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Establishing an ICAV

General Introduction and Background

The keenly anticipated legislation introducing the Irish Collective Asset-management Vehicle (“ICAV”),

Ireland’s newest investment fund vehicle, is fully operative as of 12 March 2015. The Irish Collective

Asset-management Vehicle Act 2015 is the culmination of a joint government and industry project to

make available to promoters a legal framework for a corporate fund vehicle that is specifically

designed for investment funds. Matheson partners have been extensively involved in the industry

project to introduce the ICAV, the introduction of which increases the range of available fund vehicles

in Ireland, satisfying both promoter and investor appetite, and reflecting a practical balance between

organisational and operational flexibility on the one hand and investor protection on the other.

The ICAV is a new corporate vehicle designed for Irish investment funds, providing a tailor-made

corporate solution for both UCITS and alternative investment funds (“AIFs”). Conceived specifically

with the needs of investment funds in mind, the ICAV, as a bespoke corporate investment fund

vehicle, will have the advantage that it will not be impacted by amendments to certain pieces of

European and domestic company legislation that are targeted at trading companies rather than

investment funds. For further information on the key features and benefits of the ICAV, please refer to

our factsheet available at www.matheson.com.

The following is a summary of the key steps involved in establishing an ICAV.

Initial Steps and Decisions

An ICAV can be authorised as either an AIF or as a UCITS fund. The fund type chosen will impact on

the ICAV’s documentation and on the timeframe and requirements for its authorisation. Additionally,

an ICAV may be established as an umbrella structure with a number of sub-funds benefitting from

segregated liability, with multiple share classes in each of its sub-funds, as a fund of funds investing in

shares or units of other investment funds or as a feeder fund (in accordance with the requirements

applicable to AIFs and UCITS), and may be listed on a stock exchange.

Similar to existing vehicles, an ICAV may either be managed by an external management company or

be a self-managed entity. An ICAV must, in either case, have its own board of directors.

Much the same as for any other investment fund vehicle, therefore, the promoter of an investment

fund to be established as an ICAV will have a number of initial decisions to make which are unrelated

to its choice of fund vehicle.

Once these initial decisions have been made, the process for the establishment of an ICAV will involve

two stages, with the Central Bank of Ireland (the “Central Bank”) acting as the sole registration and

authorisation body for ICAVs.

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Registration of an ICAV

In order to be registered, an ICAV must submit a written application for registration to the Central Bank

which contains the following information on the proposed ICAV:

its instrument of incorporation (the “IOI”), which is the equivalent of the memorandum and

articles of association of a company;

a statement containing details in relation to the first directors and secretary of the ICAV, as

well as the situation of the head office and registered office of the ICAV; and

any other information the Central Bank may specify.

The Central Bank will deem it appropriate to make a registration order in respect of an ICAV provided

that it is satisfied that the ICAV is, and will continue to be, in compliance with the ICAV legislation and

any directions made by the Central Bank. Before a registration order can be made, legal counsel for

the ICAV must also provide a certificate stating that the IOI is in compliance with the provisions of the

ICAV legislation.

The Instrument of Incorporation

The IOI for an ICAV must comply with the following requirements:

The IOI should set out as the sole object of the ICAV the investment of its funds in property

and the giving to its members any benefit resulting from the management of the funds.

Provisions dealing with the shares of the ICAV will also need to be set out in the IOI. As fund

specific corporate vehicles, ICAVs will not be subject to capital maintenance rules in the same

way as a normal company, and the IOI will have to provide that the actual value of the paid up

share capital of the ICAV shall be at all times be equal to the value of the assets of the ICAV

after deduction of its liabilities, and that shares will not have an nominal value assigned to

them.

The IOI should provide that the shares of the ICAV have to be purchased by the ICAV at the

request of the shareholders, unless and to the extent that approval of the Central Bank is

obtained, and subject to associated conditions imposed by the Central Bank. This is designed

to facilitate the use of the ICAV for closed-ended funds.

In the event that changes to the IOI are proposed, Central Bank approval is required. Shareholder

approval, however, will not be required where the depositary of the ICAV certifies that the changes to

the IOI do not prejudice the interests of shareholders and the Central Bank has not otherwise

mandated that the change is of a type that must be approved by the members.

Directors

A minimum of two directors is required, neither of whom may be a body corporate. The requirements

concerning directors under the Act and their obligations as directors of an ICAV are essentially the

same as those which currently apply to directors under Irish company law.

