The Irish Collective Asset-management Vehicles Act 2015 (ICAV Act) has now come into force.

This legislation, which introduces Ireland’s newest fund vehicle, the Irish Collective Asset-management Vehicle (the ICAV), was signed into law by the Irish President on 4 March 2015, and the Minister for Finance has now signed an order to commence the ICAV Act in its entirety, effective from 12 March 2015.

The ICAV is a new corporate vehicle designed for Irish investment funds.  It will sit alongside the public limited company (the PLC) and it will become the fifth type of legal structure that is available for fund structures in Ireland.  The ICAV will be registered and authorised by the Central Bank of Ireland (the Central Bank) and will provide a tailor-made corporate fund vehicle for both UCITS and alternative investment funds (AIFs).

Benefits of the ICAV

  • If the ICAV is an umbrella fund, it will be possible to prepare accounts separately for each sub-fund.  This means that investors in a single sub-fund of an umbrella with multiple sub-funds will only receive information that is relevant to them.  This measure will also reduce costs.
  • The board of directors of an ICAV will be permitted to choose to dispense with the holding of an annual general meeting by giving written notice to all of the ICAV’s shareholders.  Alternatively, shareholders representing 10% of the voting rights may require that an AGM be held in any one year.
  • The ICAV will be able to ‘check-the box’ for United States (US) tax purposes.  The Irish PLC investment company is not currently permitted to check-the-box, meaning that it is treated as a separate entity and subject to two levels of tax, one at the corporate level where the income is earned, and the second at the shareholder level when distributions are made.  The ICAV will effectively allow taxable US investors to be in the same tax position as if they had invested directly in the underlying investments of the ICAV and therefore to fall outside of the US Passive Foreign Investment Company (PFIC) Regime.
  • There is no requirement to spread risk for an ICAV, unlike for a PLC, where it is a requirement to do so under the Irish Companies Acts.
  • Existing funds established as investment companies will have the option to convert to an ICAV.  Provision has also been included in the ICAV Act for the migration of funds into Ireland, which are domiciled outside of Ireland, as ICAVs by continuation.

While the PLC is still an option as a fund structure, it is our view that the flexibility of the ICAV will mean that the ICAV will become the Irish corporate vehicle of choice for both UCITS and AIFs.  In most cases, we would also expect existing PLCs to convert to the ICAV using the conversion process included in the ICAV Act.

The Central Bank has indicated that it will accept applications for ICAVs from 16 March 2015 and, to this end, has published its application forms for ICAVs, whether UCITS or AIFs .