Private placement rules and law in Ireland

1. Summary of private placement provisions for fund interests (if applicable)

AIFMD has been transposed in Ireland through regulations.

In the context of “marketing” to “professional investors” (as each term is defined within AIFMD) without a passport, Irish implementing regulations implement the following provisions of AIFMD:

  1. Article 36 (marketing without a passport of Non-EU AIFs managed by an Irish AIFM or an AIFM from another EU State); and
  2. Article 42 (marketing without a passport of AIFs managed by Non-EU AIFM).

The Irish implementing regulations do not carry stricter supplemental rules. While they do grant the Central Bank of Ireland (“CBI”) the power to impose additional conditions or requirements where it considers it necessary for the proper and orderly regulation and supervision of alternative investment fund managers, no such conditions or restrictions have been made to date.

In the case of both the Article 36 facility and the Article 42 facility referred to above, the affected AIFM must give written notification to the CBI before marketing units or shares of an AIF it manages to professional investors in Ireland. This notification should include the name of the AIFM and the AIF and the identity of the jurisdiction in which the AIFM is domiciled and the jurisdiction where the AIF is domiciled, including details on the master AIF where relevant.

Prospectus Regulation

Where a fund is closed-ended, any offer of securities to the public in the EU will be subject to a requirement to publish a prospectus under the European Prospectus Regulation (EU) 2017/1129 (the “European Prospectus Regulation”) and the European Union (Prospectus) Regulations 2019 of Ireland (the “Irish Prospectus Regulations”, and together with the European Prospectus Regulation, the “Prospectus Regulation”).

For closed-end funds any offer which falls either (1) outside of the definition of a public offer; or (2) within the exemptions of Regulation 9 of the PDR (equivalent to Article 3(2) of the Prospectus Directive 2003 / 71 / EC, as amended), should not be subject to the prospectus requirement.

2. Other forms of possible placement options for fund interests outside fund regulations

An approach made by a potential investor on an unsolicited basis would not as a matter of principle breach any marketing restrictions under the applicable private placement exemption. To note any "pre-marketing" of an AIF under AIFMD will preclude reliance by an EU AIFM on reverse solicitation for a period of 18 months. Pre-marketing under AIFMD is defined as "provision of information or communication, direct or indirect, on investment strategies or investment ideas by an EU AIFM or on its behalf, to potential professional investors domiciled or with a registered office in the European Union in order to test their interest in an AIF or a compartment which is not yet established, or which is established, but not yet notified for marketing in accordance with Article 31 or 32, in that Member State where the potential investors are domiciled or have their registered office, and which in each case does not amount to an offer or placement to the potential investor to invest in the units or shares of that AIF or compartment".

3. Consequences of non-compliance with placement regimes for fund interests

Where a fund acts outside of the provisions outlined above, there may be consequences where a fund’s activities are deemed to fall under another set of rules / regulations (i.e. where a fund is deemed to be within the scope of the public offering regime or, where a fund is a closed-ended, any offer made to the public will be subject to a requirement to publish a prospectus under the Prospectus Regulation).

The CBI may administer sanctions in respect of prescribed contraventions by regulated financial service providers and persons concerned with the management of regulated financial service providers.

4. Private placement rules for non-fund investments available

The Prospectus Regulation requires that a prospectus be published in respect of, inter alia, any offer of securities to the public in the EU. 

The European Prospectus Regulation defines an “offer of securities to the public” as:
a communication to persons in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe for those securities. This definition also applies to the placing of securities through financial intermediaries”.

The European Prospectus Regulation defines “securities” as “transferable securities as defined in point (44) of Article 4(1) of Directive 2014/65/EU with the exception of money market instruments as defined in point (17) of Article 4(1) of Directive 2014/65/EU, having a maturity of less than 12 months”.

The European Prospectus Regulation defines an “issuer” as “a legal entity which issues or proposes to issue securities”. It is irrelevant whether the issuer is an Irish or foreign company.

There is no definition of “private placement” in the Prospectus Regulation; however, the following shall not be considered to be an offer of securities to the public pursuant to Article 1(4) of the European Prospectus Regulation (and therefore could be considered to be private placements for purposes of Irish law):

  1. an offer of securities addressed solely to qualified investors;
  2. an offer of securities addressed to fewer than 150 natural or legal persons per European member state, other than qualified investors;
  3. an offer of securities whose denomination per unit is at least EUR 100,000;
  4. an offer of securities addressed to investors who acquire securities for a total consideration of at least EUR 100,000 per investor, for each separate offer;
  5. shares issued in substitution for shares of the same class already issued, if the issuing of such new shares does not involve any increase in the issued capital;
  6. securities offered in connection with a takeover by means of an exchange offer, provided that a document is made available to the public in accordance with the arrangements set out in Article 21(2), containing information describing the transaction and its impact on the issuer;
  7. securities offered, allotted or to be allotted in connection with a merger or division, provided that a document is made available to the public in accordance with the arrangements set out in Article 21(2) of the European Prospectus Regulation, containing information describing the transaction and its impact on the issuer;
  8. dividends paid out to existing shareholders in the form of shares of the same class as the shares in respect of which such dividends are paid, provided that a document is made available containing information on the number and nature of the shares and the reasons for and details of the offer;
  9. securities offered, allotted or to be allotted to existing or former directors or employees by their employer or by an affiliated undertaking provided that a document is made available containing information on the number and nature of the securities and the reasons for and details of the offer or allotment;
  10. non-equity securities issued in a continuous or repeated manner by a credit institution, where the total aggregated consideration in the EU for the securities offered is less than EUR 75,000,000 per credit institution calculated over a period of 12 months, provided that those securities:
    • are not subordinated, convertible or exchangeable; and
    • do not give a right to subscribe for or acquire other types of securities and are not linked to a derivative instrument.

Further exemptions worth noting are the European Prospectus Regulation does not apply to, inter alia;

  1. units issued by collective investment undertakings other than the closed-end type (Article 1(2)(a) of the European Prospectus Regulation);
  2. an offer of securities to the public with a total consideration in the EU of less than EUR 1,000,000, which shall be calculated over a period of 12 months (Article 1(3) of the European Prospectus Regulation); and
  3. offers which are not subject to a notification requirement in accordance with Article 25 of the European Prospectus Regulation and the total consideration of the offer does not exceed EUR 5,000,000 (Article 3(2) of the European Prospectus Regulation and Article 3(1) of the Irish Prospectus Regulations).