Ireland Announces Further Enhancements to its Investment Funds Regime

Author:Mr Conor Durkin and Declan O'Sullivan
Profession:Dechert
 
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Ireland Implements Funds Re-Domiciliation Legislation The commencement order giving effect to the provisions of the Irish Companies (Miscellaneous Provisions) Act 2009 (the "Act") which provides for the efficient re-domiciling of offshore fund companies to Ireland has been signed. The Act permits offshore fund companies from prescribed jurisdictions to re-register as Irish companies whilst preserving their legal identity. As there is no change of legal entity, the migration should not constitute a taxable event for investors and the fund will be able to maintain its track record. The commencement order prescribes certain countries, whose domestic laws permit both outward and inward redomicilation under conditions which are substantially similar to Ireland, from which offshore fund companies may re-domicile to Ireland. The jurisdictions which offer reciprocity and which are prescribed are the British Virgin Islands, the Cayman Islands, Jersey, Guernsey, Bermuda and the Isle of Man. The Irish Financial Regulator (the "Financial Regulator") will shortly be issuing guidance on the regulatory process for redomiciling funds. Financial Regulator Permits Retail Debt Funds to Charge Fees and Expenses to Capital The Financial Regulator will now permit the charging of fees and expenses of open-ended retail distributing fixed income funds ("Retail Debt Funds") to capital provided the Retail Debt Fund complies with the requirements of the Financial Regulator and detailed risk warnings are made to investors. Background Although retail funds were permitted, in accordance with the requirements of the Financial Regulator and appropriate accounting standards, to determine how fees and expenses should be charged, the Financial Regulator required Retail Debt Funds to charge fees and expenses only to income. A Retail Debt Fund could only charge fees and expenses to capital if it did not accrue income during the relevant accounting period. This policy arose from a concern that investors in a Retail Debt Fund might not appreciate that a policy which permitted fees and expenses to be charged to capital could lead to capital erosion which would not be the expectation for a fixed income investment. The Financial Regulator was also concerned that if fees and expenses were charged to capital that returns to investors could be misleading and ultimately undermine investor confidence. General Requirements for Charging Expenses to Capital In addition to the additional...

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