The Irish Collective Asset-management Vehicle (ICAV) Act 2015 (the “Act”) was signed into law by the President of Ireland on 4 March 2015, and came into effect in its entirety on 12 March 2015. The Act provides for the establishment of the new Irish corporate investment fund vehicle that is specifically tailored to the needs of the global funds industry.
Irish Collective Asset Management Vehicle
The ICAV is a new Irish corporate fund vehicle that will exist as the fifth type of legal structure alongside the current Irish fund structures (i.e. the investment company, unit trust, common contractual fund and investment limited partnership). One of the main advantages of the ICAV is that it will be able to elect in its classification, under the US “check the box” taxation rules, to be treated as a transparent entity for US federal income tax purposes. This will allow US taxable investors to avoid certain adverse tax consequences that would normally apply to “passive foreign investment companies”. In addition, the ICAV has been specifically designed to be distinguishable from a typical company. Most Irish funds are authorised as investment companies and, as such, are required to comply with many of the rules applicable to companies which are not relevant or appropriate in the funds context. The ICAV is a bespoke corporate structure that will avoid the need for compliance with certain Irish company law requirements. This will result in reduced administrative obligations and costs.
For example, the ICAV may:
- amend its constitutional document without shareholder approval in respect of changes that do not prejudice the interests of shareholders and do not come within certain categories of changes specified by the Central Bank of Ireland (the “Central Bank”),
- prepare separate financial statements for sub-funds,
- issue debenture stock, bonds and any other securities,
- allow directors to dispense with the holding of an AGM by giving written notice to all shareholders, and
- avail of the existing merger mechanisms available to UCITS and AIFs
Now that the Act has been signed into law, the Central Bank has indicated that it will begin accepting and processing applications for the authorisation of ICAVs within the next few weeks. Arthur Cox was a contributing member of the legislative group responsible for the preparation of the Act.