As anticipated in our last briefing, the Central Bank of Ireland (“Central Bank”) has issued guidance for industry on a number of aspects of corporate governance for fund management companies. For these purposes, fund management companies include UCITS management companies, alternative investment fund managers ("AIFMs"), self-managed UCITS investment companies and internally managed alternative investment funds. We have summarised these below for you, together with additional updates on Irish regulatory developments which will be of interest.

Our asset management partners are available to speak with you should you require any further detail in relation to these matters. We will be contacting our clients shortly in relation to the impact of some of the more imminent developments outlined in this note.

Central Bank Issues Guidance on Directors’ Time Commitments

In parallel with its consultation on fund management company effectiveness issued in September 2014 ("CP86"), the Central Bank conducted a thematic review last year in order to assess the number of directorships held by individuals on the boards of corporate investment funds, fund management companies and AIF management companies and the impact on fund governance. The Central Bank has also engaged in dialogue with fund management companies on these matters. Following on from this, the Central Bank has now published guidance to assist boards and directors in assessing the time commitment of directors in fulfilling their roles (the “Guidance”).

The Guidance does not set a hard limit on the number of board appointments which a director may hold, however it is intended that high numbers of directorships combined with high aggregate levels of professional time commitments will be regarded as a risk indicator by the Central Bank. Additional supervisory attention will apply under the Central Bank’s risk-based approach to supervision where a risk indicator is triggered. Read more.

Central Bank Issues Guidance on Organisational Effectiveness

Arising from CP86, the Central Bank has decided that the “organisational effectiveness” role which it consulted on will not constitute a managerial function, but instead will constitute a task to be performed by one of the independent directors. The independent director with responsibility for the organisational effectiveness role may not perform any of the six managerial functions.

In order to provide more clarity on the organisational effectiveness role, specific guidance for industry has now been issued in this regard by the Central Bank. Existing management companies and self-managed investment companies are required to update business plans / programmes of activity with regard to the organisational effectiveness role by 30 June 2016. Read more.

CP86: Central Bank Issues Feedback Statement to Industry

CP86 set out a number of proposed initiatives to enhance and promote fund management effectiveness. In its feedback to the industry on CP86 published on 12 June 2015, the Central Bank has provided clarification in response to certain issues raised in submissions received, and has confirmed its position on a number of matters which had formed part of the CP86 proposals.

The general feedback on CP86 is contained in Part I of the Central Bank publication dated 12 June 2015 which may be accessed here.

Matters dealt with in the feedback include clarification of the designated person role, streamlining of managerial functions, documenting the rationale for board composition, the requirement for Irish resident directors and the measurement of residency. The Central Bank has also indicated that it intends to develop further guidance for management companies on managerial functions, ongoing control, operational and procedural matters this year.

We have provided an executive summary available at the link below with respect to each of these matters. Read more.

Central Bank Launches Industry Consultation on Delegate Oversight

The Central Bank has launched a consultation on its proposed guidance for industry on delegate oversight (the “Delegate Oversight Guidance”). This is directed at boards of directors of investment companies, UCITS management companies, alternative investment fund managers (“AIFMs”) and AIF management companies incorporated and authorised in Ireland. It focuses on the role of boards where significant tasks are delegated externally and describes good practice in the supervision of delegates and monitoring and oversight of delegated tasks, and sets out principles which boards should follow regarding the tasks which are delegated and which should be retained. Specific guidelines on the supervision of delegates in relation to investment management, distribution, risk management and investment operations and administration are included. The Delegate Oversight Guidance also considers support and resourcing and matters to be considered by boards of externally managed investment companies.

As the content of the Delegate Oversight Guidance formed part of the CP86 consultation, it is subject to a shortened consultation timeline and, as such, responses are requested by 24 July 2015. The Delegate Oversight Guidance is contained in Part II of the Central Bank publication which may be accessed here.

CP86 and Key Dates

In summary, the following are the key dates by which action is required under the above guidance and consultations:

Immediately: New management company and self-managed investment company applications must include: (a) letters of appointment for each designated person; and (b) a documented rationale for board composition within the business plan / programme of activity.

