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New corporate structure for funds

AUTHOR(S): Liam Collins, Michael Jackson
PRACTICE AREA GROUP: Asset Management and Investment Funds
DATE: 30.03.2012

The Minister for Finance has approved in principle the development of legislative proposals for a new corporate structure for the funds industry (“SICAV”).  The proposals for the SICAV legislation are aimed at developing the funds industry in Ireland and promoting employment and business opportunities in the State. 

One of the primary advantages of the SICAV will be to provide for a corporate entity that can elect its classification under the US check-the-box taxation rules.  Preliminary US tax advice has confirmed that the proposed SICAV structure would be eligible to avail of this classification.  The introduction of the SICAV will increase the range of structures available to promoters seeking to establish investment funds in Ireland.

The new corporate structure 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 plc structure is equivalent to the Luxembourg SICAV). The new corporate structure represents a modernising of the corporate fund structure and will be designed specifically with the needs of investment funds in mind and it is anticipated that the SICAV will not be subject to certain of the administrative obligations which apply to plcs. The SICAV will provide an additional option to promoters and will complement the existing options available in terms of fund structures. The introduction of the SICAV will not result in any changes for existing plcs which will continue to co-exist with the SICAV.

The Department of Finance is aiming to enact legislation by the end of 2012 or early 2013 in order for the SICAV to be established prior to the coming into effect of the Alternative Investment Fund Managers Directive (“AIFMD”) in July 2013.  This is a further positive step in ensuring that Ireland is well placed in the lead up to the implementation of the AIFMD.This new development underlines the Irish Government’s commitment to the Irish funds industry and follows on from the Government’s IFSC Strategy 2011 – 2016 which included a commitment to introduce such a structure. The announcement is a further example of Ireland’s pro-active approach to meeting the evolving needs of fund promoters.

Matheson has been closely involved in the development of industry submissions in respect of the proposed new corporate structure and welcomes the Minister’s decision. This new structure will further increase the attractiveness of Ireland as a funds domicile and should expand on the significant growth of Ireland as a fund’s domicile in 2011:

  • In November 2011, figures from the Central Bank of Ireland (the “Central Bank”) reported that the assets of Irish domiciled investment funds reached a record high and passed the €1 trillion mark, up 40% from the end of 2009; 
  • EFAMA’s annual statistical report records that Ireland experienced the highest inflows of UCITS of all fund domiciles in 2011, attracting €62 billion – almost €50 billion more than the next most successful domicile; and 
  • In January 2012, figures from the Central Bank showed that the number of qualifying investor funds was at an all time high of 1,420 with assets also reaching a peak of €182 billion. 
     

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