I move: "That the Bill be now read a Second Time."
I welcome the opportunity to address the Dáil Chamber on the Investment Limited Partnerships (Amendment) Bill 2020 following progression of the previous Stages in the Seanad. This Bill fulfils a commitment in the Programme for Government - Our Shared Future to progress the revision of the investment limited partnership structure and reflects the strategic priority outlined in the international financial services, IFS, 2020 action plan. In the interest of time, I will refer to investment limited partnerships as ILPs during the course of this debate.
The changes proposed in this Bill will enable Irish industry to compete for some of the global private equity market which has, to date, chosen other European or global locations to base such investment funds. The Bill caters for both the modernisation of the existing ILP structure and makes provision for best practice in the area of transparency and anti-money laundering. It also makes a number of technical amendments to the Irish Collective Asset-management Vehicles Act 2015 to enhance the efficiency of the ILP structure. In addition to these changes, the Bill proposes to amend the Social Welfare Consolidation Act 2005 to allow the Central Bank to verify PPSN information pertaining to the beneficial ownership registers, which it operates for both ILPs and common contractual funds.
I will now give an overview of investment limited partnerships. An ILP is a regulated partnership structure that does not have a separate legal personality. ILPs are tailored specifically for investment in a collective investment fund, and they are regulated and authorised by the Central Bank of Ireland. The basic structure of an ILP is made up of general partners and limited partners. The major difference between these two groupings is that a general partner has responsibility for the running of the partnership and has unlimited liability while a limited partner is a passive investor, with the exception of a limited advisory role, and is liable only for the value of its capital contribution to the partnership. Limited liability can be lost if a limited partner exceeds its advisory role in the partnership.
The Bill provides increased clarity on the list of permitted activities that will not cause a loss of limited liability for the limited partner. This is the white list concept. It is common to limited partnership regimes in other jurisdictions and is a clarification of the actions permitted while the limited partner acts in an advisory role only. Simply put, a limited partner taking part in the management of the partnership outside of the permitted activities will lose its limited liability.
The Bill provides for the establishment of umbrella funds, which will allow a single ILP structure to operate a range of investment strategies on behalf of investors, while ensuring that each such strategy is not responsible for the liabilities of another within the overall fund. Each of these sub-funds will be subject to authorisation by the Central Bank. This will allow for sub-funds with specific investment strategies to be established in an efficient manner and in line with other ILP funds in other jurisdictions along with the other four corporate vehicles used for Irish funds.
Another noteworthy aspect of this Bill are the amendments being brought forward on beneficial ownership. These amendments will bring ILPs, along with common contractual funds, CCFs, in line with beneficial ownership obligations that fall within the scope of anti-money laundering directives. These will ensure that the highest international transparency standards apply to ILPs and CCFs and that it is clear who controls the vehicles as a result of the beneficial ownership register to be maintained by the Central Bank of Ireland. The amendments will further enhance our reputation as a well regulated financial centre.
This Bill also makes minor changes to the Irish Collective Asset-management Vehicles Act 2015, or ICAV Act, including correcting typographical errors and aligning the Act with other company legislation. An ICAV is a legal structure for the holding of investment schemes established in accordance with the 2015 Act. The ICAV structure was specifically designed to be distinguishable from a trading company. As I will set out later, the changes being made to ICAV Act in this Bill are all only technical in nature.
I will now take the House through the key features of the Bill from the beginning but I hope Deputies will appreciate it is not possible to cover every single section in the detail normally required. Further detail is, therefore, set out in the explanatory memorandum published with the Bill.
The Bill contains five Parts. Part 1 consists of three sections dealing with the preliminary matters and definitions used in the Bill.
Part 2, which covers sections 4 to 41, deals with amendments to the Investment Limited Partnerships Act 1994. These amendments ensure that the same transparency and anti-money laundering and counter-terrorist financing arrangements will apply across all Irish fund vehicles in line with best international practice. There are also a number of changes to align with EU and domestic funds legislation, some typographical corrections, and corrections of cross-references.
Sections 4 and 5 are technical amendments to the 1994 Act. Section 6 amends the 1994 Act to track the language in the EU directive on alternative investment fund management and also inserts subsections to permit the establishment of umbrella funds. Section 7 amends the 1994 Act to permit a limited partner to participate on boards and committees related to an investment limited partnership. As outlined earlier, this is a clarification of the actions permitted. A limited partner taking part in the management of the partnership will lose their limited liability. Section 8 amends the 1994 Act to correct the reference to the fee prescribed under the Central Bank Act 1942, which was merely a typographical error.
Sections 9 to 11, inclusive, establish the use of an alternative foreign name and provide for related matters, and correct cross-references. Section 12 inserts an amendment to align with the requirements for records in other funds legislation. Section 13 sets out the requirements for amending a partnership agreement and the calculation of the majority of limited partners. Section 14 adds two new subsections to the Act of 1994, both related to the admission or replacement of a general partner. Section 15 relates to the naming requirements of the ILP. Sections 16 and 17 set out the procedures for correcting errors in the register, as well as the penalties for non-compliance.
