Force India, Spa-Francorchamps, 2018

Force India seeking urgent solution to allow team to race at Spa

2018 Belgian Grand Prix

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Urgent attempts are being made to permit Force India to enter this weekend’s Belgian Grand Prix despite the team’s ongoing legal problems.

RaceFans revealed yesterday the team’s participation in the race is in doubt following the sale of its assets to a consortium led by Lawrence Stroll. Complications in the team’s legal situation have prevented Stroll from purchasing its entry.

The team is in negotiations to find a solution which will allow it to compete in this weekend’s race. As a short-term measure it could compete under its original entrant title, Sahara Force India F1 Team. If necessary, similar concessions could be put in place for next week’s Italian Grand Prix.

According to well-placed sources, once all issues are resolved the Silverstone-based team could be permitted to enter as a new entity starting from scratch. However, this would mean a resultant loss of all points and benefits accrued in the 2018 FIA Formula 1 constructors’ championship thus far.

This would have further knock-on financial consequences over the next two years as teams are required to score in two of three championship seasons in order to qualify for the full range of commercial benefits.

A key issue at stake is whether the unanimous agreement of all teams is required for a mid-season entrant licence to be granted. The FIA, the sport’s governing body, has refused to comment officially on the situation.

In a separate but related development RaceFans understands the Mazepin consortium and associated company Uralkali could approach the British High Court to investigate the administration process, alleging the “process conducted by the administrator of Force India Formula One Team Limited may not be in the best interests of Force India creditors and stakeholders, and [F1] in general”.

Administrators FRP Advisory has defended the process, insisting “all bidders were given equal opportunity to submit the best deal for Force India.”

Force India appear unbranded at Spa

Force India’s motorhome, trucks and pit wall perch appeared without the ‘Sahara Force India Formula One team’ brand at Spa-Francorchamps today:

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Dieter Rencken
Dieter Rencken has held full FIA Formula 1 media accreditation since 2000, during which period he has reported from over 300 grands prix, plus...
Keith Collantine
Lifelong motor sport fan Keith set up RaceFans in 2005 - when it was originally called F1 Fanatic. Having previously worked as a motoring...

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49 comments on “Force India seeking urgent solution to allow team to race at Spa”

  1. Will the old contracts with drivers be respected under new entity?

    1. Depends who the contracts were with in terms of the team.

      1. The assets were sold, not the holding company, and its the holding company that has the driver contracts. The driver contracts would not follow the assets unless the contracts were sold as part of the assets. I find that highly unlikely. If Perez and Ocon are driving it’s because Stroll F1 agreed. And if Stroll agrees that’s likely because it was in partial exchange for the holding company agreeing to a “sale leaseback” arrangement for the purposes of Stroll F1 gaining the holding company’s race entry on a temporary basis. If the holding company doesn’t honor the driver contracts (for Spa, Monza, etc.) that would likely create a new financial liability (penalties) for the holding company.

  2. The situation at Force India is just embarrassing.
    For everybody involved and F1 in general.
    Such a shame.

    1. The worst is the Mazepin challenge to the rescue deal. They don’t know how to lose a competition and they keep beating a dead horse.

      1. Why do you not want to shine a light on to the alleged shady rescue deal?

      2. They warned that administration didnt do a good job at selling the team and it turns out they are right! Whats bad about that? The sale was rushed before the premission from Indian Banks was given and thats the reason we might see the end of Force India in a few days. Its not a rescue deal wheb u cant race after its done, its a shot in a foot.

    2. This just in: Robert Fernley has left Force India.

        1. Unable to post the link.
          I read it on Autosport.
          Here is the URL–> https://www.autosport.com/f1/news/138188/fernley-leaves-force-india-role

    3. I hope Force India push through the next two weekends and let their colours fly.
      Let Liberty / FIA concentrate on protecting them from legal BS.
      They deserve this as a family of true racers.

  3. Clearly there was a massive failing in due diligence by the purchaser and quite possibly misunderstandings/misrepresentations by the Administrator.

    Teams below FI must think it’s christmas – an instant jump up the standings and they didn’t even have to race.

    With the sort of money involved, and the wealth of the people involved, I find it staggering that their respective legal teams have allowed a purchase to proceed with no guarantee that the purchased entity could race.

    Has any money actually changed hands and asset ownership transferred? If so there’s going to be a lot of egg of a bunch of faces.

