The Irish ILP
12 July 2021
The long-awaited overhaul of the Irish Investment Limited Partnership (ILP) finally came into force earlier this year. This legislation set about modernising the existing Investment Limited Partnership legislation to bring it in line with private funds structures in key funds jurisdictions, principally Luxembourg, and England and Wales.
On the face of it, the ILP is now well placed to achieve what it set out to do, which is to gain a foothold in the private funds market currently dominated by Luxembourg. The ILP looks and feels very much like an English LP, with the key differences being that it is a regulated vehicle and that it can act as an umbrella fund, with segregated liability between sub-funds. The regulated badge should not slow down speed to market, with the Irish regulator, the Irish Central Bank, typically authorising an ILP within 24 hours of the application being submitted. Ireland is also within the EU so, like Luxembourg, the ILP can offer UK managers a post-Brexit work-around. And in addition, Ireland is an English-speaking common law jurisdiction that is closely modelled on the English legal system, so in many respects it is a more familiar jurisdiction to UK fund managers than Luxembourg.
So what are the downsides? The short answer is that it is hard to say. On paper the ILP meets and in some cases exceeds what is on offer in other jurisdictions. In reality, however, the fact that it is a new product means that some fund managers will be nervous about taking the plunge and structuring their fund in a relatively untested jurisdiction for the private funds asset class. Other fund managers will be nervous about the ILP being a regulated vehicle, with regulation typically resulting in more administration work (and costs) for the manager operating the fund. And others will be concerned that getting the Central Bank up to speed on typical private fund terms may require additional work that might not be required in other jurisdictions.
Inevitably some fund managers will lead the market on this. Assuming this confirms that the ILP is a workable product from a practicable perspective, the ILP may well become a popular product which can compete with current structures and thereby benefit the fund sector as a whole. We have set out a high-level comparison of some of the key features of the ILP compared against the English LP and the Luxembourg SCSp. Like all things, the devil is in the detail, and members of the Ashurst funds practice would be happy to discuss the nuances between these competing structures, if helpful.
| Feature | English LP | Luxembourg SCSp | Irish ILP |
|---|---|---|---|
| Partnership Type | Limited Partnership (ELP). No legal personality and so acts and contracts by its general partner. | Special Limited Partnership (SCSp). No legal personality and so acts and contracts by its general partner. | Investment Limited Partnership (ILP). No legal personality and so acts and contracts by its general partner. |
| Regulator | Financial Conduct Authority (FCA). | Commission de Surveillance Du Secteur Financier (CSSF). | Central Bank of Ireland (Central Bank). |
| Regulatory Burdens | Unregulated fund vehicle and therefore subject to light touch regulation through AIFM. | Unregulated fund vehicle and therefore subject to light touch regulation through AIFM. Options to upscale to a regulated vehicle (RAIF) and a regulated and a supervised vehicle (SIF/SICAR). | Regulated and supervised by the Central Bank as a Qualifying Investor AIF (QIAIF). Authorisation typically granted within 24 hours. Pre-authorisation can be sought in advance of closing. Additional reporting requirements to the Central Bank. |
| Umbrella/ Sub-Funds | Umbrella/Sub-Funds structure is not possible in an ELP. | Umbrella/Sub-Funds structure is not possible in an unregulated SCSp – unless regulated as a RAIF/SIF/SICAR by the CSSF. | Umbrella/Sub-Funds structure is possible. Segregated liability between the sub-funds (protected by statute). |
| General Partner | May be any entity (English or non-English) with legal personality. The GP has unlimited liability for the debts and obligations of the ELP. | Strongly recommended to have a Lux GP for corporate law and substance purposes. The GP has unlimited liability for the debts and obligations of the SCSp. | May be any entity (Irish or non-Irish). The GP has unlimited liability for the debts and obligations of the ILP. GP Board of Directors subject to advance Central Bank approval. |
| AIFM | FCA approval required. Third party AIFMs are permitted. | CSSF approval required. Third party AIFMs are permitted. | Central Bank approval required. Third party AIFMs are permitted. |
| Portfolio Manager | Portfolio managers not subject to approval by the FCA. | Appointment of portfolio managers by uregulated SCSp in a sub-threshold AIFM context not subject to approval by the CSSF, but appointment of portfolio manager by full scope Lux AIFM subject to approval by the CSSF. | Portfolio managers subject to approval by the Central Bank. |
| Depositary | Required if the ELP is an AIF (rather than a non-AIF CIS) and is managed by a full scope AIFM. | Yes, required if the SCSp is managed by a full scope AIFM. | Required. |
| Administrator | Not required. | Not required. | Irish administrator required. |
| Carried Interest Partner | Can be any entity selected in light of legal/tax considerations. | Can be any entity selected in light of legal/tax considerations. | Can be any entity selected in light of legal/tax considerations. |
| Governing Document | LPA. | LPA. | LPA. |
| PPM/Offering Memorandum | Not strictly required. | Not strictly required (unless structured as a SIF/SICAR/RAIF). | Required. |
| Limited Partner Liability | Limited to the amount of its investment/ commitment. | Limited to the amount of its investment/ commitment. | Limited to the amount of its investment/ commitment. |
| Limited Partner Whitelist | Such a whitelist exists under an ELP structure (provided it is a PFLP). | Such a whitelist exists under a Lux SCSp structure. | Such a whitelist exists under an ILP structure. |
| Investment Restrictions | Can be freely determined in the LPA. | No restriction on unregulated SCSps. | QIAIF classification imposes certain investment restrictions on the ILP, which will require derogation from the Central Bank on a case-by-case basis. |
| Leverage Restrictions | None. | None. | None. |
| Public Accounts Filings |
Yes, unless qualifying partnership exemption applies. |
None required for SCSp. | None required. |
Authors: Piers Warburton, Practice Group Head; Peter Mallon, Senior Associate