Sections 18 to 22, inclusive are technical amendments to the 1994 Act. Section 23 amends the 1994 Act to allow the ILP to purchase insurance for a general partner or auditor to indemnify him or her against any liability in the event of a case of negligence or default where he or she is found not be negligent or in default. Section 24 amends the 1994 Act to ensure that if the partnership agreement provides for sanctions where a partner breaches the partnership agreement, the sanctions applicable for the failure of performance or breach will not be unenforceable solely because they are penal in nature. Section 25 amends the 1994 Act to correct a typographical error. Section 26 amends the 1994 Act to clarify the subsection being referenced. Section 27 inserts new sections into the 1994 Act to introduce beneficial ownership to ILPs and align with S.I. No. 110/2019, the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019. Section 28 amends the 1994 Act to correct a typographical error and continues to align the beneficial ownership requirements with the previously mentioned regulations. Section 29 inserts a new section into the 1994 Act covering further beneficial ownership provisions.
Section 30 amends the 1994 Act to remove the requirement for the bank to publish notice of revocation of authorisation in Iris Oifigiúil. Section 31 amends the 1994 Act by inserting the words "or depositary" after "proposed new general partner". Section 32 amends the 1994 Act to require the general partner to notify the limited partners of a direction from the bank immediately upon receipt. Section 33 corrects a typographical error in the original Act. Section 34 clarifies that there must be at least one general partner and also clarifies that the partnership is not immediately dissolved in the case of death.
Sections 35 to 36, inclusive, clarify the liabilities and duties of limited partners and include a typographical amendment to remove the requirement to be published in Iris Oifigiúil. Section 37 amends the 1994 Act by adding a new section to align indemnification provisions with the Irish Collective Asset-management Vehicles Act 2015 and the Companies Act 2014. Section 38 amends the 1994 Act to provide for a cost recovery system in respect of the bank’s role in maintaining the beneficial ownership registers. Section 39 inserts new sections, sections 46 to 59, inclusive, which relate to beneficial ownership registers including central register and associated procedures, obligations, etc.
Section 40 inserts a new Part into the 1994 Act to govern the migration of investment limited partnerships in and out of Ireland as well as their conditions of solvency. Section 41 introduces the use of sub-funds in investment limited partnerships. As outlined earlier, these sub-funds are ILPs and are structured in exactly the same way, including regulation by the Central Bank. This is line with existing investment fund vehicles, including ICAVs and common contractual funds, CCFs.
The amendments to the Irish Collective Asset-management Vehicles Act 2015 are dealt with in Part 3. Section 42 amends section 2 of the 2015 Act by adding a new definition of category 4 offence to the definitions. Section 43 adds a new section to the 2015 Act providing supplemental interpretation provisions regarding ordinary and special resolutions. Section 44 amends the 2015 Act in order that the sole object in an ICAV constitutional document aligns with the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011. Sections 45 and 46 add new sections to the 2015 Act to provide that capacity is not limited by an ICAV's instrument of incorporation, along with providing that a contract entered into outside the vires of an ICAV is still enforceable. Sections 47 and 48 amend the 2015 Act to clarify the duties of the Central Bank of Ireland following the change of name of an ICAV. Sections 49 and 50 clarify the use of a common seal and delete a subsection in order that the director of an ICAV acting on behalf of various ICAVs does not have to sign an agreement multiple times. Section 51 amends the 2015 Act to align with the Companies Act 2014 and to allow ICAVs to issue power of attorney in a similar manner to that prescribed under the Companies Act 2014.
Section 52 amends the Act of 2015 by inserting a new section to align ICAVs with the Companies Act 2014 in permitting intra-group loans or transactions. Section 53 adds a new section to the Act of 2015 which provides that an officer of an ICAV, in anticipation of apprehended proceedings, can make an application to the court to be relieved of liability in respect of the wrong concerned. Section 54 adds a new section to the 2015 Act regarding written resolutions. This will align the Act with the similar provisions in the Companies Act 2014. Section 55 amends the 2015 Act by substituting a new subsection clarifying that, where an investment company converts into an ICAV, the priority of pre-existing charges remains unchanged. Section 56 amends section 140 of the 2015 Act to correct a typographical error. Sections 57 and 58 amend the 2015 Act by aligning the Act with the provisions of the Companies Act 2014. Section 59 corrects a typographical error in the 2015 Act. Section 60 amends the 2015 Act by inserting a new subsection after section 186(3) stating that a person guilty of a category 4 offence under the Act shall be liable to a class A fine.
Part 4 deals with amendments to the Investment Funds, Companies and Miscellaneous Provisions Act 2005. These amendments provide for the establishment of a beneficial ownership register for CCFs and will bring the latter into line with the beneficial ownership obligations that apply to companies and corporate entities, as well as other investment vehicles such as unit trusts and ICAVs. Section 61 amends the 2005 Act to provide for a cost recovery system in respect of the bank’s role in maintaining the beneficial ownership registers. Section 62 amends the 2005 Act to add definitions of new terms. Section 63 inserts new sections into the 2005 Act introducing beneficial ownership to common contractual funds and aligns with the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019.
Part 5 deals with amendments to the Social Welfare Consolidation Act 2005. Section 64 amends the 2005 Act to provide for the inclusion of a registrar of beneficial ownership of investment limited partnerships; a registrar of beneficial ownership of Irish collective asset-management vehicles, credit unions and unit trusts; and a registrar of beneficial ownership of common contractual funds in the list of bodies specified in the Schedule.
I hope the detailed outline I have provided will assist Deputies in understanding the technical aspects of this legislation, along with the benefits that will arise from this new Bill. The economic impact of Covid-19 emphasises the need to progress legislation that promotes investment, job opportunities and Ireland’s competitiveness in the international financial services sector. In addition, the anti-money laundering provisions for both ILPs and CCFs contained in the Bill will give Ireland a best in class beneficial ownership framework. I look forward to hearing Deputies' contributions on this important Bill, which I commend to the House.