Anne-Marie Bohan examines the Irish Collective Asset Management Vehicle Bill.
The eagerly-awaited Irish Collective Asset Management Vehicle (ICAV) Bill 2014 was published on July 29th 2014. The ICAV is a new, bespoke, corporate investment fund vehicle which will be available for both Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs), and will have a range of attractive advantages for fund promoters looking to establish, convert or migrate a new or existing corporate fund vehicle.
The genesis of the ICAV was as an industry proposal, with the advantages of a bespoke corporate vehicle became apparent over time. The inclusion of a commitment to introduce the ICAV in the Government’s IFSC Strategy 2011–2016, was a clear demonstration of its commitment to the Irish funds industry.
Unlike the existing Irish corporate fund vehicle, which grew organically out of the pre-existing companies legislation, one of the primary advantages of the ICAV will be the fact that it will not be automatically impacted by amendments to European and domestic company legislation which are targeted at trading companies, rather than investment funds.
Similar in many respects to the existing Irish investment company, the ICAV can be established as a self-managed or externally managed, stand-alone or umbrella, open-ended or close-ended vehicle; can be authorised as a UCITS or as an AIF, and may be either managed by an external management company or be a self-managed entity.
However, the ICAV will have some operational benefits, which include the ability to dispense with an AGM in specific circumstances, to produce more streamlined audited accounts, and to amend its constitutional document in a more flexible manner. These feature are expected to result in significant cost savings, especially for those funds which market into a wide range of different jurisdictions and which currently have to translate AGM notices and accompanying financial statements into numerous languages. Another feature of the ICAV will be its ability to elect its classification under the US check-the-box taxation rules, which would enable it to avail of more favourable tax treatment. This represents a significant development for fund promoters seeking to market a European fund vehicle to US investors, as the existing structure is not currently permitted to check-the-box for US tax purposes.
Conversion of an existing UCITS or AIF, established as an Irish investment company, will be possible, using a relatively straightforward procedure, and any costs of converting to ICAV status are likely to be outweighed by the cost saving benefits arising from the additional flexibility afforded by the ICAV.
The Bill also specifically anticipates a single, combined, migration and conversion process which will allow for the re-domiciliation of certain non-Irish investment companies to Ireland as ICAVs by way of continuation, with the existing legal identity retained, allowing continued reliance on past performance data and existing contracts. It is anticipated that the Bill will be enacted during the third quarter of 2014. On that basis, it is expected that ICAVs will be available, as an investment fund corporate vehicle, during the last quarter of this year.
The ICAV will represent an improvement – rather than a significant departure – for the existing fund regime in Ireland providing as it does an enhanced investment fund bespoke corporate vehicle which will be an alternative to but not a replacement for the existing investment company structure.
With its range of potential cost saving benefits and advantageous features, the ICAV is expected to be the corporate vehicle of choice for Irish domiciled investment funds in the future, regardless of the domicile of the investor base.