Update On ICAV

Author:Mr Kevin Murphy, Sarah Cunniff and Dara Harrington
Profession:Arthur Cox
 
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Executive Summary

On 20 December 2013, Ireland's Minister for Finance, Michael Noonan TD, published the General Scheme of the Irish Collective Asset-management Vehicle (ICAV) Bill 2014 which will allow for the establishment of a new Irish corporate investment fund structure that is tailored to the needs of the global funds industry. The drafting of the bill is to be progressed as a priority within the Irish Government and it is intended that the new structure will minimise the administrative complexity and cost of establishing and maintaining collective investment schemes in Ireland. The new investment fund structure will be exempted from many of the rules applicable to public companies, and will also meet certain U.S. taxation rules, thereby providing increased flexibility and choice of Irish fund vehicle to promoters. Once the legislative process has been completed, it is anticipated that the primary legislation will be enacted towards the end of Q1 2014.

Background

In March 2012, the Irish Minister for Finance announced the development of legislative proposals for a new corporate structure for the Irish investment funds industry. This corporate structure will be called the Irish Collective Asset-management Vehicle ("ICAV") and will exist as an additional legal structure alongside the existing fund structures (including the investment company constituted as a public limited company) so as to offer increased choice of vehicle to fund promoters.

The ICAV will be capable of being authorised by the Central Bank of Ireland as either a UCITS fund under the UCITS Regulations1 or as an alternative investment fund ("AIF") under the AIF Regulations2.

The ICAV will be a corporate entity that will have a similar structure to the SICAV that is used in other European jurisdictions and will operate outside of the Companies Acts in Ireland. A similar vehicle, known as the Open-Ended Investment Company ("OEIC"), has been available as in the UK since 1997. However, the ICAV may be formed as an open-ended, closed-ended or limited liquidity vehicle, thereby providing an alternative to all forms of company currently permitted by the Irish Companies Acts.

The main advantage of the ICAV is that it is expected to meet the U.S. "check the box" taxation rules. The ICAV can elect in its classification under the U.S. "check the box" taxation rules to be treated as a transparent entity for U.S. federal income tax purposes, which will allow U.S. taxable investors to...

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