Finally, asset managers interested in targeting US taxable investors can rejoice…
In Ireland, and across the EU (with the exception of Luxembourg) the same corporate legal structures that house actual businesses also have traditionally been used to house collective investment schemes, including the plc, the LLP, and the unit trust. However, these structures were adopted by the fund industry, and not originally designed for funds, which has led to a lot of regulatory burdens and inefficiencies for the funds. Where Ireland is not alone in that globally, most countries do not have a specialized corporate vehicle for funds, they have taken steps to change that with the intent of making the country a more attractive domicile for investment funds. And that has led to the creation of the Irish Collective Asset Management Vehicle, or ICAV, Ireland’s first corporate organization designed specifically to function as a collective investment scheme for both UCITS and AIFs.
First and foremost, the new ICAV will facilitate investment by US taxable investors, allowing access to UCITS funds and AIFs taking advantage of "check the box" status, meaning that the ICAV can elect to be treated as a partnership for US tax purposes, thereby allowing US taxpayers to avoid the high tax burdens that come with investments in foreign corporate fund structures. Secondly, the ICAV will not be subject to a number of the general Irish and European company law requirements which are applicable to the current fund structures by virtue of their incorporation under the Companies Acts, which should make a simpler and less costly governance and administration framework for funds. Thirdly, the ICAV will be overseen by the Central Bank of Ireland ("CBI"), which will act as both the incorporating and authorizing body for the ICAV, which may be formed in a stand-alone structure or as an umbrella fund. Finally, the new law provides for continuation in the conversion from another Irish corporate entity into the ICAV, or in re-domiciling a foreign fund structure into the ICAV. This means that the new fund will not be considered a new legal entity and instead can retain its existing corporate identity, track record and performance data upon its conversion into an Irish ICAV, which will be very important to managers considering the switch.
The CBI has indicated that they will be prepared to take applications for the ICAV within two weeks of the bill being signed into law. Based on the industry buzz, it sounds like there may be a line at the door when they open for business.
If you have questions on the ICAV, please contact your ACA consultant or Andrew Welch in the London office at +44 (0) 207 042 0593.
ACA Compliance (Europe)