The Force India Formula 1 team may be denied entry for this weekend’s Belgian Grand Prix unless the team’s legal status is clarified, RaceFans has learned.
The team’s operating company, Force India Forms One Team Limited (reg. no. 02417588), went into administration in the run-up to the Hungarian Grand Prix after a company linked to driver Sergio Perez triggered the process over unpaid 2017 monies. FRP Advisory were appointed to administer the team until a buyer could be found.
The administrators were hopeful of saving the team through a sale as a going concern during Formula 1’s summer break, with at least five interested parties said to be interested in acquiring the team.According to a 7 August statement issued by FRP Advisory a deal to save the team was agreed between the administrators, senior members of the team’s management and a group of investors led by Canadian fashion mogul Lawrence Stroll, father of Williams F1 driver Lance.
However, due to legal issues surrounding the majority shareholders Vijay Mallya and Subrata Roy, who jointly owned 85 per cent of Force India Limited, consent from 13 Indian creditor banks was required to close the sale of the company.
According to sources such consent was not received in time. Therefore the sale was completed on an asset sale basis, and not as a going concern, which means the team must enter and race as a new entity.
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In addition, Force India stands to forfeit its accrued share of F1’s revenues unless all teams agree to a concession. Three teams are said to have withheld their approval.
At present Force India Limited holds the entry for Sahara Force India, but has no assets, while the Stroll consortium owns the hardware – including the cars – but has no entry. Unless this situation is resolved the team could be denied entry for this weekend’s grand prix at Spa-Francorchamps. First practice for the race begins in less than 48 hours.
The sport’s governing body, the FIA, is understood to be studying the legal implications of the situation, and is expected to issue a statement.
Another company controlled by Russian oligarch Dmitry Mazepin, one of the unsuccessful bidders for Force India, this week questioned the sale process to Stroll and partners. However, Force India’s latest predicament is not thought to be related to the challenge by Uralkali and would have arisen regardless of buyer.
The team has not issued any media releases since the post-Hungarian Grand Prix test, nor provided any indication as to its management structure. A spokesperson for Force India would not immediately comment on the situation.
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Jere (@jerejj)
22nd August 2018, 16:16
Hopefully not, though.
Ben Needham (@ben-n)
22nd August 2018, 16:21
Any ideas on how this could be resolved? I’m naively assuming that Lawrence Stroll simply has to lease the cars/hardware etc. which he now owns, back to Force India? Or give written permission for them to be used?
Unfortunately, it’s not in his interests to do so, as young Lance gains two places in every Grand Prix missed by Force India.
A shame for everyone involved with Force India as they are a shining light for small independents in a sport dominated by big budgets.
jj_0
22nd August 2018, 16:27
Do you really think he has bought the assets so ‘young Lance’ will gain two places? With the money involved he’d be better of using it to buy his son a seat in a better-performing team…
Ben Needham (@ben-n)
22nd August 2018, 16:33
Of course not, I’m simply suggesting that this could be a “happy” by-product of his purchase of the team, which is surely to give his son a faster car in 2019.
I have no doubt that Lance Stroll will drive a “Force India” in 2019; but if Lawrence’s purchase can help his son in 2018, whether by removing the cars for the rest of the season, or by putting Lance in one of them, then I would imagine he would do so.
Martin
22nd August 2018, 17:21
If there is no team in 2019 though then the whole thing is a waste of time right? No point messing around with childish stuff like short term hurting Force India now so Stroll can finish 18th instead of 20th :/ That would be absolutely ridiculous.
Phylyp (@phylyp)
22nd August 2018, 16:28
Or Stroll Sr.’s lease of the hardware is contingent on Lance being given a drive in FI this weekend… @ben-n
Ben Everard (@beneverard)
22nd August 2018, 16:37
This is an interesting concept, given Lance’s average finishing position (13.8) daddy Stroll will need to purchase one more team in order for Lance to get into the points.
