Ireland: Asset Management & Investment Funds

The Alternative Investment Fund Managers Directive (“AIFMD”) was implemented into Irish legislation pursuant to the European Union (Alternative Investment Fund Managers) Regulations, 2013 (the “AIFM Regulations”). The competent authority with respect to AIFMD in Ireland is the Central Bank of Ireland (the “Central Bank”).

AIFM

The AIFM Regulations require that each alternative investment fund (“AIF”) shall have a single alternative investment fund manager (“AIFM”) who is responsible for ensuring compliance with AIFMD.

Each AIFM will be required to seek authorisation from its home regulator to act as an AIFM and a detailed application procedure is required (an “Authorised AIFM”).

AIFMD does make provision for a lighter ‘registration’ (rather than authorisation) regulatory regime for those AIFMs which manage portfolios of AIFs which do not exceed the following thresholds;

• EUR 100 million; or

• In the instance of AIFs that are unleveraged and have no redemption rights exercisable during a period of five years following the date of initial investment in each AIF, EUR 500 million.

(a “Registered AIFM”).

Although registration is a lighter regime than full AIFM authorisation, a Registered AIFM will still need to register with the Central Bank identifying itself and the AIFs that it manages and comply with various AIFMD requirements.

It is important to note that the Central Bank currently only permits a new qualifying investor alternative investment fund (a “QIAIF” details of which are outlined later in this note) which has appointed a Registered AIFM, to have a two year start-up period post establishment (the “Transitional Period”). After the Transitional Period, an Authorised AIFM must be appointed to the QIAIF. During the Transitional Period, those QIAIF’s who have appointed Registered AIFMs, are subject to the full AIFMD depositary regime but may exclude the AIFMD depositary liability provisions in favour of adopting the depositary liability standard set out in the pre-AIFMD Central Bank rules (details in relation to which are set out in the Central Bank’s Non-UCITS Notices).

New retail alternative investment funds cannot appoint a Registered AIFM and must appoint an Authorised AIFM.

An Authorised or Registered AIFM can be either (i) an external manager or, (ii) where the legal form of the AIF permits internal management and where the AIF’s governing body chooses not to appoint an external AIFM, the AIF itself, which shall then be Authorised/Registered as an AIFM. This is commonly referred to as an “Internally Managed” AIF and this is a structure that is permitted by the Central Bank. This essentially means the AIF and the AIFM are the same entity.

The below documentation checklists (“Dillon Eustace Checklist 1” and “Dillon Eustace Checklist 2”) focus on the documentation required to submit applications to the Central Bank for approval as either an Authorised or Registered AIFM where such entity will be an external manager for the AIF. Dillon Eustace Checklist A and Dillon Eustace Checklist B focus on the internally managed AIFs.

AIF

At the AIF (or fund) level, the Irish regulatory regime recognises two types of AIF reflecting not only the provisions of AIFMD but also building on the pre-existing and well known Irish qualifying investor fund ("QIF")structure which, to date, has been the principal Irish non-UCITS scheme used for hedge funds and other alternative fund products.

The two types of AIFs which can be established are the qualifying investor alternative investment fund (the “QIAIF”) and the retail alternative investment fund (the "RIAIF").

We have set out below, some high level detail on the QIAIF and RIAIF structures.

QIAIF

QIAIFs are subject to a EUR 100,000 (or equivalent in other currencies) minimum subscription requirement and can only be “marketed” (ie. using the passport) to “professional investors”, although there is a higher EUR 500,000 figure for QIAIFs which invest more than 50% of net assets in unregulated funds. If they have an Authorised AIFM, QIAIFs can be “marketed” cross-border within the EU to professional investors using the passport. QIAIFs are subject to few investment restrictions, the principal ones being those imposed by AIFMD on certain private equity type strategies and on investments in securitisations and certain Central Bank imposed restrictions on investing in other funds. QIAIFs are not subject to borrowing or leverage limits but are subject to leverage disclosure requirements. QIAIFs are, accordingly, suitable structures for hedge funds, Funds of Hedge Funds, less liquid and illiquid alternatives, private equity, venture capital and development capital funds, real estate funds and most other types of investment fund, whether considered “alternative” or not.

QIAIFs can currently be established in Ireland as Irish collective asset vehicles (“ICAVs”), variable capital investment companies (“VCC”), as unit trusts, as tax transparent investment limited partnerships or as tax transparent common contractual funds. The choice of legal structure for a QIAIF will usually depend on a number of issues, including but not limited to investor familiarity, investor capacity to invest and tax treatment.

The below documentation checklists focus on various options for QIAIFs structured as ICAVs or unit trust schemes.

RIAIF

A RIAIF is a more retail investor focused AIF and has no regulatory minimum subscription. Unlike the QIAIF (which has very few investment restriction and concentration rules) the Central Bank has general investment and borrowing restrictions applicable to RIAIFs. A RIAIF may only be marketed to professional investors on a cross-border basis using its AIFMs marketing passport.

RIAIFs can be established in Ireland as ICAVs, VCCs, as unit trusts, as tax transparent investment limited partnerships or as tax transparent common contractual funds. The choice of legal structure for a RIAIF will usually depend on a number of issues, including but not limited to investor familiarity, investor capacity to invest and tax treatment.

The below documentation checklists focus on various options for RIAIFs structured as ICAVs or unit trust schemes.