The Irish Minister for Finance has recently published the General Scheme of the Irish Collective Asset-management Vehicle (ICAV) Bill (the "General Scheme"). The publication followed approval of the General Scheme for legal drafting at a Government meeting on 17 December 2013. The Minister has stated that he will press ahead with the drafting of the bill as a matter of priority.
Matheson partners have been extensively involved in an industry project to introduce the ICAV, which it is hoped will lead to the publication of a bill early in 2014. The introduction of the ICAV will increase the range of fund vehicles in Ireland available to promoters, fulfilling one of the initiatives outlined in the Irish Government's IFSC Strategy 2011-2016.
What is an ICAV?
The ICAV is a new corporate vehicle designed for Irish investment funds. It will sit alongside the public limited company ("plc"), which has been the most successful and popular of the existing Irish collective investment fund vehicles to date. The ICAV is expected to be incorporated with the Central Bank of Ireland (the "Central Bank") and will provide a tailor-made corporate fund vehicle for both UCITS and alternative investment funds ("AIFs").
Why is the ICAV being introduced?
The ICAV legislation will modernise the corporate fund structure and is conceived specifically with the needs of investment funds in mind. As a bespoke corporate investment fund vehicle, a fund established as an ICAV will have the advantage that it will not be impacted by amendments to certain pieces of European and domestic company legislation that are targeted at trading companies rather than investment funds.
An important feature of the ICAV is that it will be able to elect its classification under the US check-the-box taxation rules. The Irish plc is not currently 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 the shareholder level when distributions are made. An "eligible entity" ie, 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, as currently proposed, are set out below.
An ICAV will not have the status of an ordinary Irish company established under the Irish...