Of course, Lawrence will also need to choose to purchase a team that is performing better than Williams for this to work, fortunately literally every other team on the grid is eligible! Perhaps a billionaires game of eeny meeny miny moe is on the cards. :P
Ben Everard (@beneverard)
22nd August 2018, 16:38
Damn, replied to the wrong person! Y’all know what I meant :D
ColdFly (@)
22nd August 2018, 17:43
That’s actually a very smart construction to buy some time and continue to collect their fair share of F1 profits.
@ben-n
Alianora La Canta (@alianora-la-canta)
22nd August 2018, 20:57
As I understand it, the holding company needs to in the Strolls’ hands for the team to count as a current team. That will require an Indian legal ruling to remove the freeze on it, which I seriously doubt would be possible for Spa given the timeframe involved. It might be possible for later in the season, depending on the speed of the Indian system on these things, whether the courts think they’ll get a better offer for the holding company by playing hardball and whether Vijay Mallya is able to do anything to make the court more amenable to releasing that asset (for example, by replacing it with other assets of his that are not currently frozen).
To race as a new team, it would require specific FIA approval as it has missed the window for 2018 entrants (by 11 months!) and cannot proceed as a new team (at Spa or ever) without this approval. That would allow it to forego its TV revenue income but race from whatever point approval was obtained.
Kai
22nd August 2018, 16:21
Wow, this really isn’t over yet…
Todd (@braketurnaccelerate)
22nd August 2018, 16:25
Wonder who they were?
If I had to guess, they’d be Williams, HAAS and oh we’ll say, Renault.
Matthias[Wlkp] (@matthias-wlkp)
22nd August 2018, 16:30
It was mentioned in one article a while ago, that it was McLaren, Williams and Renault.
GeeMac (@geemac)
22nd August 2018, 16:34
It was Williams, McLaren and Renault according to earlier reports…
Tarheelpup
22nd August 2018, 16:52
Haas and Steiner want results on the track, not in the political back room. Don’t put this on Haas.
Brian (@bealzbob)
22nd August 2018, 16:26
I’d be surprised if they don’t race. No-one wants that situation. I expect a solution will be magically found in just the nick of time.
ECWDanSelby (@ecwdanselby)
22nd August 2018, 17:08
Bar McLaren, Williams and Renault.
Alianora La Canta (@alianora-la-canta)
22nd August 2018, 20:58
If the FIA approves it as a new team, I believe it is authorised to do so without asking the current teams. The current teams may sulk if not consulted.
Thomas Bennett (@felipemassadobrasil)
23rd August 2018, 12:19
Lotus had bailiffs at Spa in 2015 which sounds more serious. But the scary thing is where relying on Stroll for something. As a Williams fan, that is really worrying.
GeeMac (@geemac)
22nd August 2018, 16:37
I’m sure it’s just a bit of “finger trouble” @dieterrencken, but company number 02417588 is “Force India Formula One Team Limited”.
Dieter Rencken (@dieterrencken)
22nd August 2018, 16:45
Indeed, twas finger probs, thanks. Got mixed up between holding company Orange India and Force India Formula One Team Ltd.
Alianora La Canta (@alianora-la-canta)
22nd August 2018, 20:58
Understandable – there’s a lot of companies in the average F1 team…
Aldoid
22nd August 2018, 16:40
Such a shame that such a great team is in such turmoil.
NS Biker (@rekibsn)
22nd August 2018, 17:18
“However, due to legal issues surrounding the majority shareholders Vijay Mallya and Subrata Roy, who jointly owned 85 per cent of Force India Limited, consent from 13 Indian creditor banks was required to close the sale of the company.
According to sources such consent was not received in time. Therefore the sale was completed on an asset sale basis, and not as a going concern, which means the team must enter and race as a new entity.”
It would appear that the heart of the problem is with the Indian creditor banks connected with the 85% ownership.
Not an encouraging scenario. I somehow doubt that Indian banks have a reputation for acting quickly.
