The forthcoming enhanced Irish investment limited partnership: the choice of an attractive vehicle for Irish regulated funds and private equity funds promoters

Thursday, January 23, 2020 | By Flavien Corolleur, Senior Legal Counsel and Director

The forthcoming enhanced Irish investment limited partnership: the choice of an attractive vehicle for Irish regulated funds and private equity funds promoters

The investment limited partnership (“ILP”) is a regulated common-law partnership structure used specifically for investment in a collective investment fund. Regulated ILPs were made available in Ireland under the Investment Limited Partnership Act 1994.

In July 2017, and as part of the Irish Government’s deliverable of its strategy for the further development of the international financial services sector in Ireland to 2025, the Irish Minister for Finance indicated that the Irish Government had approved the legal drafting to amend the decades-old legal framework of the Irish ILP.

In June 2019, the Irish Government subsequently approved the publication of the Investment Limited Partnership (Amendment) Bill 2019 (“ILP Bill”). The Irish Minister for Finance & Public Expenditure and Reform, Paschal Donohoe TD indicated that “This is a further step towards ensuring that Ireland remains one of the leading funds domiciles in Europe. The revised Investment Limited Partnership structure will stand alongside the Irish Collective Asset-management Vehicle as a symbol of Ireland’s responsiveness to business needs and a sound regulatory environment.”

The proposed new regulated ILP legal framework will require the Central Bank of Ireland to update the AIF Rulebook in order to take account of the enhanced features made to the regulated ILP.

Short Overview of the proposed amendments to the ILP vehicle

  • The purpose of the ILP Bill is to modernize the operation of ILPs in Ireland and promote the revised Irish regulated ILP framework as the vehicle of choice for private equity funds in Ireland, meeting promoters’ investor preference.  
  • The new ILP legal framework will be referred to as the “Investment Limited Partnerships Acts 1994 to 2019”.
  • The features of the enhanced ILP will include:
    • alignment of the ILP legal framework with EU and domestic funds legislation by updating terminology such as “custodian” by “depositary”
    • update to the defined term for “limited partner” to clarify the limited liability of a limited partner in an ILP
    • allow limited partners to participate in the governance of the ILP by, for instance, serving on the board or committee of the ILP without the limited partner losing its limited liability status
    • clarification of limited partners obligations to include their obligations in respect of capital contribution
    • establishment either as standalone fund or “umbrella” fund (one of the key benefits of an umbrella fund is that the sub-funds established by the umbrella fund will be ring-fenced from each other in the event of liabilities or insolvency)
    • alteration of partnership agreement by a majority of the limited partners
    • a new statutory process to facilitate the change of a general partner with the effect that the assets and liabilities of the out-coming general partner transfer to the in-coming general partner
    • create a facility to register a foreign name with the effect that the ILP can conduct business in a non-English speaking jurisdiction

So why is this forthcoming Irish regulated ILP worth considering? The purpose of the ILP Bill is to adapt the Irish-regulated ILP structure created in 1994 to the current environment and meet the market clientele needs. It is worth considering as a new type of legal vehicle for Irish-regulated funds such as a qualifying investor alternative investment funds (“QIAIFs”), particularly for US-based promoters that may have a preference for regulated ILP vehicles.

Alternative Investments, Asset Management, EMEA, Fund Administration, Regulation

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