Legislation designed to streamline the process of redomiciling a fund to Ireland was introduced last year. Many wonder if the idea will take off.

Until this year if a manager wanted to change the domicile of his fund to Ireland from another jurisdiction, he was forced to close down the existing fund and set up an entirely new one.

Not any more. In December 2009 the Irish government passed the Companies (Miscellaneous Provisions) Act 2009. Among the act’s provisions was a streamlined process for redomiciliation that brings Ireland into line with other jurisdictions and has already attracted a high level of interest from managers.

The process is praised by market participants for being simple, straightforward and timely. Many report a significant number of enquiries about redomiciling since the enactment of the legislation. The actual work so far seems to be restricted to fund managers finding out what is involved or beginning the process.

Deloitte partner Christian McManus says: “I would expect to see a raft of redomiciliations coming through in the current environment. It’s going to happen. It’s just a question of which jurisdiction clients want to redomicile to.”

To date the only big name to redomicile to Ireland is Marshall Wace, which moved its funds from the Cayman Islands under the old process.

The Irish legislation will enable migrating funds to move all their assets, investors and track record to Ireland. The Irish-established fund will be the same company as it was in its original jurisdiction.

According to A&L Goodbody funds partner Brian McDermott, the redomiciling exercise is “quite simple” and consists of three major steps. First, the fund considering redomiciling must convene a shareholders’ meeting to approve the process and the investment management company has to be approved by the Irish Financial Regulator to act as the promoter and manager of the fund.

The fund manager has to decide whether the Irish fund will be established as a Ucits-compliant vehicle or as an Irish qualifying investor fund (QIF), a decision dependent on investment strategy and how it will be distributed.

All the fund’s documentation must then be put in order, including ensuring its memorandum and articles of association comply with Irish law. A declaration of solvency from a director, signed off by an auditor is also needed.

Once the fund has complied with the regulatory requirements of setting up a company in Ireland, the regulator and the Companies Registration Office will approve it. It can then de-register from its original jurisdiction.

Funds set up in Ireland must appoint Irish-based service providers, including a custodian or prime broker, administrator, law firm and directors. Many hedge funds are already administered from Ireland although their custodians, prime brokers, law firms and directors are unlikely to be based there.

Nevertheless the process of redomiciling a fund should, say some market participants, be cheaper than closing the fund in the original jurisdiction and setting up a new fund structure in Ireland.

“There’s no magic to it beyond that,” says McDermott.

He and his counterparts across the funds servicing industry see the legislation as providing an opportunity for Ireland to take advantage of the current environment of investor demand for regulated products.

“It’s really an extension of what’s already there in other jurisdictions,” says Deloitte’s Aidan Tiernan, adding that he expects demand to gain momentum.

Trinity Fund Administration director Peter O’Dwyer says the enactment of the legislation demonstrated the Irish government’s commitment to and recognition of the industry as well as the country’s willingness to innovate. “Just the mere fact that it happened was good for Ireland,” adds O’Dwyer.

Opinions vary as to how widely used the legislation will be. Matheson Ormsby Prentice partner Tara Doyle notes that the list of approved jurisdictions from which funds can migrate is still being drawn up. Such jurisdictions must have reciprocal legislation. This means Ireland will be unable to tempt existing funds away from its arch-rival Luxembourg, which has no such regulation.

Enquiries, say those in Ireland, are mainly coming from the principal Caribbean jurisdictions of the Cayman Islands and the British Virgin Islands.

Doyle says there are more enquiries than actual instructions at the moment. “It may be that the reasons for redomiciling are not as manifold as we might have originally hoped,” she says, although some funds may not want to bring poor performance records with them.

Others are more optimistic. “We as a jurisdiction certainly felt that the interest in redomiciling was real. Primary legislation can’t be done on a whim,” says Irish Funds Industry Association chief executive Gary Palmer. He, and the rest of the Irish fund industry, is hoping that the work will pay off.