There will be a brief review of the five NAMA Codes of Practice which were published on 6th July, 2010. The first is the code dealing with the Disposal of Bank Assets. Like most of the codes, it appears to have been put together by NAMA’s Head of Legal and Tax, Aideen O’Reilly who joined NAMA in February, 2010 having acted as a Senior Legal Adviser to the NTMA since 2002. She might use a spell-checker on future published documents.
The Code itself is a very brief four pages with one header page and four additional pages of Glossary.
Bank assets are of course the loans – NOT the assets underpinning the loans (see below). So NAMA will sell loans on to third parties which was of course referred to in the NAMA Act (section 35(1)(d)) though I think many people thought this referred to the sale of the underlying property and not the loans themselves. As regards this Code, it merely says that the NAMA Board will develop a strategy for selling loans and these may be sold directly by NAMA or through intermediaries, at all times observing the main objective of maximising the return to the taxpayer. If the loans have a value below €100m then one independent adviser must provide a valuation and above that level or for “complex” loans, two valuations are required.
NAMA are observing the Code of Practice for the Governance of State Agencies 2009 as regards the sale of the underlying property and this will probably be of more interest to many people. How NAMA can dispose of assets to local authorities within this framework is unclear, and again will disposing of property at advantageous prices to local authorities weaken NAMA’s ability to pursue borrowers who may turn around and defend themselves in court by saying NAMA failed in their duty to get the best price for the property? The relevant section of this Code is “Disposal of State Assets and Access to Assets by Third Parties” which states
18.1 The disposal of assets of State bodies or the granting of access to property or infrastructure for commercial arrangements e.g. joint ventures with third parties, with an anticipated value at or above a threshold level of €150,000 should be by auction or competitive tendering process, other than in exceptional circumstances (such as a sale to a charitable body). The method used should be both transparent and likely to achieve a fair market-related price. The anticipated value may be determined either by a reserve price recorded in advance in the State body’s records or by a formal sign-off by the Board on the advice of the Chief Financial Officer (CFO) or, if delegated by the Board, sign-off by the CFO or the Board Audit Committee, that, in its view, the anticipated value is likely to be less or greater than €150,000. In determining market value, regard should be had to accounting standards best practice in Ireland. Compliance with use of Auction or Tendering Requirements
18.2 If an auction or competitive tendering process takes place and the highest bid is not the bid accepted, then specific Board approval is required before the disposal of the asset or granting of access to property or infrastructure for commercial arrangements with third parties can be completed. For reasons of transparency, such approval together with the reason why a lower bid was permitted to be accepted should be noted in the minutes of the Board.
18.3 Where an auction or competitive tendering process is not used and the agreed price is €150,000 or more, then specific Board approval is required before negotiations start and also before the disposal of the asset or granting of access to property or infrastructure for commercial joint-venture arrangements with third parties can be completed.
18.4 No disposal of an asset or grant of access to property or infrastructure for commercial arrangements with third parties should be completed until the officer authorising the disposal or grant of access has certified formally that (i) Board approval is not necessary, with the reasons therefore, or (ii) Board approval, where necessary, has been obtained.
Directors and their Families
18.5 Disposal of assets to Directors, employees or their families or connected persons, should, as with all disposals, be at a fair market-related price. Where the Board is considering a proposal for any such disposal, the Director connected to the potential purchase should absent him or herself from the Board deliberations on the issue. A record of all such disposals to such persons (to include details of the asset disposed of, price paid and name of the buyer) should be noted in a register kept for this purpose (minor disposals below €5,000, or a threshold approved by the Board may be omitted from the register). This register should be available for inspection, if requested, by the Board or by any Director. The Board may specify that any disposal above an approved threshold should be formally endorsed by the Board who may impose specific restrictions with regard to any such disposal.
Reporting of Disposals
18.6 Details of all disposals of assets or grants of access to property or infrastructure for commercial arrangements with third parties (save for connected third parties which is dealt with in paragraph 18.5) below the threshold value of €150,000 without auction or competitive tendering process should be formally reported to the Board, including the paid price and the name of the buyer, on an annual basis.
18.7 Details of and explanations for the disposals of assets or grants of access to property or infrastructure for commercial arrangements with third parties above the threshold of €150,000 which have not been subject to auction or competitive tendering process should be included in the Chairperson’s annual report to the relevant Minister (see paragraph 13.1).
18.8 The Chairperson, in the annual report to the relevant Minister (see Paragraph 13.1), should affirm that the disposal procedures, as outlined above, have been complied with.
Code of Practice
NAMA Wine Lake 