Segregated Liability For Irish Investment Funds

Author:Mr Karen Jennings
Profession:Dillon Eustace
  1. Introduction

    The Investment Funds, Companies and Miscellaneous Provisions

    Act, 2005 (hereafter referred to as the "2005 Act")

    was signed into law on 30th June, 2005. The 2005 Act provided

    for a number of significant developments in the Irish funds

    industry, including:

  2. The provision of cross investment between sub-funds of

    the same umbrella, where the umbrella is structured as an

    investment company.

  3. The introduction of a Non-UCITS CCF fund structure.

  4. The introduction of segregated liability at sub-fund

    level for investment companies which are structured as umbrella


  5. Segregated Liability

    Prior to the commencement of the 2005 Act, the position of

    an Irish umbrella investment company under Irish law was that

    although separate books, accounts and records were kept for

    each sub-fund and while assets and liabilities remained

    attributable to each sub-fund, the company as a whole remained

    legally responsible to third parties for the liabilities of

    each sub-fund.

    This position can be contrasted with the position of an

    Irish umbrella unit trust, where the legislative regime already

    enabled the assets and liabilities of each sub-fund of an

    umbrella unit trust to be segregated from the assets and

    liabilities of the other sub-funds of that umbrella.

    France and Luxembourg, two of the largest fund markets in

    the EU, have already introduced amendments to their legislation

    to provide for segregated liability between sub-funds of an

    umbrella investment company. The introduction of such

    amendments in Ireland shall be welcomed as it will allow for

    greater investor protection and choice, and will make Ireland a

    more attractive location for the establishment of investment

    funds, thereby increasing Ireland's competitiveness in this


    However, it is important to note that the concept of

    "protected cell" or "segregated liability"

    legislation is relatively new. Therefore, it remains possible

    that such segregation could be disallowed in jurisdictions

    outside the domicile of the investment fund or jurisdictions

    where such legislation is not recognised.

  6. Procedural Regime for Segregated Liability under the

    2005 Act

    Section 25 of the 2005 Act amends Part XIII of the 1990 Act

    by inserting five sections (sections 256A to 256E) after

    section 256 of the 1990 Act to provide for segregated liability

    for investment funds. It provides a mechanism for an umbrella

    fund to avail of the benefits of segregated liability but also

    provides for certain safeguards to...

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