On 7 March 2025, the Central Bank of Ireland (the “Central Bank”) published the 50th edition of its AIFMD Questions and Answers (“Q&A”), which provides important clarifications on the application of the prohibition on Alternative Investment Funds (“AIFs”) acting as guarantors for third parties under the Central Bank’s AIF Rulebook. It also includes guidance on the application of two existing rules to loan originating AIFs.

We welcome these helpful clarifications and understand that the Central Bank has issued them on an interim basis pending a proposed consultation this year on a wider review of the AIF Rulebook. Such consultation is intended to address the recommendation in the Government’s Fund Sector 2030 Final Report, published in October 2024, that to support further growth of private assets, the Central Bank should review its AIF Rulebook and associated requirements that impact on the establishment of private asset funds in Ireland.

Here is a summary of the key points under each of the three new questions:

1. Q&A ID 1160: I am a Qualifying Investor AIF (“QIAIF”) that intends to provide a guarantee in respect of investments and/or intermediate vehicles for such investments in which I have a direct or indirect economic interest. Is this a contravention of the rule in the AIF Rulebook that a QIAIF shall not act as a guarantor on behalf of third parties?

The Central Bank has clarified that guarantees are permissible for investments and/or intermediate vehicles for such investments in which the QIAIF has a direct or indirect economic interest, subject to the following safeguards and investor disclosures:

• the arrangements are determined by the Alternative Investment Fund Manager (“AIFM”) to be in the best interests of both the QIAIF and its investors and are ancillary to the QIAIF’s predominant investment strategy;
• the AIFM and the QIAIF’s depositary confirm that the proposed transaction is at arm’s length and in the best interest of investors;
• the prospectus discloses to investors that the QIAIF can provide a guarantee in respect of investments and/or intermediate vehicles in which the QIAIF has a direct or indirect economic interest, along with any associated material risks;
• the liability of investors in the QIAIF under such arrangements (above the value of their current holdings in the QIAIF) shall be limited to the amount, if any, unpaid on the shares or other interests held by them;
• the QIAIF complies with the Central Bank’s requirements in relation to investing through a co-investment vehicle that includes other third-party investors and is not a wholly owned subsidiary of the QIAIF; and
• the AIFM must comply with the relevant requirements under the Alternative Investment Fund Managers Directive (“AIFMD”), as applicable, in relation to leverage and risk management, including regularly conducting stress tests and other applicable requirements which shall cover market risks and any resulting impact, including on margin calls, collateral requirements and credit lines.

2. Q&A ID 1161: I am a loan originating QIAIF, which entities are considered “financial institutions” for the purposes of the prohibition on lending to “financial institutions”?

The Central Bank has clarified that the meaning of a financial institution under the AIF Rulebook is aligned with the revised AIFMD II loan origination rules. These rules cross-refer to “financial undertakings” under EU Directive 2009/138/EC (“Solvency II Directive”), which is transposed into Irish law through the European Union (Insurance and Reinsurance) Regulations 2015.

This means that the prohibition in the AIF Rulebook on lending to “financial institutions” should be interpreted as including any of the following entities:

• a credit institution or a financial institution or an ancillary services undertaking within the meaning of Directive 2006/48/EC (“CRD IV Directive”);
• an insurance undertaking, reinsurance undertaking or an insurance holding company within the meaning of the Solvency II Directive;
• an investment firm within the meaning of Directive 2014/65/EU (“MiFID II Directive”); or
• a mixed financial holding company within the meaning of Directive 2002/87/EC (“Financial Conglomerates Directive”).

3. Q&A ID 1162: I am a loan originating QIAIF that wishes to originate a loan to a borrower who will use the proceeds to acquire equities, debt, equity or debt related securities (whether listed or unlisted) or otherwise finance the acquisition of another company. A loan originating QIAIF is prohibited under the AIF Rulebook from issuing loans to persons intending the invest in equities or other traded investments or commodities. As a loan originating QIAIF, am I prohibited from originating this loan?

The Central Bank has clarified that the prohibition on lending to persons intending to invest in equities or other traded investments or commodities does not prevent lending to a borrower with the specified intention of acquiring only equity, debt or other equity or debt related securities to obtain a controlling interest in a target company.

If you require assistance with any aspect of the new Q&A, please contact a member of our team.