A guide to the Irish Investment Limited Partnership (ILP)

The ILP is subject to the requirements of the Act, the AIFM Directive (AIFMD) and the Central Bank's AIF Rulebook.

The ILP can avail of the Central Bank's 24-hour fast track authorisation process.

The ILP may be structured as a standalone fund or as an umbrella fund with segregated liability between sub-funds.

The majority of ILPs are typically established as closed-ended. However, it is also possible to establish an ILP as open-ended or open-ended with limited liquidity.

The GP to the ILP is not required to be an Irish entity, it may be a body corporate or a partnership. However, typically the GP will be a corporate entity.

The directors of the GP must be approved by the Central Bank and are subject to its fitness and probity regime.

Limited partners (LP) benefit from limited liability. Provided the LPs do not take part in the management of the ILP, the liability of the limited partners is limited to its capital committed and outstanding commitments. The ILP Act includes a comprehensive list of activities which may be undertaken by LPs without breaching their limited liability protection. 

The GP has unlimited liability for the debts and obligations of the ILP.

There is no limit on the number of LPs for an ILP and there can be as few as one LP.

The minimum initial investment in a QIAIF is €100,000. The categories of investor that a QIAIF may be marketed to are restricted to those that satisfy the ''qualifying investor'' criteria.

The ILP is suitable for a broad range of asset classes. There are limited investment restrictions, save for those that are loan origination and Irish property QIAIF ILPs which are subject to additional regulatory requirements and investment restrictions.

There are no risk-spreading requirements therefore the ILP may have a highly concentrated portfolio / single asset.

There are no borrowing or leverage limits (subject to the limits disclosed to investors).

Required service providers to the ILP include:

• a general partner (may be Irish or non-Irish)
• an Irish depositary
• an Irish administrator
• an AIFM if the pan-EEA AIFMD marketing passport is required
• an investment manager / portfolio manager
• an Irish company secretary
• an Irish money laundering reporting officer
• an Irish auditor
• Irish legal counsel

The AIFM / non-EEA investment manager (if no AIFM is appointed) may delegate portfolio management to an EEA or non-EEA discretionary investment manager subject to obtaining clearance from the Central Bank. Non-EEA based investment managers domiciled and regulated in the following jurisdictions may be appointed to ILPs, subject to Central Bank clearance:  Abu Dhabi, Australia, Bahamas, Bermuda, Brazil, Canada, Dubai, Guernsey, Hong Kong, India, Japan, Jersey, Malaysia, Mexico, Qatar, Singapore, South Africa, South Korea, Switzerland, the United States and the United Kingdom.

Additional structural features such as feeder vehicles, carry vehicles, co-investment vehicles, parallel vehicles and the establishment of subsidiaries may be availed of.

Changes to the LPA can be made with the approval of the majority of the LPs. There is flexibility in terms of defining how this "majority" is determined in the LPA (e.g. majority by class, value or number).

Changes to the LPA may be made without the consent of LPs where the depositary to the ILP certifies that the changes do not prejudice the interests of the LPs.

Typical private equity fund features may be availed of, for example capital accounting, excuse and exclude provisions, capital commitments and contributions, drawdowns, defaulting investor provisions, carried interest, distribution waterfalls and advisory committees.

Side letters may be entered into setting out particular terms agreed between the GP and a LP, subject to the requirements of AIFMD.

The ILP is a tax transparent vehicle. All income gains or losses of an ILP are treated as accruing to each LP for Irish tax purposes as if such income, gains or losses had accrued to the LPs without passing through the ILP.

Generally there is no Irish stamp duty on the transfer, re-purchase or redemption of partnership interests in an ILP.

The management and administration services to an ILP are VAT exempt.

An ILP which appoints an EEA AIFM pursuant to AIFMD may avail of the pan-EEA marketing passport.

An ILP which appoints a non-EEA investment manager and no AIFM, may only be marketed under national private placement rules (where available).

The migration of an ILP into and out of Ireland by continuation on a statutory basis is provided for under the Act.