Available Legal Structures

Author:Mr Andrew Bates
Profession:Dillon Eustace

UCITS can be established in Ireland as variable capital investment companies, unit trusts, or as common contractual funds (*fixed capital investment companies are also available but not in practice used).

All three legal structures are subject to the standard UCITS investment and borrowing restrictions, the same authorization process and operating conditions and each must have as its sole object the collective investment in eligible assets of capital raised from the public and provide for at least fortnightly redemption facilities.

Under current legislation, each of the structures must have an Irish based Trustee/Custodian (responsible for safekeeping of assets and performance of certain fiduciary type duties).

Typically, the administration function (calculation of the NAV, the accounting function, maintenance of books and records and the transfer agency function) is carried out by an Irish administrator although, under UCITS IV, there is now scope for such services to be passported into Ireland (please refer to the following Chapter, which sets out further information with regard to the management company passport).

Most UCITS will appoint an Investment Manager (responsible for discretionary asset management of the UCITS portfolio) and many will appoint a Global Distributor or local Distributors. Notwithstanding the above there are a number of distinctions between the three legal structures as summarised below.

UCITS variable capital investment companies UCITS variable capital investment companies or "VCCs" are public limited liability corporate vehicles with their own legal personality. In addition to the UCITS Regulations they are subject to Irish company law (with relevant exceptions) as it applies to public limited companies.

Their constitutive document is the Memorandum and Articles of Association and ultimate management authority resides with a board of directors, two of whom must be Irish resident. VCCs issue shares to investors which shares do not represent a legal or beneficial interest in the VCCs assets, those assets being legally held by the Custodian, beneficially by the VCC itself. Unlike both unit trusts and CCFs, VCCs are required to convene and hold an annual general meeting of shareholders and any changes to their Memorandum and Articles of Association require investor approval.

Self-managed VCCs require a minimum paid up capital of Euro 300,000 before commencing operations and are also subject to the "substance"...

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