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High Hopes for Ireland’s new ILP: What You Need to Know

By Lynda Kenny
Head of Compliance and Risk, Fund Services | CSC Global Financial Markets
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After a decade of debate and deliberation, the Irish government introduced updated legislation in late 2020 regarding investment limited partnerships (ILPs) in Ireland. It’s a welcome development for the country’s alternative funds industry, where there is hope fund managers from around the world will look at Ireland as the ideal location to domicile their alternative investment funds in the future.

The ILP legislation provides a competitive solution for managers of private equity and credit, real assets, and other private and alternative fund strategies. This legislation brings considerable benefits to the alternative fund industry. It presents Ireland with an opportunity to position itself as a genuine competitor to other alternative investment fund jurisdictions, including the Cayman Islands, Luxembourg, and Delaware.

Benefits of the new ILP legislation include:

Ability to avail of AIFMD passporting

Alternative investment fund managers (AIFMs) may distribute funds to professional European investors across the EU and the EEA. They can also delegate portfolio management and risk management to a non-EEA investment manager under the provisions of AIFMD.

Umbrella ILPs now possible

ILPs can be structured with sub-funds, allowing for segregated liability for different and separate client types and investment strategies. These can all be established under the same umbrella structure, rather than creating standalone entities for each, improving efficiencies and costs.

Easy migration from other jurisdictions

The new legislation allows for straightforward migration into Ireland from other fund jurisdictions using ILP structures. Crucially in this scenario, a fund migrating from another jurisdiction will keep its performance and financial proven track records.

Limited partners (LPs)

There are no restrictions on the number of LPs admitted to an ILP. The liability of an LP for the debts and obligations of the ILP is limited to the value of its capital contributed or committed, except where an LP is involved in the ILP’s management. The legislation includes a whitelist of activities that can be performed by LPs without affecting their limited liability status. The assets, liabilities, and profits of an ILP belong jointly to the partners in the partnership agreement’s proportions.

Sustainable Investment focus for ILPs

Flexibilities in borrowing, speed-to-market, and investment restrictions make ILPs an attractive option for alternative environmental, social, and governance (ESG) focused funds. With the European Commission’s Green Deal to make Europe the first climate-neutral continent by 2050 in mind, ILP funds are expected to be at the forefront of alternative sustainable investment funds in the foreseeable future.

The opportunity for growth in Ireland’s alternative investment fund industry is significant following the ILP legislation’s introduction. The arrival of new fund managers from other jurisdictions will be pushing on an open door—the experience and expertise within Ireland in this space is comparable with any around the world. And as an English-speaking jurisdiction governed by common law, communication with clients worldwide is experienced, knowledgeable, and clear.

CSC can help

CSC’s offices support clients across a range of services, including fund administration, transfer agency, administering special purpose vehicles (SPVs) and “hold co’s,” and the provision of depository services.