Andrew Traynor
Partner
Ireland
Removal of prohibition for QIAIFs
The Central Bank of Ireland (Central Bank) has released an updated version of its AIF Rulebook with a number of enhancements including, in a fund finance context, the removal of the historical regulatory prohibition which prevents Alternative Investment Funds (AIFs) from acting as a guarantor on behalf of third parties.
The term 'guarantor' was not defined but this was generally understood to mean that Irish authorised AIFs could guarantee, secure and/or be responsible for the obligations of themselves and their wholly owned subsidiaries but they could not guarantee, give security for and/or be responsible for any other party. This prohibition lead to some additional structuring requirements and often involving cascading pledge.
Following constructive engagement with industry, which Walkers has been centrally involved in, the Central Bank has now completely removed this of this restriction for Qualifying Investor Alternative Investment Fund (QIAIFs). This would include all Irish Collective Asset-management Vehicles (ICAVs) and Investment Limited Partnerships which are authorised as QIAIFs.
The prohibition never applied to European Long-Term Investment Funds (ELTIFs) and it is very welcome to now see the Central Bank aligning the two regimes.
Timeline
The removal of the prohibition is effective as of 5 May 2026.
Commentary
While the existing prohibition could be unhelpful for certain structures, it was generally possible to deal with the restriction by implementing a cascading pledge or other structural solution.
The removal of the restriction is a welcome development in a fund finance context for transactions involving Irish entities. This change will simplify deals and allow QIAIFs to provide direct guarantees and security for other obligors instead of requiring a more cumbersome and costly structural solution. While there will no longer be any Irish regulatory driver for a cascading pledge, it will still be possible to implement a cascade for other purposes e.g. ERISA or other commercial reasons.
The removal of the prohibition brings the QIAIF regime broadly in line with other key funds jurisdictions and the current position for Irish AIFs established as ELTIFs.
This development can be expected to ultimately benefit investors and market participants by reducing deal complexity and costs of permitted financings while also further strengthening Ireland's established position as a recognised centre of excellence for the private funds industry.
