In March 2012, the Minister for Finance agreed to approve, in principle, the introduction of legislation for a new corporate structure tailored specifically to the Irish funds industry (“SICAV”).
At present corporate funds domiciled in Ireland are structured as public limited companies (“plcs”). The new SICAV structure’s two principal benefits over the plc lie in the SICAV’s straightforward company law requirements and its attractiveness to certain US investors.
The SICAV structure is designed specifically for investment funds and does not require compliance with certain company law and accounting rules which do apply to plcs. This should result in lower administrative costs in the SICAV. In addition, the SICAV will be able to elect its classification under the US ‘check-the-box’ taxation rules as a ‘flow-through’ for US tax purposes. In contrast to investment funds authorised as unit trusts and investment limited partnerships (which can be treated as ‘flow-throughs’ for US tax purposes), plcs are currently viewed as corporations, not ‘flow-throughs’, for US tax purposes and are therefore potentially subject to certain adverse tax consequences for US taxable investors.
There will be no compulsory changes to the existing corporate structures for investment funds and the plc structure will continue to be available to promoters who wish to use it. The SICAV however will offer a new option designed specifically for investment funds. It is also envisaged that existing plcs will have the option of converting to the new SICAV structure.
It is anticipated that the proposed legislation is likely to be enacted by the end of 2012 in order for the SICAV to be established in advance of the implementation of the Alternative Investment Fund Managers Directive in July 2013.