Never has there been a more timely focus on the Irish Investment Limited Partnership vehicle (the “ILP”), but it seems the Irish Collective Asset-management Vehicle (the “ICAV”) continues to be the trusted choice of Irish Fund structures. As described by Cadwalader, Wickersham & Taft LLP, the ICAV can be described as the workhorse, or stallion of these fund structures. Given its prominence, it is beneficial for legal professionals to have a firm grasp on the key features of the ICAV and its place in finance transactions.
The ICAV is not considered a corporate entity under the Irish Companies Act, which offers substantial flexibility. This ensures, for example, that the ICAV does not have to adhere to typical company law requirements around share capital, dividends and financial aid. The specific legislation governing the ICAV allows it to be more responsive to investor needs and accommodate bespoke arrangements. Thus, it is a versatile and adaptable tool.
From a taxation perspective, this flexibility can prove highly advantageous. Like a typical investment fund in Ireland, an ICAV is exempt from Irish tax on its income and profits. An ICAV structure also enables investors, particularly U.S. taxable investors, to avoid the adverse tax issues associated with Passive Foreign Investment Company rules.
There exists an option to check-the-box for U.S. tax purposes, allowing ICAVs to elect their classification for U.S tax purposes, creating significant tax planning opportunities. These provisions help maintain the ICAV as the dominant vehicle in Irish fund structures.
The ICAV has the ability to streamline financial statements. It can prepare separate accounts for sub-funds, a feature that prevents cross-contamination between sub-funds. This means sub-funds operate effectively as standalone entities.
Combining these features with the fact that the ICAV is recognized by the Central Bank of Ireland and can be both UCITS and AIFMD compliant, it becomes clear why the ICAV continues to be the go-to structure for many funds.
While there may be plenty of industry attention on the ILP right now, the Irish ICAV remains a strong contender, quietly powering ahead as the stalwart of Ireland’s fund structures.