BasCB (@bascb)
22nd August 2018, 18:42
This does seem to be one of the major issues in India, doesn’t it.
Nitzo (@webtel)
22nd August 2018, 19:04
@rekibsn
Ha ha ha. I would not blame you for this doubt but somethings need to be clarified. I did so in another post. Mallya is fighting extradition. He owes the banks in India about $1B.
A London High court froze all his international assets back in May. It is surprising how this deal went ahead without the consent of the banks because the assets must have been attached to them. Its only logical to think that getting a consent from 13 different entities for such sale would certainly take time. Doesn’t matter which country it is.
Alianora La Canta (@alianora-la-canta)
22nd August 2018, 21:03
In the UK, an administrator would be empowered to use certain legal processes to make the decision on behalf of creditors. Certain more complex situations (e.g. debt reduction) would have direct creditor input (e.g. via the CVA process), but in general the administrator is empowered to use whatever tools British law permits to maximise the value of the administered asset and put it into a position to exit administration (the preferred end to all administration procedures). However, it can’t speak for separate legal proceedings applicable to the company or assets, especially foreign ones, and that’s what’s tripped up the process here.
Asset-stripping is, I think, legal under UK administrative proceedings where no better arrangement is possible, and unless the freeze spoke to those specific assets (hard to do when the assets of a specific team are ever-changing), then I don’t think the Indian freeze would have been able to prevent this.
Nitzo (@webtel)
23rd August 2018, 10:15
@alianora-la-canta
Your first para is very informative, to say the least. Thanks.
And i believe the international freezing was enforced upon by a court in London. Nevertheless, as u mentioned, when this is the best possible arrangement/outcome for all the stakeholders involved, then the sale of assets may happen. Now arriving at that stage where the outcome is acceptable (consent) to all , doesn’t look so simple from the outside. If no consensus is arrived at, assets are normally auctioned.
Now since the assets and the team is registered in the UK, i believe the final decision rests in the hands of the authorities there; it is not about the final decision though.
Martin
22nd August 2018, 17:25
What a clusterfudge :(
Tristan (@skipgamer)
22nd August 2018, 17:37
Considering it’s the Indian banks that stuffed it, take the Force India name off everything, let them race as Stroll GP (or whatever) and call it done as a special exemption.
They’ve done enough to ruin the reputation of Mallya and the Force India F1 team, it’s obvious they have no interest in their country being advertised by the sport in anyway. Just get rid of them…
Nitzo (@webtel)
22nd August 2018, 19:06
@skipgamer
Dude, the only thing that is Indian about Force India, is Mallya (and of course Subrata Roy who is out on parole i guess).
And i think i can boldly say, that Mr. Mallya doesn’t have a (good) reputation.. atleast in India.
MtlRacer (@mtlracer)
22nd August 2018, 17:42
Forget Lance for a minute:
Lawrence Stroll and his buddies are hardly idiots — they are a established businessmen with a excellent records… this cannot be a surprise to them and surely they foresaw this as a possibility. Who would by a race team that will not be permitted to race?
Can’t wait for the RaceFans exclusive interview with Lawrence Stroll!! ;)
Steven Robertson (@emu55)
22nd August 2018, 18:06
I wonder if the misfortunes of Mercedes customer teams might influence their decision to stay in the sport long term.
Klon (@)
22nd August 2018, 20:35
It’s a misfortune Mercedes is more than willing to live with. They didn’t do anything when Manor bit the bullet, they won’t do anything here either. Mercedes-Benz has no interest inside the sport outside of the success of its works team anymore. Hell, I sometimes wonder whether Mercedes only supplies engines to customer teams anymore in order to not lose political power against Ferrari/Renault.
Silfen (@silfen)
22nd August 2018, 18:21
With an asset sale, instead of a complete takeover as was reported earlier, I wonder they will race at all this year. They will have to get a new entry and thus forfeit all price money. Don’t know how long this will take.
