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Enhancements to Irish Loan Originating Funds Regime Announced
AUTHOR(S): Tara Doyle, Michael Jackson, Dualta Counihan, Joe Beashel, Anne-Marie Bohan, Shay Lydon, Liam Collins, Philip Lovegrove, Elizabeth Grace, Oisin McClenaghan, Michelle Ridge
PRACTICE AREA GROUP: Asset Management and Investment Funds
The Central Bank of Ireland (“Central Bank”) has announced that, with effect from 3 January 2017, Irish authorised loan originating qualifying investor alternative investment funds (“L-QIAIFs”) will be permitted to engage in a broader range of activities to include investing in “debt and equity securities of entities or groups to which the loan originating Qualifying Investor AIF lends or which are held for treasury, cash management or hedging purposes”. Matheson advised on the establishment of one of the first L-QIAIFs in Ireland and welcomes any enhancements to the Central Bank’s L-QIAIF regime which facilitate managers operating in the direct lending sphere.
On 25 November 2016, the Central Bank published a notice of intention to amend the requirements applicable to L-QIAIFs set out in its AIF Rulebook. At present, L-QIAIFs are prohibited from engaging in activities other than lending and directly related operations. Following a number of submissions from industry, the Central Bank has now reviewed this position, and has concluded that it is appropriate to allow other investments linked to the loan origination strategy.
While the Central Bank has not issued a formal consultation in relation to the announced changes, it has invited comments while the arrangements are being finalised.
Ireland was the first EU member state to introduce a specific regulatory framework for loan originating investment funds and we welcome the Central Bank’s willingness to keep the applicable requirements under review as investor demands and European regulation evolve. The European Commission has indicated that it intends to consult on establishing a common European framework for loan originating investment funds as part of its ongoing work on building a Capital Markets Union, which may suggest further positive developments in this area.