New rules for Qualifying Investors in Investment Funds
The Central Bank of Ireland is the regulator for both UCITS and non-UCITS funds in Ireland. The investment industry has been lobbying for more flexibility with regard to high net worth investors on the basis that they do not need the same level of protection as is generally desirable. The Central Bank of Ireland has now issued a special derogation from the general rules in relation to investment objectives, investment policies and the level of leverage employed where non-UCITS schemes are marketed solely to 'qualifying investors'.
Such a scheme must have a minimum subscription level of I£2 million (US$ 3.17 million), or foreign currency equivalent. A qualifying investor is:
- a person with a minimum net worth of more the I£1 million;
- an entity whose beneficial owners are qualifying persons; or
- an entity which owns or has investment rights for at least I£20 million (or foreign currency equivalent).
Investors must certify that they qualify, that they are aware of the risk involved and that they are aware that there is the potential for the loss of the entire investment. The prospectus for any such scheme must contain a warning notice as well as readily comprehensible statements of the objectives and policies of the scheme.
The new provisions, known as NU 24, provide further evidence of the responsiveness of the Irish regulator to the needs of the collective investment schemes industry in Ireland.
Irish court protection rejected
Secured creditors have not had a happy time of it when trying to limit the application of the Irish court protection legislation. The Supreme Court in various cases has confirmed the broad and wide-ranging effect of the legislation, with court protection being available even if there is only a possibility of the company being rescued. However, in a recent case involving companies in the Butlers Engineering Group, an application to have the companies placed under the protection of the court was rejected.
The judge decided that the evidence presented by the petitioner was insufficient to enable him to decide whether there was any possibility of a successful restructuring. In arriving at his decision the judge relied on various factors. There was a substantial discrepancy in the affidavits presented to him as to the actual debt of the group. The auditors to the group had heavily qualified the accounts. No credible information had been given as to how the group might be restructured.
The application was made by a creditor rather than by the company itself. When the application failed the judge awarded costs of the secured parties against the creditor. The Irish court protection procedure still remains as a worrying element in the equation when considering the value of any security taken from an Irish company. Nevertheless, the Butlers Engineering case confirms that minimum standards must be met before an application to place a company under the protection of the court will be successful.