What is a SICAV and Why are the Irish so excited about them?
By Jeff Corbett
Perhaps no other country in the world has been more romanticized thanIreland. The Emerald Isle with its friendly people, timeless legends and lush green landscapes have been greeting visitors since before the time of St. Patrick. As a result, the Irish culture – which to name just a few disciplines includes: literature, music and dance – has been successfully exported to virtually every corner of the world.
Irelandis like a big-small town. Its population of approximately 4.5 million is scattered throughout numerous cities and towns where historic architecture is widespread providing an old-world feel but yet it maintains a level of sophistication expected from any major financial center. The Irish take pride in individuality and privacy which is a likely outgrowth from long periods of religious and political persecution. Today,Irelandis a parliamentary democracy based on common law and legislation. Its concentration on the individual rights of citizens makesIrelandan attractive option for those seeking a high degree of liberty.
The Celtic Tiger
The last few decades has seen the Irish economy go through substantial change. First was the Celtic Tiger. This was a nickname given to the economy ofIrelandas a result of the boom and rapid growth it experienced between the years of 1995 and 2007. During that period, the Irish economy expanded at an average rate of 9.4% between 1995 and 2000. Further, it continued to expand at an average annual rate of 5.5% during the following decade until 2008 when the global recession struckIrelandhard. This boom specifically focused on Irish infrastructure and the tertiary segments of the economy such as financial services. The resulting benefits to infrastructure were vast starting with utilities being deregulated and eventually establishing internet access to nearly 90% of homes and businesses. On the other hand, the development of the tertiary financial services sector resulted in an influx of highly educated fiduciary representatives who remain potential valuable resources for entrepreneurs to this day. With the global economic crisis, however, the Irish economy underwent a dramatic reversal hitting unemployment levels as high as 14% in 2010. This about face resulted in Moody’s downgrading their government bond ratings to junk status in 2011. Since then the Celtic Tiger has become a distant memory and the Irish with its developed infrastructure and qualified fiduciaries are searching for new ways to compete in the global marketplace.
What is a SICAV?
A SICAV is an open-ended investment company (fund) common inWestern Europe. It is similar to an open-ended mutual fund in theUnited States. Up until now, it has been frequently found inSpain,Italy,FranceandLuxembourg. Basically, SICAV is an acronym which loosely translated means; “Investment Company with variable capital.” Conversely, its sister SICAF is also an acronym which means; “closed-end Investment Company.” SICAVs are important to be aware of since they are increasing being cross-border promoted throughout the European Union.
In a popular move,Ireland’s Minister for Finance has recently approved the development of a legislative proposal to form an Irish SICAV which will be a corporate structure new to their funds industry. It is anticipated that the proposed legislation will be enacted towards the end of 2012 or the beginning of 2013. The bid for the SICAV legislation is aimed directly at developing employment and business opportunities in country. One of the primary competitive advantages of the SICAV will be to provide for a corporate entity that can elect to be treated as a partnership forUStax purposes. Thus, it may avoid certain adverse tax consequences for US investors which arise if the structure is deemed to be a passive foreign investment company.
Conclusion
Whether or not the Irish SICAV will be a success and thus becomes a small stepping stone towards an economic rebound forIreland has yet to be seen. It, nevertheless, is noteworthy. As international business owners, we must be aware of every creative structure which might offer benefits to our interests as recovering markets endeavor to compete in the aftermath of the 2008 crisis.
Posted in: Miscellaneous, Uncategorized on July 7, 2012
Related Posts
New Business Opportunity for Sale!
Cross-Border Business Planning
Cross-Border Business Planning
Subscribe
Free E-Book
“The Complete Guide to Swiss Trust Company Ownership”
by Jeffrey H. Corbett
