The Irish Minister for Finance, Michael Noonan signed the commencement order for the Irish Collective Asset-management Vehicles Act 2015 (the "Act") on 12 March 2015. The Act allows for the creation of a new, tax-efficient and innovative corporate structure for Irish investment funds.
The Irish Collective Asset-management Vehicle (ICAV) sits alongside the existing public limited company ("Irish PLC") structure, which has been the most successful and popular of the existing Irish fund structures to date. It complements other legal forms of Irish regulated funds – such as the unit trust, investment limited partnership and the common contractual fund – and can be used in conjunction with these funds as master-feeders or parallel fund structures. Like other regulated fund structures, the ICAV can be established by way of a filing with the Central Bank of Ireland (the "Central Bank") and can seek authorisation as either a UCITS or an alternative investment fund ("AIF"). From a regulatory perspective, the ICAV may be established as either a stand-alone or an umbrella fund and can be structured to suit all major investment strategies (accommodating traditional as well as alternative investment policies). It can also avail of a full suite of liquidity options making it suitable for mutual funds, hedge, real estate, infrastructure, lending vehicles, private equity, managed accounts and hybrid funds.
Notable features of the ICAV
The principal advantage to an investment fund established as an Irish PLC is that the ICAV has its own specific legislative code. This means it will not be impacted by amendments to European and Irish company legislation (which are targeted at ordinary companies but which currently impact Irish PLCs). This results in a more straightforward set of legal rules applicable to the ICAV, and lower administration costs. For example, the ICAV is not subject to the principle of risk spreading which will facilitate single asset deals. The Act also permits changes to be made to the ICAV's constitutional document, the instrument of incorporation ("IOI"), without the requirement to obtain prior investor approval provided that the ICAV's depositary certifies that changes to the IOI do not prejudice the interests of investors (similar to the requirements relating to changes to the trust deed of a unit trust). The ICAV will also be permitted to prepare separate sub-fund accounts for individual sub-funds within an umbrella structure. This will be a very important feature for large multi-manager structures as currently Irish PLCs have to produce one set of accounts for the entire umbrella (with a single year-end date) and the ability of investors in one sub-fund to receive financial details of all other sub-funds.
The Irish PLC is currently considered to be a "per se corporation" for US tax purposes and can't avail of the "check-the-box" election and is generally treated as a separate entity for US tax purposes. A key advantage of the ICAV is that it will not automatically be considered a corporation for US tax purposes and can elect to "check-the-box" which will allow it to be treated as a partnership or a disregarded entity for U.S. tax purposes putting the ICAV on a par with the tax election available for Luxemburg SICAVs. This "check-the-box" election allows taxable U.S. investors to be in the same tax position as if they had invested directly in the underlying assets of the ICAV and will bring such U.S. investors outside of the U.S. Passive Foreign Company Investment Regime. This feature should enhance the attractiveness of the ICAV to US investors and managers who, to date, have traditionally established Irish funds as unit trusts in order to achieve this result. An added benefit to the ICAV is that while it may elect for U.S. purposes to be tax transparent it will still generally be treated as a corporate vehicle in most other jurisdictions thereby allowing it to avail of the existing network of Irish double taxation agreements.
The ICAV will constitute an investment undertaking for Irish tax purposes and will be subject to the same gross roll-up regime that currently applies to existing Irish investment funds, AIFs and UCITS. Broadly, this means that any profits and gains of the ICAV will be exempt from tax in Ireland subject to certain conditions. The ICAV is available to both new and existing structures and the Act provides a mechanism for existing Irish PLCs to convert into an ICAV. The Central Bank started accepting applications for ICAV on the 16 March 2015.
The Irish funds industry has welcomed the new ICAV structure confirming Ireland’s commitment to being a competitive domicile for investment funds.
Ian Conlon, Partner, Maples and Calder