The Irish Collective Asset-management Vehicle (ICAV) is a new corporate fund vehicle which was introduced by the ICAV Act 2015. Both UCITS and Alternative Investment Funds (AIFs) can adopt the form of an ICAV, which offers some decisive advantages as compared to other types of fund vehicles in Ireland. The funds industry (with McCann FitzGerald playing a leading role) was heavily involved in the development of the ICAV legislation. The ICAV Act highlights the Irish Government's commitment to the Irish funds industry and enhances Ireland’s attractiveness as a domicile for collective investment schemes. It was signed into law in March 2015.

What is the objective of the ICAV Act?

The ICAV Act provides for the establishment of a new form of Irish corporate investment vehicle which is intended to provide managers and promoters with a vehicle that is designed specifically for investment funds and which co-exists with the longer-established Irish fund  structures.

Is the ICAV a suitable vehicle for both UCITS and AIFs?

Yes, the ICAV is suitable for both UCITS and AIFs and can be used as a vehicle for self-managed or externally managed, open-ended or closed-ended collective investment schemes.

What is the primary advantage of an ICAV, as compared to a traditional investment company?

One of the ICAV’s primary advantages is that it has its own legislative regime, which means that unlike the traditional investment company, it is not subject to those aspects of company law which are irrelevant to or inappropriate for a collective investment scheme (thereby helping to reduce administrative burden and costs).  It is also worth noting that an ICAV is not subject to the risk-spreading/ diversification requirements which currently apply to investment companies.

Can an ICAV “check the box” for US tax purposes?

Yes, an ICAV is entitled to elect (ie, ‘check the box’) to be treated as a flow-through or partnership for US tax purposes, an option that is not open to an investment company.

What are the characteristics of an ICAV?

An ICAV:

  • must have a governing document, known as an instrument of incorporation. This is similar to the memorandum and articles or other form of constitutive document of a regular company. Significantly, an ICAV’s instrument of incorporation may be amended without shareholder approval provided its depositary certifies that the change does not prejudice the shareholders’ interests. In addition, the change must not relate to any matter specified by the Central Bank of Ireland (Central Bank) as one which requires shareholder approval;
  • must have a board of directors, comprising a minimum of 2 directors, and a company secretary; and
  • may dispense with holding an annual general meeting by giving at least sixty days prior written notice to all of the ICAV’s shareholders.

In addition, the ICAV Act provides that investors own shares in the ICAV and that the ICAV may issue and redeem shares in a similar manner to an existing corporate fund.

Is it possible to use the ICAV as a vehicle for an umbrella fund?

Yes, an ICAV may be used to establish an umbrella fund with a number of sub-funds and share classes. The ICAV Act provides for segregated liability between sub-funds. In addition, accounts can be prepared on a sub-fund by sub-fund basis in accordance with normal accounting standards.

How do I establish an ICAV?

Establishing an ICAV involves a two-step process. The ICAV must first be registered with the Central Bank and then authorised as either as a UCITS fund pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 or as an AIF pursuant to the European Communities (Alternative Investment Fund Managers Directive)Regulations2013.

Is it possible to convert or redomicile an existing fund to an ICAV?

Yes, the ICAV Act permits the conversion/ redomiciliation of an existing Irish investment company or certain foreign corporate funds to an ICAV by way of continuation.  This means that the ICAV retains the existing corporate identity, track record and performance data on conversion.  Existing funds should therefore consider the benefits offered by the ICAV in the context of the costs of conversion.

Existing UCITS or AIF unit trusts, investment limited partnerships or common contractual funds cannot convert to an ICAV, although merger schemes can be effected in accordance with the regulations of the Central Bank.

Who is responsible for supervising an ICAV?

The Central Bank is responsible for supervising ICAVs and it has stated that it intends to apply the same review and supervisory regime to a fund constituted as an ICAV as that which it currently applies to a fund constituted as another form of corporate vehicle, such as an investment company or a unit trust.

What implications does the ICAV Act have for the investment company?

The ICAV Act does not affect the existing investment company and it will continue to be possible to set up a new fund using the investment company as a vehicle after the Companies Act 2014 comes into force on 1 June 2015. However, because of the advantages which the ICAV offers, we expect it to become the vehicle of choice for new collective investment schemes.