Independent Review Committees (IRCs)

NI 81-107 requires every investment fund that is a reporting issuer to have a fully independent body, called an Independent Review Committee (the IRC), whose role is to oversee all decisions involving an actual or perceived conflict of interest faced by the fund manager in the operation of the fund.

An IRC must have at least three members. Every IRC member must be completely independent from the relevant fund(s) and the manager. The IRC must appoint one member as “Chair” of the committee.

The size of the IRC is determined by the manager, with a view to facilitating effective decision-making, and may only be changed by the manager.

The Instrument does not mandate a specific legal structure for the IRC, but the manager is expected to establish an IRC using a structure that is appropriate for the investment funds it manages, having regard to the expected workload of the committee. For example, a manager may establish a separate IRC for each of the investment funds it manages, or establish more than one IRC where each IRC acts for several of its investment funds, or it may establish just one IRC for all of its investment funds.

One committee can act as the IRC for multiple funds that are managed by the same manager and the Instrument states that it does not prevent investment funds from sharing an IRC with investment funds managed by another manager.

The Instrument, suggests that sharing an IRC may be a more cost-effective way to establish an IRC for smaller fund families.

Many commentators in the industry have pointed out that there is a very limited pool of people who are both suitably qualified and willing to take on the role of an IRC member (particularly in view of the potential legal liabilities that might attach to such a role) and that such committees may impose a significant cost burden on the industry.

However, a fund client can outsource its independent review committee obligation to Independent Review Inc. We will help set up and then run the committee for the Fund (thus saving the Fund the time and expense of constituting its own IRC and having to find and appoint appropriate, independent persons).

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