First Merger Of Irish UCITS Approved Under UCITS IV

Author:Dillon Eustace's Financial Services Practice Group
Profession:Dillon Eustace
 
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The first merger of an Irish authorised UCITS has been approved under the new merger regime for UCITS, as set out in Directive 2009/65/EC ("UCITS IV"). The transaction involved the merger of a sub-fund of an Irish UCITS unit trust (the "Merging Fund") with a sub-fund of a UCITS SICAV authorised under Luxembourg law (the "Receiving Fund"). The merger was approved by the Central Bank of Ireland (the "Central Bank") on 1st September, 2011 and implemented on 21st October, 2011. Dillon Eustace acted for the Merging Fund. The purpose of this Article is to examine the merger requirements under UCITS IV and the practical application of such requirements. Merger Techniques There are three types of merger techniques contemplated under UCITS IV as follows: an operation whereby one or more UCITS or sub-funds thereof, the "merging UCITS", on being dissolved without going into liquidation, transfer all of their assets and liabilities to another existing UCITS or a sub-fund thereof, the "receiving UCITS", in exchange for the issue to their unitholders of units of the receiving UCITS and, if applicable, a cash payment not exceeding 10% of the net asset value of those units; an operation whereby two or more UCITS or sub-funds thereof, the "merging UCITS", on being dissolved without going into liquidation, transfer all of their assets and liabilities to a UCITS which they form or a sub-fund thereof, the "receiving UCITS", in exchange for the issue to their unitholders of units of the receiving UCITS and, if applicable, a cash payment not exceeding 10% of the net asset value of those units; an operation whereby one or more UCITS or sub-funds thereof, the "merging UCITS", which continue to exist until the liabilities have been discharged, transfer their net assets to another sub-fund of the same UCITS, to a UCITS which they form or to another existing UCITS or a sub-fund thereof, the "receiving UCITS". This is the most commonly used merger technique for Irish authorised UCITS. The merger of the Merging Fund with the Receiving Fund was carried out under the technique outlined at (iii) above. It is expected that this technique will be the most attractive for fund promoters given that, in practise, the liabilities of merging funds are generally not transferred as part of the merger arrangements. Approval Process As part of the approval process under UCITS IV, the merging UCITS is required to provide the following information to the Central Bank: the common draft terms of the proposed merger duly approved by the merging UCITS and the receiving UCITS; an up-to-date version of the prospectus and the key investor information (or simplified prospectus) of the receiving UCITS; a statement by each of the trustee / custodian of the merging and the receiving UCITS verifying compliance of certain particulars with the requirements of the UCITS Regulations and the respective UCITS' fund rules; and the information on the proposed merger (the "Circular") that each of the merging and the receiving UCITS intend to provide to their respective unitholders. Fund promoters should be aware of the requirement referred to at (d) above and the fact that it will be necessary to send a Circular to both...

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