Ireland, a member of the European Union, has been a top funds domicile for over three decades and is the largest substitute investment fund center in the world. Upwards of 40% of global alternative investment funds assets are serviced in Ireland. Ireland was the first regulated jurisdiction to provide a regulatory framework specifically for the alternative investment fund industry.
Ireland is an expert in venture capital products, along with regulated and unregulated funds, with top service providers through different sectors physically situated in Ireland, that includes fund formation services, fund administration, and transfer agency, asset management, legal, audit, tax, and compliance services.
Key Fund Structures
To help in finding the ideal structure for fundraising, here is a summary of typical Irish regulated and unregulated fund vehicles suited to housing venture capital strategies:
Key Fund Structures1907 Limited Partnership (1907 Lp) – Unregulated–
The 1907 LP is a common law limited partnership constituted under the Limited Partnerships Act 1907, as amended. The 1907 LP has been often used in past years by Irish and international venture capital panels. Since 1907 LPs are not liable to regulation, they are inexpensive to set up and run.
A 1907 LP may, liable to some restrictions, access to the pan‑European marketing passport under the Alternative Investment Fund Managers Directive (AIFMD) given that a completely approved Alternative Investment Fund Manager (AIFM) and depositary are elected.
Irish Collective Asset-management Vehicle (Icav) – Regulated –
The ICAV is a tailor-made corporate vehicle formed particularly for Irish investment funds. Different from an investment company, it does not apply to some pieces of company legislation that are aimed at trading companies. After its launch in 2015, the ICAV has been the primary corporate vehicle preferred for planning regulated venture capital funds.
UAVs with a venture capital strategy are needed to be controlled by the Central Bank of Ireland as Qualified Investor Alternative Investment Funds (QIAIFs). Based on the authorization of the elected AIFM, an ICAV can usually utilize the AIFMD marketing passport.
Investment Limited Partnership (ILP) – Regulated – The ILP is a common-law partnership of two or more persons having as its principal business the investment of its funds in all types of property and including a minimum of one general partner and one limited partner.
In wake of the latest improvements to its legislative regimen, the improved ILP is seen as a game-changer bringing an increasing count of fund promoters to Ireland to set up their venture capital funds.
Among other available structures, like the common contractual fund and unit trusts, but are generally utilized by asset managers for more bespoke products.
The below table is a non-exhaustive high-level overview of the main distinctions between a QIAIF ICAV, a QIAIF ILP, and the 1907 LP.
Qualified Investor Alternative Investment Fund – Regulatory Wrapper
QIAIFs are Irish-controlled AIFMD-compliant structures targeted at sophisticated or institutional investors. Key classifications of a QIAIF are:
24-hour fast-track authorization process – QIAIFs that have an approved Alternative Investment Fund Manager (“AIFM”) can typically be approved within 24 hours of application to the Central Bank.
AIFM appointment needed – An AIFM must be elected regarding a QIAIF product, which can be an EU-approved AIFM, Irish-enlisted AIFM, or a non-EU AIFM. The approval of the AIFM will affect the availability of the AIFMD marketing passport, which is just available to an approved EU AIFM.
Asset types and investment ideas – A QIAIF can typically invest in any kind of assets and conduct any investment plan, along with venture capital ideas. QIAIFs can conduct an extensive range of assets, along with equity investments and debt, either directly or via a conduit vehicle.
Diversification requirements – QIAIFs usually don’t have any diversification criteria, which eases venture capital investments.
Borrowing and leverage – Generally, there are no limits on borrowing or leverage when it comes to QIAIF ILPs.
Flexible capital/liquid structures – Subscriptions can be on a full or commitment basis and QIAIFs can be open-ended, open-ended with limited liquidity, or closed-ended.
Access to European capital/passport – QIAIFs that have elected an authorized AIFM can utilize the pan-European AIFMD passport and can be promoted into any EEA country, dependent on a direct notification procedure through the marketing passport, like the marketing passport for UCITS. Else, marketing is based on private placement.
Minimal ongoing reporting and publication necessities – QIAIFs are needed to produce and provide to investors a proposing document and financial statements and to give certain statistical data continuously to the Central Bank.
Investor qualifications – QIAIFs may solely be marketed to “qualified investors,” which consist (i) a professional client within the meaning of AIFMD; (ii) investors with an appraisal verifying their felicity from an EU credit institution, MiFID firm, or UCITS management company; or (iii) an investor that self-verifies to having enough information and experience or actively involving in business in the alike assets as the fund is offering.
Minimum investment – Investors have to subscribe for a minimum investment/commitment of €100,000 or its equivalent in foreign currency (or €500,000 for QIAIFs that invest 50 percent or more into an unregulated fund).
Based on the completion of adequate certification requirements, there is an exemption from the minimum subscription requirements for individuals linked with the management of the QIAIF.
Eureka – Regulatory Wrapper
The Irish European Venture Capital Fund (EuVECA) structure can also appoint for the EU label for managers of investment funds investing predominantly in venture capital.
Based on adherence to eligible asset diversification and other rules embarked in applicable EU regulations, registered EuVECA managers benefit from a “passport” allowing them to market their funds to eligible investors across the EU. EuVECA may represent a great chance if you are or regard being based in Ireland.
How Can Dla Piper Ireland Assist?
DLA Piper Ireland has wide experience in venture capital along with structuring, building, and financing unregulated and regulated Irish and international venture capital funds along with advising funds, investors, management, and investee companies on the full range of venture capital transactions.