New Corporate Structure For Funds – The ICAV

Author:Mr Michael Jackson, Tara Doyle, Dualta Counihan, Joe Beashel, Anne-Marie Bohan, Shay Lydon, Liam Collins, Philip Lovegrove, Aiden Kelly and Elizabeth Grace
Profession:Matheson
 
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Progress is being made on draft legislation which will introduce the ICAV, a new corporate structure for the establishment of collective investment schemes in Ireland, increasing the range of fund structures available to promoters. It is hoped that an industry project relating to the ICAV, with which Matheson partners are extensively involved, will lead to the publication of a draft bill by the end of this year. The introduction of the ICAV underlines the Irish Government's commitment to the Irish funds industry and represents the fulfilment of one of the initiatives outlined in the Governments IFSC Strategy 2011-2016.

What is an ICAV?

The ICAV will sit alongside the public limited company ("plc") 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 will be available as a corporate structure to both UCITS and alternative investment funds ("AIFs").

Why is the ICAV being introduced?

The ICAV will represent a modernising 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 be impacted by amendments to certain pieces of European and domestic company legislation which are targeted at trading companies rather than investment funds.

The ICAV 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 are set out below.

An ICAV will not have the status of an ordinary Irish company established under the Irish Companies Acts. Instead, it will have its own legislative regime, which will assist in ensuring that the ICAV is distinguished from ordinary companies and therefore will not be subject to those aspects of company law...

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