Following on from the announcement in March 2012 of the proposal to introduce a new corporate structure tailored specifically to the Irish Fund Industry, significant progress has been made on draft legislation which, it is anticipated, will be published shortly.
The new corporate structure, which will be known as an ‘ICAV’, will sit alongside the existing corporate structure for collective investment schemes in Ireland, namely the public limited company (plc), which is the form a significant number of existing Irish fund structures have adopted to date. It is anticipated that the ICAV structure will be available to both UCITS and Alternative Investment Funds.
The ICAV structure has been designed specifically for investment funds. As such, much of the Irish company law and accounting rules which currently apply to existing Irish collective investment schemes structured as plcs will not apply to the ICAV structure. In addition, ICAVs will not be subject to further developments in European and Irish company law, which developments are more appropriate for trading companies rather than investment funds. This should result in lower administrative costs for an ICAV.
In addition, the ICAV will be able to elect for classification under the US “check – the – box” taxation rules as ‘flow throughs’ for US tax purposes. In contrast to investment funds authorised as unit trusts and investment limited partnerships (which can be treated as ‘flow throughs’ for US tax purposes) plcs are currently viewed as corporations for US tax purposes and therefore are potentially subject to two levels of tax, one at the corporate level where the income is earned and a second at the shareholder level when distributions are made. An eligible entity (i.e. an entity that can elect for classification under the “check – the – box” rules), can elect for alternative, more favourable tax treatment. The ICAV will be an eligible entity for these purposes.
It is anticipated that the proposed legislation, which William Fry have been extensively involved in the preparation of, will be published in late December 2013 or early 2014. William Fry will provide a more detailed analysis, once the draft legislation is published.