Wednesday 13 December 2017

Call for SPV shake-up to make Ireland world leader

Ireland is Europe's top SPV jurisdiction with €761bn worth of assets managed through 1865 registered entities, largely to hold financial assets. Stock image: David Ewing
Ireland is Europe's top SPV jurisdiction with €761bn worth of assets managed through 1865 registered entities, largely to hold financial assets. Stock image: David Ewing

Gretchen Friemann

The financial sector has proposed a new form of Irish Special Purpose Vehicles (ISPV) in a move aimed at buttressing the industry here, following controversies over their reliance on charitable trusts and their use by private equity funds to minimise tax bills.

Industry group, the Irish Debt Securities Association (IDSA) has held discussions with the Government to pitch a new regime it thinks can reform and enhance current legislation.

Ireland is Europe's top SPV jurisdiction with €761bn worth of assets managed through 1865 registered entities, largely to hold financial assets.

IDSA's changes would pave the way for a new, "best in class", investment vehicle known as the ISPV, according to Gary Palmer, head of the IDSA. The proposed structure would provide greater transparency and consistency to existing SPV structures, he said, and would position Ireland as a world leader in the industry.

The moves, understood to be backed by the Irish Stock Exchange, could be adopted as part of the Government's IFS2020 strategy for the financial sector. However, the proposals will not change the requirement for SPVs to be owned by a trust for a charitable purpose - a legal mechanism that means firms that use SPVs can manage the assets within them at arm's length, to guard against bankruptcy at the parent level,

That has long been controversial, because despite the name the trusts are not true charities - and are under no obligation to support good causes.

It is understood the industry has sought a new trust classification and name to reflect that, but without success.

A memo sent by the IDSA to the Department of Finance sets out a string of reforms needed to establish a "bespoke legal framework" for the ISPV.

It includes an accelerated incorporation regime, meaning an SPV could be incorporated online, possibly within one or two days, as well as a more rigorous reporting regime that would require two qualified directors per ISPV, along with audited financial statements.

The reforms also stipulate greater engagement with the central bank with an ISPV required to share balance sheet data with the regulator on a quarterly basis.

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