Ireland's all-in-one banking/fund regulator has announced that it will be the supervisory authority for the incoming Irish Collective Asset-management Vehicle structure.

The Central Bank of
Ireland (Ireland's all-in-one banking regulator and fund regulator)
has said that it will be the supervisory authority for the incoming
ICAV structure and will take a similar approach in respect of filings
and reviews to the one it takes to the fund vehicles that it
authorises at the moment, depending on whether the scheme in question
is an Undertaking for Collective Investments in Transferable
Securities (UCITS) or an Alternative Investment Fund. The team at
Mattheson Partners, which helped frame the legislation, comments. 

The Central Bank of
Ireland (Ireland's all-in-one banking regulator and fund regulator)
has announced that it will be the supervisory authority for the
incoming Irish Collective Asset-management Vehicle structure and will
take a similar approach in respect of filings and review to the one
it takes to fund vehicles that it authorises at the moment, depending
on whether the scheme in question is a UCITS or an AIF.

The Irish parliament is
making progress with the Bill which will, in due course, introduce
the ICAV, a new corporate structure for the establishment of
collective investment schemes in Ireland, and increase the range of
fund structures available to promoters. 

The ICAV Bill was
published in mid-December. Its preparation, with which we have been
and are extensively involved, underlines the Irish Government's
commitment to beefing up the funds industry and represents the
fulfilment of one of the initiatives outlined in its “Strategy for
the International Financial Services Industry in Ireland 2011-2016.”

What is an ICAV?

The ICAV will sit
alongside the public limited company structure, which has been the
most successful and popular of the existing Irish fund structures to
date. The ICAV is expected to be incorporated with the Central Bank
(although this has yet to be confirmed) and will provide a
tailor-made fund vehicle to which ought to be available as a
corporate structure to both Undertakings for Collective Investment in
Transferable Securities (UCITS) and alternative investment funds
(AIFS). 

Why is Ireland
introducing it?

The ICAV will represent
a modernisation of the corporate fund structure and is conceived
specifically with the needs of investment funds in mind. The
advantage of a bespoke funds vehicle is that an investment fund
established as an ICAV will not suffer from endless amendments to
certain pieces of European Union and domestic company legislation
which are targeted at trading companies rather than investment funds.

CALLOUT: The ICAV
will have its own legislative regime to distinguish it from ordinary
companies 

The ICAV will be able
to 'elect' its classification under the US 'check-the-box' taxation
rules. The present-day Irish plc is not permitted to 'check-the-box'
for US tax purposes, meaning that it is treated as a separate entity
and subject to two levels of tax: one at the corporate level where
the income is earned and the second at shareholder level when
distributions are made. An 'eligible entity', i.e. an entity that can
'elect' its classification under the 'check-the-box' rules, can elect
for alternative, more favourable tax-treatment. The ICAV will be an
'eligible entity' for these purposes.

Features of the ICAV

The primary features of
the ICAV are to be as follows.

• An ICAV will not have
  the status of an ordinary Irish company that has been established
  under the Irish Companies Acts. Instead, it will have its own
  legislative regime which will help to ensure that the ICAV is
  distinguished from ordinary companies and therefore will not be
  subject to those aspects of company law that would not be relevant or
  appropriate to a collective investment scheme.
• An ICAV may be
  established as an 'umbrella structure' with a number of sub-funds and
  share classes. It may be listed on a stock exchange, which itself
  will act as a front-line regulator. Investors are to own shares in
  the ICAV and the ICAV should be able to issue and redeem shares
  continually according to demand from investors. In this regard, there
  is to be no difference between the ICAV and other open-ended
  collective investment schemes.
• The ICAV will have a
  governing document which is likely to be known as an instrument of
  incorporation or IOI. Similar to the memorandum and articles of
  association of an investment company, this will be the constitutional
  document of the ICAV. The primary reason in differentiating between a
  memorandum and articles of association and an IOI is to emphasise the
  distinction between the ICAV and existing plcs as different types of
  corporate entity.
• In the case of
  changes to the IOI, it is envisaged that there will be no need for
  the board to obtain prior approval from investors as long as the
  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).
• Like a plc, an ICAV
  will have to have a board of directors to govern its affairs. Similar
  to other collective investment schemes, the ICAV may either be
  managed by an external management company or be a self-managed
  entity.
• Depositary
  requirements that resemble those that currently exist for an
  investment company will apply to an ICAV (although, of course, these
  will vary depending on whether the ICAV is a UCITS or an AIF).
• It is likely that the
  directors of an open-ended ICAV will be permitted to elect to
  dispense with the need to hold an annual general meeting by giving
  written notice to all of the ICAV's shareholders.
• Existing funds
  established as plcs will have the option to convert to ICAV status.

 Michael Jackson,
Tara Doyle, Dualta Counihan, Liz Grace, Philip Lovegrove and Shay
Lydon of Matheson Partners wrote this summary.