Irish Collective Asset-management Vehicle (ICAV)

The Irish Collective Asset-management Vehicles Act 2015 (the ICAV Act) provides for a new corporate vehicle, the ICAV, which has been specifically tailored for the funds industry. The ICAV sits alongside the other fund structures currently available in Ireland, namely the variable capital company (VCC), the unit trust, the common contractual fund (CCF) and the investment limited partnership (ILP). Partners in the A&L Goodbody Asset Management & Investment Funds Unit have been closely involved in drafting this legislation.

The Central Bank of Ireland (Central Bank) acts as the incorporating, authorising and supervisory body for the ICAV.

Key advantages of an ICAV

  • The ICAV benefits from being subject to a separate and distinct corporate governance regime which has been drafted specifically for use by the funds industry. As such, the ICAV is not subject to a number of the general Irish and European company law requirements which are applicable to VCCs by virtue of their incorporation under the Irish Companies Acts, but which are generally more appropriate to trading companies than fund vehicles. The ICAV represents a simpler and more cost effective choice of corporate vehicle for funds. This should also “future proof” the ICAV against future changes in Irish and European company law.
  • The ICAV is able to elect its classification under the US ‘check-the-box’ taxation rules (which is of particular interest to managers of funds targeting US investors).  This allows an ICAV to be treated as a partnership for US tax purposes and thereby avoid certain adverse tax consequences for US taxable investors. This is in contrast to the status of the VCC which is unable to ‘check-the-box’ for US tax purposes, and gives rise to potential treatment as a Passive Foreign Investment Company (PFIC) for US investors which, depending on the precise status of the investor and the elections it makes, can give rise to a greater tax and administrative burden than if the fund is able to ‘check-the-box’.
  • ICAVs may be authorised as either alternative investment funds (AIFs) or as undertakings for collective investment in transferable securities (UCITS). They may be self-managed (or internally managed) or have an external manager.
  • ICAVs may be authorised as stand-alone or umbrella structures.
  • Umbrella ICAVs have segregated liability between sub-funds.
  • ICAVs established as AIFs may issue partly paid shares.
  • ICAVs can be structured as open-ended, closed-ended or limited liquidity funds.
  • ICAVs may list on the Irish Stock Exchange (ISE) by following the normal listing process for Irish domiciled funds without any additional requirements.
  • Umbrella ICAVs may prepare separate accounts with different year-ends in respect of each sub-fund. It will not be necessary for the ICAV to produce consolidated accounts as a VCC is currently obliged to do. This provides added flexibility and may reduce costs. The requirements for the preparation of financial statements for an ICAV follow the UCITS or AIF requirements (as the case may be) and additional requirements are not prescribed. The ICAV enjoys flexibility as to which accounting standards to adopt in the preparation of its financial statements.
  • ICAVs may dispense with the ability to hold an annual general meeting (AGM) by giving at least sixty days prior written notice to all of the ICAV’s shareholders.
  • There will be no requirement to obtain prior investor approval where changes are sought to the instrument of incorporation (IOI), provided the ICAV’s depositary can certify that the changes do not prejudice the interests of investors.
  • ICAVs are not subject to risk spreading/diversification requirements which currently apply to VCCs under Irish company law. This is of interest to QIAIFs which are already subject to AIFMD risk management policy requirements.
  • Existing funds established as investment companies may convert to ICAV status by way of continuation without impacting their regulatory or Irish taxation status, and without interrupting their performance record.
  • Existing funds domiciled outside of Ireland into Ireland may migrate (i.e. re-domicile) to Ireland as ICAVs by way of continuation and so avoid interrupting their performance record.

Incorporation, Conversion, Re-Domiciliation (Migration) and Merger

The ICAV Act sets out simple, streamlined and fairly straight forward procedures (which are based on existing tried and tested procedures) for:

  • the incorporation of an ICAV;
  • the conversion of an existing Irish corporate vehicle established under the Irish Companies Acts to an ICAV;
  • the re-domiciliation (or migration) of an existing non-Irish fund to Ireland as an ICAV; and
  • a merger involving an ICAV as the receiving fund.