Irish Quarterly Legal And Regulatory Report: July - September 2025

1. UCITS & AIFMD DEVELOPMENTS

1.1 Consultation Paper 161 on proposed amendments to both the Central Bank UCITS Regulations and the Central Bank Guidance on performance fees

On 9 September 2025, the Central Bank published Consultation Paper 161 on proposed amendments to both the Central Bank UCITS Regulations and the Central Bank Guidance on performance fees for UCITS and certain types of Retail Investor AIFs ("CP161").

CP161 proposes significant changes to Ireland's UCITS regulatory framework to align with the revised framework introduced under Directive (EU) 2024/927 (and its ancillary regulations and technical standards) ("AIFMD II") including:

• UCITS funds must select at least two liquidity management tools ("LMTs"), disclosed in fund rules, to strengthen responses to liquidity stress. A new dedicated LMT section will set operational requirements and rules for LMT selection, side pockets, suspensions, swing pricing, and redemption gates. Administrative redemption charges and in-specie redemptions will not be treated as LMTs.
• UCITS to consider including at least one quantitative LMT (e.g., redemption gate, notice period extension) and one anti-dilution tool. UCITS must notify the Central Bank if LMTs disclosed in the prospectus are activated or deactivated outside the normal course of business.
• Redemptions in specie will be permitted only for professional investors, where provided for in the prospectus, consistent with AIFMD II. This ensures that retail investors cannot be required to accept securities instead of cash when redeeming units.
• The Central Bank proposes removing the current rule that redemption gates may only be applied if redemption requests exceed 10% of UCITS units or net asset value. Instead, UCITS responsible persons would have discretion to set their own thresholds for imposing redemption gates, provided they comply with the broader UCITS framework.

The changes contemplated by CP161 would also see certain legislative constraints in the Central Bank UCITS Regulations removed in order to fully implement ESMA's Guidelines on performance fees in UCITS and certain types of AIFs. These include changes aligning the domestic performance fee rules with ESMA Guidelines to allow:

• the possibility of a performance reference period that is less than the whole life of the fund for certain fee models;
• fulcrum fee models or other models which provide for a symmetrical fee structure; and
• crystallisation of performance fees more frequently than annually for high water mark or high-onhigh models that have a performance reference period of the life of the fund that cannot be reset, and fulcrum fee models or other models which provide for a symmetrical fee structure.

Additionally, the Central Bank proposes to amend the Central Bank UCITS Regulations to incorporate ESMA Q&A guidance on funds with multiple portfolio managers, ensuring consistency with the UCITS Directive.

CP161 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 CP161, the Central Bank intends to publish a feedback statement, outlining the commentary received from stakeholders and setting out how the Central Bank propose to proceed in respect of the changes suggested.

Walkers Asset Management and Investment Funds group advisory on CP161 highlighting the key proposed changes and outlining what's next in the consultation process.

1.2 Consultation Paper 162 on proposed amendments to the Central Bank's Alternative Investment Fund Rulebook ("AIF Rulebook")

On 9 September 2025, the Central Bank published Consultation Paper 162 on proposed amendments to the AIF Rulebook ("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").

CP162 seeks to align the AIF Rulebook with the revised European rules (particularly AIFMD II and ELTIF 2.0), take account of market developments, enhance regulatory effectiveness and provide additional clarity regarding the Central Bank's expectations for regulated AIFs. CP162 proposes significant changes to Ireland's UCITS and AIF regulatory frameworks to align with the framework introduced under AIFMD II.

L-QIAIF: 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.

Irish L-QIAIFs 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. Significantly, 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.

The general restriction on QIAIFs granting loans and acting as a guarantor for third parties will be deleted in its entirety, better aligning the QIAIF rules with AIFMD II and the ELTIF Regulations. 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.

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 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.

Investment through subsidiaries and intermediary investment vehicles: 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 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 subsidiaries and other intermediary investment vehicles, the Central Bank proposes to place enhanced due diligence, oversight and monitoring responsibilities on the AIFM. In this regard, AIFMs must (i) disclose the use and purpose of such vehicles in the QIAIF prospectus, (ii) carry out due diligence on the vehicles and (iii) have in place documented policies and procedures for the oversight and monitoring of the vehicle.

