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Making Ireland more attractive to Private Equity

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The Irish funds industry recently got a breakthrough in its efforts to establish Ireland as a European domicile for private equity funds as the Investment Limited Partnerships Bill 2018 will be published shortly (depending on Brexit developments) following a government approved amendment.

In September 2018 assets under management of Irish AIFs were at €627 bn, the highest in history, but only a small percent of this is allocated to the ILP structure (defined as a transparent alternative investment fund, regulated by the Central Bank of Ireland). Private equity fund managers believe that the current legislation (the Investment Limited Partnerships Act 1994) is not in line with more favourable partnership structures available in other international fund domiciles.

The Irish collective asset management vehicle (ICAV) has up to this point served PE asset managers looking to establish private equity funds in Ireland. A corporate vehicle designed specifically for Irish investment funds, is it used for both retail funds (UCITS) and AIFs. It can also accommodate many PE strategies and PE-centric features due to its flexible structuring and be treated as a tax transparent partnership for U.S. federal tax purposes. However the ICAV is not a partnership, which is the default legal form for PE funds.

With the introduction of AIFMD in 2014,  there has been pressure to establish a fit-for-purpose Irish partnership vehicle from global PE asset managers looking to establish parallel European structures or distribution to European investors via the AIFMD passport. Dialogue between the Irish funds industry, the CBI and the Irish Department of Finance has resulted in the new bill to attract more Private Equity asset managers to Ireland.

It is assumed that there will be key enhancements to the bill to include:

(i) best practice features from other jurisdictions;

(ii) clarifying the rights, obligations and status of investors, thus improving the operation of ILPs

(iii) Fully aligning ILP structure with AIFMD and other Irish fund structures,

(iv) the option to establish umbrella ILPs and

(v) the ability to migrate a partnership into and out of Ireland on a statutory basis.

Due to Brexit, the enacting of the bill may be delayed, but it is hoped that the Bill will come before the Daíl  in Q2/Q3 2019. In the event of a no-deal Brexit, the Irish Government will fast-track emergency legislation to protect Ireland from any potential economic damage, which one assumes will result in the bill becoming a top priority.  

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