24 July 2015: Responses due to consultation on Delegate Oversight Guidance.

1 January 2016: From this date, previously authorised investment funds with directors triggering the directors’ time commitment risk indicator will receive priority consideration for inclusion in Central Bank thematic reviews where board effectiveness is being assessed.

30 June 2016: Existing management companies and self-managed investment companies are required to update business plans / programmes of activity to reflect the revised managerial functions and the organisational effectiveness role.

Companies Act 2014: Central Bank Publishes New Q&A

The Central Bank has published Q&A guidance for industry on the application of the Companies Act 2014 (the “Act”). The Act requires existing private limited companies to convert to either the new form private company limited by shares (“LTD”) or a designated activity company (“DAC”). One of the key differences between the two types of company is that a DAC is required to have an objects clause. In response to the question as to whether the Central Bank requires UCITS management companies, AIFMs, AIF management companies, fund administrators, depositaries and investment firms to convert to a DAC, the Central Bank has confirmed that it does not require these entities to convert to DACs, on the basis that the Central Bank is of the view that corporate structuring is a matter for each entity. Such entities may therefore determine to convert to either a LTD or DAC.

UCITS: Updates to Q&A

The Central Bank has updated its UCITS questions and answers document (“UCITS Q&A”) to address whether a fund re-domiciling to Ireland as a UCITS can disclose its past performance relating to the period when it was domiciled outside of Ireland in its key investor information document (“KIID”).

The Central Bank confirms that it will permit this, subject to confirmation by the management company of a number of matters, including no substantial alteration to the investment policy, strategy and portfolio composition as a consequence of the transfer to the UCITS regime; no change to the entities involved in the investment management of the UCITS; satisfaction as to the accuracy of the data; and inclusion of appropriate disclosure in the KIID with respect to the past performance data relating to a period when the fund was domiciled outside Ireland and was not authorised as a UCITS.

The updated UCITS Q&A may be accessed here.

UCITS: Proposed New Regulations

The Central Bank has indicated that the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) Undertakings for Collective Investment in Transferable Securities) Regulations 2015 (the “UCITS Regulations”) will be published shortly. It is understood that the UCITS Regulations will set out the Central Bank rules applicable to UCITS currently contained in the UCITS Notices and will essentially be the new “UCITS Rulebook”. We will keep you informed of further developments in this regard.

AIFMD: Central Bank Updates Q&A

The Central Bank has issued the thirteenth edition of its AIFMD questions and answers document (the “AIFMD Q&A”). The AIFMD Q&A has been amended to state that professional investor funds and QIAIFs can continue to be managed by non-EU AIFMs under the existing transitional arrangements until at least 22 October 2015. By way of background, ESMA is required to issue advice to the European Commission on, inter alia, the application of the AIFMD passport to non-EU AIFMs by 22 July 2015. If that advice is positive, the European Commission is required, by 22 October 2015, to adopt a delegated act specifying the date when the non-EU AIFM passport will be “turned on”. This process is underway and the outcome is not yet known. Accordingly, the Central Bank has clarified that professional investor funds and QIAIFs can continue to be managed by non-EU AIFMs under the existing transitional arrangements until at least 22 October 2015.

The AIFMD Q&A has also been amended to clarify the rules that will apply to professional investor funds once their AIFMs have been authorised or registered. New questions and answers relating to the marketing of unauthorised AIFs have been added.

The updated AIFMD Q&A may be accessed here.

EU Venture Capital Funds and Social Entrepreneurship Funds

The European Union (European Social Entrepreneurship Funds) Regulations 2015 and the European Union (European Venture Capital Funds) Regulations 2015 were signed by the Irish Minister for Finance last month, and application forms for the registration of managers of European Venture Capital Funds (“EuVECA”) and European Social Entrepreneurship Funds (“EuSEF”) have now been published by the Central Bank.

Outsourcing of final NAV Calculation and the Treatment of NAV Errors

Over the coming weeks, we understand that the Central Bank proposes to consult with industry on new requirements for the outsourcing by fund administrators of certain tasks in relation to the net asset value (“NAV”) calculation process. This is with a view to providing a coherent and transparent framework which will allow fund NAVs to be calculated and released in the affiliate offices of Irish fund administrators in limited circumstances. Later in the year, the Central Bank also plans to consult on rules for fund administrators and fund managers with regard to NAV calculation errors. We will keep you updated.