The proposed directors are subject to the usual requirements concerning levels of experience and

expertise, and also have to meet the Central Bank fitness and probity requirements. As a matter of

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practice, the Irish Funds Industry Association’s corporate governance code also applies to ICAV

directors.

Authorisation of an ICAV

An ICAV which has been registered by the Central Bank is not permitted to carry on business unless it

has also been authorised by the Central Bank (this does not prevent the ICAV undertaking any

necessary pre-authorisations steps). The precise authorisation process depends on whether the ICAV

is to be authorised as an AIF or a UCITS.

For UCITS ICAVs, the authorisation process will be the same as for UCITS structured as investment

companies, unit trusts etc, and the ICAV will be authorised pursuant to the European Communities

(Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (the “UCITS

Regulations”). An application by an ICAV for authorisation as an UCITS under the UCITS

Regulations must be made in writing to the Central Bank and must contain all information required by

the Central Bank for the purpose of determining the application. The fund documents will be subject

to prior approval by the Central Bank. Typically, a UCITS authorisation takes four to six weeks.

For ICAVs seeking authorisation as AIFs, the Act sets out the authorisation process in detail. An

application by an ICAV for authorisation as an AIF must be made in writing to the Central Bank and

contain the following information:

a statement of the general objectives of the ICAV;

if the ICAV is not also to be authorised as an alternative investment fund manager (“AIFM”)

under the European Union (Alternative Investment Fund Managers) Regulations 2013, the full

name and address of the proposed external AIFM;

the full name and address of the proposed depositary; and

any other information the Central Bank may specify.

The Central Bank will deem it appropriate to grant an authorisation, as an AIF, in respect of an ICAV

provided that the following conditions are met:

the Central Bank is satisfied that the ICAV is, and will continue to be, in compliance with the

ICAV legislation and any conditions imposed by the Central Bank under that legislation or any

financial services legislation;

the Central Bank has approved the proposed depositary and the management company (if

any);

the directors of the ICAV are fit and proper persons with appropriate levels of experience; and

the name of the ICAV is not undesirable or misleading. The name of the ICAV must end witheither Irish Collective Asset-management Vehicle or ICAV.

Once the Central Bank is satisfied with an application, it will provide the applicant with written notice of

the authorisation order, which notice will specify the date on which it is to come into effect. The

Central Bank may impose such conditions as it deems appropriate in relation to the granting of the

authorisation of an ICAV AIF and the orderly and proper regulation of the business of the ICAV’s,

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depositaries or management companies. Such conditions may be related to particular classes of, or

individual, ICAVs, depositaries or management companies. The current 24 hour approval process for

qualifying investor AIFs will apply to ICAV AIFs.

Approval of Depositary

The Act requires that an ICAV appoint a depositary. An application for approval of the nominated

depositary must be made in writing to the Central Bank and be accompanied by such information as

the Central Bank may specify for the purpose of determining the application. The Central Bank may

also impose such conditions as it deems appropriate in relation to the granting of depositary approval.

Approval of Management Company

An application for approval of the ICAVs nominated management company must be made in writing to

the Central Bank and be accompanied by such information as the Central Bank may specify for the

purpose of determining the application. As with the depositary approval, the Central Bank may

impose such conditions as it deems appropriate in relation to the granting of approval.

The Central Bank will approve a management company:

which is an AIFM authorised by the Central Bank or another EU member state’s regulatory

authority; or

is an Irish company which the Central Bank is satisfied has the necessary competency, probity

and financial resources to conduct its affairs effectively and in compliance with Central Bank

requirements.

Comment

The introduction of the ICAV provides an additional option for promoters, complementing the existing

range of available Irish fund vehicles. This will not result in any changes for established investment

companies which will continue to co-exist with the ICAV. However, it is anticipated that the ICAV will

become the vehicle of choice for AIFs and UCITS in Europe. The uncomplicated registration and

authorisation process is expected to be of interest to managers wishing to avail of the benefits of the

ICAV.

If you require detailed advice relating to the ICAV, please get in touch with your usual Asset

Management and Investment Funds Group contact who would be delighted to assist you.

Full details of the Asset Management and Investment Funds Group, together with further updates,

articles and briefing notes written by members of the Asset Management and Investment Funds team

can be accessed at www.matheson.com.

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The material is provided for general information purposes only and does not purport to cover every aspect of thethemes and subject matter discussed, nor is it intended to provide, and does not constitute, legal or any otheradvice on any particular matter. The information in this document is provided subject to the Legal Terms andLiability Disclaimer contained on the Matheson website.

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