subject to restrictions in respect of
acquiring positions of significant influence in 'issuers',
unless those positions are acquired as part of a private equity,
development capital or venture capital strategy. It is proposed
that QIAIFs may in the future take such positions in underlying
issuers (be they private or public) provided sufficient disclosure
in respect of the ability to take legal and management control of
underlying issuers is appropriately disclosed in the fund
documentation.
This is an important development as it allows a broader range of
funds to take controlling stakes in underlying issuers,
particularly hedge fund and private credit strategies which may not
ordinarily be characterised as private equity strategies.
Removal of equal treatment requirement
The AIF Rulebook currently requires that unitholders in a share
class must be treated 'equally' and where more than one
share class exists, all the unitholders in the different share
classes must be treated fairly.
The requirement that unitholders in a share class be treated
equally has caused ambiguity in the context of AIFMD preferential
treatment requirements. The Rulebook Consultation proposes that the
AIF Rulebook be amended to remove this reference to unitholders in
the same class being treated 'equally' and clarify that
unitholders may be treated fairly while taking into account AIFMD
preferential treatment requirements.
This proposed amendment is helpful in removing any ambiguity around
the basis upon which AIFMs and asset managers may enter into
side-letter arrangements.
Other miscellaneous updates
As part of the Rulebook Consultation, the Central Bank proposes a number of other miscellaneous updates to the AIF Rulebook to facilitate the smooth operation of private market funds. Such proposed changes include, but are not limited to the following:
- Incorporating capital commitments into the QIAIF
subscription mechanism and expanding the list of exempted parties
– General updates are proposed to the AIF Rulebook
to better reflect the typical capital commitment and drawdown
approach utilised by the promoters of private asset funds and to
reflect the staged closing mechanics typically utilised by these
types of (closed-ended or open-ended with limited liquidity) funds
in their initial fund-raising periods. In this regard, the QIAIF
requirements will account for the contribution of the committed
capital towards the minimum subscription amount and the list of
eligible exempted parties from this minimum subscription/commitment
requirement will be expanded. The requirement that the initial
offer period be no longer than 2.5 years for private equity and
similar type strategies would be removed to facilitate longer
closing cycles. The guidance that the Central Bank published in
2021 on share class features of closed-ended funds will also be
incorporated into the updated AIF Rulebook enabling all QIAIFs
(both open-ended and closed-ended funds) to avail of these
provisions.
- Liquidity Management Tools (LMTs) –
Proposed amendments to the AIF Rulebook will incorporate disclosure
and notification requirements for the selection and operation of
LMTs, reflecting the AIFMD II requirements and also provide for
AIFMs to select further LMTs in addition to those defined in Annex
V of AIFMD II. Amendments are also being made to clarify that
certain administrative charges applied to the normal investor
redemptions/repurchase process are distinct from (and will not
trigger) requirements related to the use of LMTs under Annex
V.
- Warehousing disclosures – The current
requirement that the QIAIF not pay more than the current market
value for warehoused assets has been removed, subject to the
disclosure to investors of the terms of the warehousing
arrangement.
- Connected party dealing rules - The provisions
directed at dealings with connected parties will be expanded to
include unitholders in the list of entities subject to the
requirements. This will address circumstances where an investment
fund may enter into commercial transactions with unitholders in the
fund and will not apply to transactions by unitholders in relation
to their units (subscriptions, redemptions, conversions or dividend
payments).
- Clarification of the ability to impose suspensions in
respect of Investment Limited Partnerships (ILPs) –
Proposed updates to remove language restricting ILPs to calling
suspensions only in exceptional circumstances and where
specifically provided for in the partnership agreement.
- Disclosure of provisions in governing documents – A series of general updates are proposed to add additional flexibility to include certain specific provisions in the constitutional document and / or the prospectus. Currently certain provisions must be disclosed in both, which makes it cumbersome to make changes.
What are the next steps?
The Central Bank has indicated that the Rulebook Consultation
will run for an 8-week period until 5 November 2025. Stakeholders
are invited to review and respond to the queries raised by the
Central Bank in respect of the individual changes which are being
proposed. Following the conclusion of the consultation, the Central
Bank intends to publish a feedback statement, outlining the
commentary received from stakeholders and setting out how the
Central Bank proposes to proceed in respect of the changes
suggested. Industry are hopeful that the entire process will be
completed before year-end 2025.
While updates to the section of the AIF Rulebook relating to Retail
Investor Alternative Investor Funds (RIAIFs) do not form part of
the Rulebook Consultation at this stage, the Central Bank has
indicated that it is open to engaging in a review of RIAIF
regulatory rules and requirements as a next step in the Central
Bank's review of the AIF Rulebook and with a view to better
supporting the establishment of retail focused private assets funds
in Ireland, in the future following the successful introduction of
the ELTIF authorisation framework in 2024.
The Central Bank has also published a consultation paper (CP161) on proposed
amendments to both the Central Bank UCITS Regulations and the
Central Bank Guidance on performance fees for UCITS and certain
types of RIAIFs. The proposed amendments update the domestic
regulatory framework applicable to UCITS and take account of policy
developments since the current Central Bank UCITS Regulations were
published. For further details on that consultation please see our
separate advisory publication.
Conclusion
The Rulebook Consultation is an extremely positive and welcome
development from the Irish fund industry perspective. It
demonstrates that the Central Bank is seeking to implement the
recommendations in the Funds Sector 2030 Report and is actively
looking to reform the rules that promoters of private assets funds
are most focused on when selecting a jurisdiction in which to
establish new product.
Together with the AIF Rulebook changes introduced last year to
facilitate the creation of retail, qualifying and professional
investor ELTIFs, these additional QIAIF related updates to the AIF
Rulebook are likely to be well received by the market and will
shape how those promoters view Ireland when looking to set up new
fund structures in the future.
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.