Other notable proposed changes contained in CP162 include:

• Changes to the requirements governing positions of significant influence in issuers: 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.
• Removal of equal treatment requirement: The requirement that unitholders in a share class be treated equally has caused ambiguity around the basis upon which AIFMs and asset managers may enter into side-letter arrangements. CP162 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.
• Incorporating capital commitments into the QIAIF subscription mechanism: 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. 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.
• Warehousing disclosures – The current requirement that the QIAIF not pay more than the current market value for warehoused assets would be 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 would be expanded to include unitholders in the list of entities subject to the requirements. This would address circumstances where an investment fund may enter into commercial transactions with unitholders in the fund and would not apply to transactions by unitholders in relation to their units (subscriptions, redemptions, conversions or dividend payments).
• Suspensions in respect of Investment Limited Partnerships ("ILPs") – Proposals if implemented would remove language restricting ILPs from calling suspensions only in exceptional circumstances and where specifically provided for in the partnership agreement.
• A number of helpful technical amendments to the AIF Rulebook are contained including expansion of the list of parties eligible for an exemption from the €100,000 minimum subscription/commitment requirement.

CP162 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 is hopeful that the entire process will be completed before year-end 2025.

Walkers Asset Management and Investment Funds group have produced an advisory entitled 'Reform of Irish private funds regulatory rules' outlining the key proposed changes with further commentary, highlighting additional updates and the next steps in the consultation process.

1.3 ESMA Q&A on UCITS performance fees for feeder funds

On 16 July 2025, new Q&A 2609 was published on ESMA's Q&A tool relating to the charging of performance fees within UCITS feeder funds.

The Q&A confirms that for the purposes of Article 58 UCITS Directive and the Guidelines on performance fees in UCITS and certain types of alternative investment funds ("AIFs") (the "Guidelines") that a manager may only charge a performance fee at the level of a feeder fund where it also manages the master fund (or both the master and feeder fund are manged by managers belonging to the same group) and where the feeder fund(s) is(are) the sole investor(s) in the master fund.

Where there is more than one feeder fund then the approach should be applied consistently to all feeder funds.

The Q&A is as set out below.

QA 2609 (Performance fees for feeder funds)

Q. Can the manager of a feeder fund within the meaning of Article 58 of the UCITS Directive charge a performance fee?

A. Under Article 58 of the UCITS Directive, a feeder fund is a fund which has been approved to invest at least 85 % of its assets in units of another fund (master funds). Paragraph 18 of the Guidelines states that a manager "should always be able to demonstrate how the performance fee model of a fund it manages constitutes a reasonable incentive for the manager and is aligned with investors' interests".

Against this background, the feeder manager does not exercise sufficient discretion over the asset allocation, selection and fund strategy to warrant the charging of a performance fee and as such, the charging of a performance fee to investors should not be considered as appropriate and justified in such cases. Therefore, performance fees, if any, should only be charged at the level of the master fund. This is unless:

• the master fund and the feeder fund are managed by the same manager or by managers belonging to the same group; and
• the only investor(s) of the master fund is(are) feeder fund(s).

In which case, performance fees could be paid at the level of the feeder fund(s), and not at the level of the master fund, provided that this approach applies consistently to all feeder funds, if more than one.

2. CENTRAL BANK UPDATES

2.1 Central Bank markets update (5 of 2025)

On 9 September 2025, the Central Bank published its latest markets update ( issue 5/2025), including the publication of CP161 (outlined at section 1.1. of this report) and CP162 (outlined at section 1.2 of this report), as well as certain updates and clarifications to the Central Bank's ELTIF authorisation process by way of an updated application form and website guidance.

The Central Bank updated its ELTIF application form to clarify certain requirements relating to:

• establishing open-ended ELTIFs;
• disclosures required under the Sustainable Finance Disclosure Regulation ("SFDR"); and
• performance fee disclosure requirements for open-ended ELTIFs marketed to retail investors (referencing Section 2.16.9 A of the Central Bank's RIAIF Application Form).

The guidance relating to the authorisation process for ELTIFs has also been updated on the website to align with the updated application form and reflect certain passage of time updates.

The updated ELTIF application form and website guidance should be used for ELTIF authorisation and post-authorisation updates going forward.

2.2 Cross industry guidance on operational resilience (updated) (This is a further update to section 3.2 of the quarterly report covering the fourth quarter of 2021)

On 14 July 2025, the Central Bank updated and republished the Cross industry guidance on operational resilience (the "OpRes Guidance"), replacing its previous (December 2021) version of the Guidance.

To view the full article, click here .

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.