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ILP and speed to market

Insight 17 March 2021

ILP and speed to market

The Investment Limited Partnership (ILP) Act has been updated to further enhance the attractiveness of ILPs for international investors. In June 2019, the Irish Finance Minister published the long-awaited ILP Amendment Bill. Following its approval in December 2020, the legislation is positioned to significantly change the alternative funds industry in Ireland.

The updated ILP allows asset managers to set up a European structure and distribute these funds via the AIFMD passport. A key feature of the new legislation is the removal of the requirement for the General Partner (GP) of the ILP to be regulated. Accordingly, the GP can appoint a third party AIFM or non-EU AIFM, depending on the investment strategy). The Board of Directors of the GP will be appointed to fulfil pre-controlled functions and will therefore be subject to the fitness probity rules and CBI guidelines.

A significant advantage of the ILP is that provided all service providers are approved by the Central Bank of Ireland in advance, the ILP can avail of their enhanced 24-hour authorisation process.

  • GPs can register and operate an ILP as an Umbrella Fund with segregated liability between sub-funds.
  • The introduction of “Safe Harbour” rules allow LPs to participate in advisory committees, vote on changes to the LPA and conduct certain activities without losing their limited liability status.
  • GPs have the ability to register a “dual foreign name” for the ILP for non-English speaking jurisdictions and receive official recognition thereof.
  • Certain provisions, clauses and definitions have been amended to conform to the AIFMD prescribed legislation.
  • Minimum initial commitment is €100,000.
  • The ILP liability provisions have been standardised and aligned to Irish regulated investment fund legislation and AIFMD.
  • The admission / removal of GP’s creates a statutory vesting event, allowing the transfer between the incoming and outgoing GP’s to be far simpler.
  • Modifying the provisions relating to withdrawals or redemptions to reflect other forms of collective investment schemes.

The ILP is a regulated common law partnership structure which will be of significant interest to Irish and international asset managers marketing to EU investors and wider global markets now that this new enhanced structure is available. The new ILP falls within the AIFMD regime and therefore can fully avail of the marketing passports and associated investor protection features.

  • The ILP is considered a tax transparent structure from an Irish tax perspective. The ILP will be required to file accounts with the Irish Revenue.
  • Certain payment made from the ILP to LP’s or GP’s may attract withholding tax (“WHT”). Ireland has extensive exemptions in relation to WHT and holds a number of double tax treaties which will be a key consideration for LP’s and GP’s in the structuring stages.
  • Exemptions from stamp duty may be applicable on the transfer of partnership interests in the ILP. Additionally, stamp duty may be applicable where immovable property is contributed to the ILP for a partnership interest.
  • The management of the ILP (investment management, depositary services, fund administration, etc.) will be exempt from VAT. ILP arrangers can take advantage of specific VATable services provided from outside of Ireland.

Growing and enhancing Ireland

With the attraction of investment though the ILP by asset managers it is expected that the ILP will create additional jobs and opportunities in the Irish and international market, which is particularly timely noting the challenges posed by Brexit and recovery from COVID-19. As a licenced and regulated service provider we offer the full one-stop-shop offering, and provide scale and efficiency, leaving asset managers with more time to focus on investments and their limited partners.