    1. To be fair to those involved, the issue of buying the whole team as such came down to the huge companies in India who Mallya owes a heck of a lot of money to. Force India is small fry in this picture but they can’t be seen to make allowances to him in any way otherwise it will weaken their case.

      1. I don’t see how we can be fair to those involved.

        It was “presented” to the world that the Consortium headed by Stroll had purchased the team and secured its future when clearly that isn’t the case. Why on earth would a consortium buy a bunch of assets knowing they can’t use them.

        This can’t have been news to them – if it is then it’s probably the most foolhardy purchase in F1 history. Either that or the purchase has in fact fallen through completely and no one has bothered to tell anyone.

        1. We have no idea what was the price Stroll paid, it might be way too small, which will mean that the coming death of current Force India is acceptable to them.

        2. They did it to perhaps stop anyone else getting it? Forgo the entry in the hope the FIA badly want to stop F1 dropping to 9 teams and be given an entry? Who knows, all I’m saying is that the reason why it isn’t straight forward is because of the money Mallya owes to the various people/companies in India, not those looking to buy the team.

    2. or they knew and gambled that a solution would be found to let them race because it’s in the best interest of the sport.

  4. this is somewhat absurd. the team would have to start as a new entity in the championship despite having exactly the same cars and (presumably) the same team crew. I’m guessing this is some kind of legal backstop to prevent teams chopping and changing ownership behind the scenes, but we need a bit more clarity than this. this team finished 4th last year! now we learn it is some nebulous shell of organisations and shareholders with the structural integrity of a dry sandcastle.

    1. If you are shocked at the corporate structure behind this team, you will be horrified at the ownership structures of just about every company in the world.

    2. @frood19d19 This is because of the pending legal action against Vijay Mallya in India. Because of this, he’s can’t sell any businesses in which he has a controlling stake – he’s legally prohibited from doing so. This is why the team couldn’t be sold as a going concern (along with its entry and right to TV money from FOM etc). What Stroll has done is effectively buy out all of the assets of the Force India F1 team; he now owns the cars, the factory, and has taken over all of the staff contracts. But he doesn’t have a current entry into the F1 championship. It’s not unfeasible to get an entry to be able to race (perhaps the deadline has passed to get that in place this weekend), but they wouldn’t get any of the TV money nor have any right to prize monies from a single point scored so far this season, or from previous championship results. That’s a massive hit, I think upwards of 30 million in whatever currency you care to mention.

      They could end up being granted all of this, but it has to be with the agreement of FOM and the other teams, and as you can imagine there are teams on the grid with their own problems who don’t have any reason to help out a competitor. Not least because they stand to inherit not only the positions on track and championship (and all the extra money those extra points will earn) but also get a bigger slice of the FOM money as a result.

    3. Because the old entitiy would have to paid for the races they did and other related agreements. Im no corporate expert but only if these rights are sold to the new owners i guess will they get the benefits

    4. @frood19

      The new investors (Stroll & Co.) want to buy the assets of the team, not take over the company it seems by reading that.
      If they take over the existing company they assume liability of all current and previous debts, including tax debts etc. They would not want that from Vijay.

      If they simply buy the assets its a whole new entity, smart from an investment point of view but losses all SFI history and prize money- its a new F1 entry.

      These are smart people, they must have weighted up the pros and cons of each. With VJ they just know the history of the team.

  5. This is what happens when you cut deals with someone behind the scenes to buy something on the cheap.
    The sudden move to go into administration spears to have been an underhand move to purchase a valuable product at giveaway price.
    There are bound to be aggrieved parties and also vultures circling overhead waiting to get a piece of the carcass if life gets snuffed out of the entity.
    How they’ve managed to turn prime real estate to almost landfill in the space of a few days is just beyond me.
    The quick fix is the pay more.

    1. I meant to pay more.

    2. OOliver
      “This is what happens when you cut deals with someone behind the scenes to buy something on the cheap.”

      That statement is flat out incorrect. The reason for calling in debts owed to Perez and his backers, was that VJ was never going to sell at any price he did not think fair. It was in his interest to get as high a price as possible, even if in doing so the FI going bankrupt. Complicated as this undoubtedly is, this really was the easiest for forward for FI. I would go further, and say even if FI loose the historic performance payments for been a new entry, whatever stroll and his other investors paid, will be a lot less than it would have been had they bought the team without legal trouble from the owners, and certainly starting a new team from scratch. These teething problems will be overcome, (hopefully), as it is in everyone interest for this team with 2 cars on the grid.