It does clarify why the entry holder is still in administration as was reported elsewhere.
jamt
22nd August 2018, 19:41
What about the minimum number of cars that are needed to be placed on the grid at the start of each GP?
Probably I’m wrong but, as far as I remember, it should be 20 (??).
Dieter Rencken (@dieterrencken)
22nd August 2018, 20:14
16
jamt
22nd August 2018, 22:52
Thanks for the info Dieter!
Alianora La Canta (@alianora-la-canta)
22nd August 2018, 21:09
@jamt Also, I think the critical element is the entry rather than the qualification. Otherwise, a grid that had an especially fast driver would be at risk of not having a race (if said driver managed to get enough of their rivals outside the 107% rule), which would be a silly situation to have. (I know F1 is not entirely averse to silly situations, but there are limits).
Keith Crossley
22nd August 2018, 22:06
This is on par with the 2005 Indianapolis fiasco. Where common sense and civil behavior was crushed by petulant idiocy and self-interest.
Matt Lyons
22nd August 2018, 22:07
What a mess. As happened with RR & BMW.
Thomas Bennett (@felipemassadobrasil)
23rd August 2018, 12:20
RR?
DB-C90 (@dbradock)
23rd August 2018, 0:00
One wonders who’s interests the Administrators were really looking after (beyond their fees) in this fiasco.
Despite all of the hoopla regarding the securing of all of the 400 odd employees, it seems that may not have been the case at all.
I really hope we see the pink panthers out on the track but it’s looking less and less likely for the foreseeable future.
Alianora La Canta (@alianora-la-canta)
23rd August 2018, 16:11
The team’s. Even if we next see this team in Australia 2019, and it loses its next two years of funding from Liberty, that still puts it ahead of where it would be if not participating in F1. It does not appear that waiting for the holding company to be unfrozen was an option available to the administrator due to the timeframe.
Strontium (@strontium)
23rd August 2018, 0:37
God help us all. Demonstrates perfectly why lawyers are paid so much.
I’m not one, but I get the impression from what I have read that the administrators have done a poor job.
Plus, if a team misses a race there are even bigger contractual implications with FOM
Jimmi Cynic (@jimmi-cynic)
23rd August 2018, 7:06
Fortunately, FOM has been lost in the FOG.
Phylyp (@phylyp)
23rd August 2018, 7:31
Groan 🙂 @jimmi-cynic
Phylyp (@phylyp)
23rd August 2018, 1:21
So we need to force India to get their banks to approve the change?
(I’m sorry, couldn’t resist, I’ll see myself out)
Gerulf Dösinger (@)
23rd August 2018, 2:55
+1
Jimmi Cynic (@jimmi-cynic)
23rd August 2018, 7:07
Racefans just want to have pun, @phylyp ;-)
NS Biker (@rekibsn)
23rd August 2018, 4:30
Tempting to take the Liberty to toss another one in … just a Chaser.
So frustrating to see The Team getting hammered this way.
If I am not mistaken, loosing out on the current prize fund would affect them for more than just this year. Are not the prize allocations based on a number of years and standings in each.?
Forming a new team effectively puts you back to square zero. If this is the case, it compounds the loss of $$$ and could put the whole deal in jeopardy.
ZUKMaN
23rd August 2018, 6:31
Do race promouters get a discount if not all 20 cars are on the grid?
Alianora La Canta (@alianora-la-canta)
23rd August 2018, 16:13
No. Nobody gets a discount if there are 18 cars on the grid, though the remaining teams will get more money next year if there are fewer than 10 teams eligible to receive payments.
Dieter Rencken (@dieterrencken)
23rd August 2018, 7:13
No, the contract specifies minimum 16 cars. They also don’t pay more if up to 26
OOliver
23rd August 2018, 12:10
An asset sale!!!
What assets exactly, and do you consider team personnel asset?
I don’t see how this helps anyone or guarantees anyone of secure employment.