Investment companies incorporated pursuant to the provisions of Part XIII of the Companies Act 1990 are commonly referred to as Non UCITS funds, as distinct to those investment funds (including companies) which are governed by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (the UCITS Regulations).
Impact of Companies Bill
With a small number of exceptions, Part 24 of the Bill is largely a consolidation and restatement of the existing Companies Act legislation applicable to Non UCITS investment companies.
The Bill gathers together in one place the legislative provisions governing investment companies which are currently spread across several different pieces of legislation, including:-
Companies Act 1963
- the circumstances in which an investment company may be wound-up by the courts.
Companies Act 1990
- the authorisation of Non UCITS investment companies by the Central Bank;
- the application of certain provisions of the UCITS Regulations to Non-UCITS investment companies.
- the purchase by an investment company of its own shares.
Companies (Amendment) (No 2) Act 1999
- the requirement that an investment company carry on activity in Ireland.
Investment Funds, Companies and Miscellaneous Provisions Act 2005
- segregated liability between sub-funds of an umbrella fund;
- cross investment between sub-funds of an umbrella fund;
- the option to prepare entity financial statements under an alternative body of accounting standards (i.e. other than under IFRS).
Companies (Miscellaneous Provisions) Act 2009
- the migration of collective investment undertakings both in and out of Ireland.
EC (Directive 2006/46/EC) Regulations 2010
- the amendment of the Companies Act 1963 to require a corporate governance statement for investment companies admitted to trading on regulated markets.
While Part 24 deals specifically with investment companies, the provisions of Parts 1 to 14 and 17 of the Bill are also applicable to investment companies, save where specific provisions are disapplied to public limited companies or disapplied or modified within Part 24 (for example certain requirements in relation to share capital which are inconsistent with the workings of an investment company).
New company law features
Investment companies authorised under Part XIII of the Companies Act 1990 should note some of the new features of the Bill which will be applicable to them:-
- the codification of directors duties;
- the categorisation of company law offences into four tiers, with Category 1 offences being the most serious;
- the period provided for under current company law during which a company which has been struck off the register can apply for restoration, currently 20 years, has been shortened to 2 years for investment companies.
Implications for Investment Companies
Part 24 provides that, once the Bill becomes law, those investment companies which are already incorporated under the current Companies Acts will be deemed to have continued in existence as investment companies to which the new legislation applies.
For the first time, a model form Memorandum and Articles of Association for investment companies is provided for under Irish company law (see Schedule 16 of the Bill). The existing model constitutions set out in the Schedule to the Companies Act 1963 did not specifically provide for investment companies.
The constitutions of existing investment companies are deemed to continue in force, save to the extent that they are inconsistent with what are called "mandatory provisions" (i.e. provisions that are not "optional provisions" under the Bill).
Prospectus, Market Abuse and Transparency law
For those investment companies which have securities admitted to trading on regulated markets, it will also be necessary to comply with certain provisions of Part 23 of the Bill which relate to the implementation into Irish law of the EU Prospectus, Market Abuse, and Transparency Directives.
Proposed ICAV legislation
It will be interesting to see the impact of the proposed ICAV legislation on investment companies. The ICAV will be a new corporate structure specifically designed for Irish investment funds. Existing investment funds set up as companies will have the option to convert to the new ICAV structure, while new funds may choose to incorporate under the ICAV legislation rather than the new Companies Act. Thus, Part 24, when enacted, may become less significant for the Irish investment funds industry.