  6. I wonder what’s on Sergio Perez mind after all this. I know he is probably just a pawn in all this, but i’d want to know what he is thinking right now.

    I’m not saying he is a villain in all this situation, but it was his call that triggered this situation

    1. If he hadn’t stepped in, another creditor had an order already to liquidise the company… If that had happened, the team would have already been shut down, all staff retrenched and all assetts auctioned off to the highest bidder… The forcing into administration has saved the team for the time being, but it all seems to hinge on the cooperation of the other teams to see how things develop further.

      AMUS said that the likely scenario is that the team will be allowed to race under a new entry, they will forfeit all points so far this season, therefore loosing all prize money, but will be able to get the television appearance fee. Should that happen, Lance Stroll will get Ocons seat, Kubica Stroll’s seat, and Ocon might get Vandoorne’s seat if McLaren can get rid of him in time for Monza.

      1. The largest creditor of the team was Mallya himself, there was no way a minor creditor could liquidise the whole team. Perez started a hostile takeover which by the looks of things is not going smoothly.

      2. Perez did what he had to do to stop liquidation. From what I have read it seems like these administrators have made an absolute balls up, which Perez had no control over.

  7. I thought this would happen. I really don’t think the pink cars (however they are branded) will be on the grid.
    Am I right in thinking that the cars have to be presented themselves with a valid entry at Scrutineering on Friday morning, otherwise they will be excluded from the event?

    1. The cars must be presented, but if an entry is queried by the FIA without being excluded by it, the processes can be separated a bit.

      On the other hand, this means scrutineering of the cars does not guarantee the team’s participation.

  8. “Hi Honey, how was work today?”

    “I spent the whole day peeling the stickers off everything that said Sahara Force India Team”

    1. And also Kingfisher and another company owned by Mallya

  9. Hopefully, they’re going to be able to find a solution quickly enough to compete for this weekend (and for the rest of the season as well for that matter).

  10. Looking at those sad photos, if I was a PR agent of pampers or libero. I could approach the team for a possible title sponsor partnership.

    Anyway good luck for them to sort it out!

  11. I once worked for a company that sold their assets to a new entity, left their debts with the old company and were able to pretty much do business as usual. It left a bad taste in the mouths of a lot of people, but it’s a tried and true business practice. It appears that the Stroll consortium didn’t do their due diligence in finding out the ramifications of creating a new entity out of FI. Unfortunately it’s looking like this may not be sorted out quickly with the challenges hinted at by Mazepin.

    1. @velocityboy – wouldn’t the money earned from the sale of assets have been claimed by the debtors?

      1. @phylyp If I recall, the assets were sold for next to nothing (maybe even $1) which meant there were no proceeds for the creditors.

  12. If they are going to lose all points (because of being a new entity), then the engine component usage count should be reset to zero, and they should be allowed to use maximum of each engine component (ICE, MGU-K, MGU-H) etc.

  13. Welcome to the next episode of Bickering Billionaires and their faithful lawyers.

    Just what F1 needs…..

  14. This looks like a situation that Liberty should be stepping up to help sort out.
    You would think that it would be in their best interest, both short and long term. The current commercial aspects of entering and running a team does not seem to be conducive to encourage anyone else to join, in any way.
    Any chance this will be revised in future replacements for the Concorde Agreement.? One can hope.
    My vote is that Perez did the right thing. No action would have been significantly worse.
    Appears that what the Indian Banks hold is the name of The Team and the F1 Entry. This has value at the moment, but if they delay and The Team fails to enter the race, it will be of no value. Stroll and Co. will be entering as a new team with all the ramifications of that.
    Not the best, but it gives them a few extra months to focus on next year’s car. Maybe they could even go testing.

  15. Guess who get’s the assets money ?

  16. It’s worth pointing out that the lack of speed from the Indian banks will also be exacerbated (beyond their normal delays) by the fact that the Mallya issue is politicized in India, which means that no banker will sign-off without a nod from the Reserve Bank of India, and they in turn from the government. The ruling coalition will not want to give any ammunition to the opposition by signing of on something that can be spun against them.

    I’m not a fan of bringing politics onto unrelated sites, but wanted to give this context so people understand why the banks in question might seem to be dragging their feet on a sale that putatively brings back some proceeds to them.

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