In December 2013, the Irish Minister for Finance published the General Scheme of the proposed Irish Collective Asset-management Vehicle (ICAV) Bill 2014. The ICAV is a proposed new form of Irish corporate fund structure, specifically tailored for corporate collective investment schemes (CIS).
What is the ICAV?
At present, Irish corporate CIS must be established as Investment Companies under Part XIII of the Companies Act 1990 or the UCITS Regulations. While the Investment Company structure has worked well for fund promoters in the past, industry commentators have in recent times made a case for a new type of corporate fund structure, engineered with just the funds industry in mind.
Here is a list of what is proposed will be the main features of the ICAV:
- The ICAV will be able to make an election under US tax rules (the "check the box" rules) to be treated as a “flow-through” for US tax purposes. This is widely seen as the main advantage of the ICAV. The “check the box” provision has the potential to allow US taxable investors to avoid tax consequences that are usually associated with an investment in passive foreign investment companies.
- The ICAV will not have to comply with certain Irish and European company law and accounting requirements which are more appropriate for trading companies than investment funds. This should mean ICAVs will avoid some of the administrative costs which currently apply to Investment Companies.
- CIS structured as ICAVs will have the ability to prepare separate audited accounts for each sub-fund in an umbrella structure.
- An ICAV will not have a Memorandum and Articles of Association. The ICAV constitutional document will be called an Instrument of Incorporation (IOI). The proposal is that shareholder consent will not be needed to amend the IOI so long as the Central Bank and the appointed depositary agree that any proposed changes to the IOI would not prejudice shareholders.
- ICAVs may be used to establish both alternative investment funds (AIFs) and retail investment funds (UCITS).
- ICAVs will be both incorporated and supervised by the Central Bank of Ireland.
What does this mean for the Investment Companies?
The introduction of the ICAV will not alter the existing legislative regime for Investment Companies but will provide a mechanism for existing CIS structured as Investment Companies to convert to the ICAV structure. This can be achieved by applying to the Central Bank to be registered as an ICAV by way of continuation.
Existing CIS domiciled outside of Ireland will also be able to migrate into Ireland as an ICAV by continuation if coming from a "relevant jurisdiction". The Minister for Finance may make regulations outlining the definition of, or a list of, relevant jurisdictions in the future.
The below table summarises some of the differences between the proposed new ICAV structure and Investment Companies:
Click here to view the table.
The ICAV and the Investment Company will share a number of similar characteristics including the requirement to appoint a depositary and a board of directors.
The expectation is that draft ICAV legislation will come before the Irish legislature for consideration later this year. We understand the government department with responsibility for introducing the ICAV legislation is aiming to have it considered before the summer break.
The Central Bank has indicated that preparations are underway aimed at ensuring it will be in a position to begin accepting applications for ICAV registrations shortly after the new law is enacted.
The proposals in relation to the ICAV show an eagerness on the part of the Irish government to cement Ireland’s position as a leading funds jurisdiction.