05/02/2010
NEWS STORY
With the air thick with talk of USF1 and Campos not making it to the first race this year it came as quite a surprise to find out today that Force India is in even more immediate danger.
The proof of how close Force India is to the wall comes from a report in today's Telegraph by Pitpass' business editor Chris Sylt. This reveals that Companies House, the UK government division which holds the register of all businesses in the country, has officially begun the process of closing down Force India for not filing its 2008 accounts.
The 2008 accounts for the Northamptonshire-based company, Force India Formula One Team, were due on October 31, 2009. However, it failed to file them and on January 26 Companies House sent a notice to the company's directors, including Indian billionaire Vijay Mallya, stating that "unless cause is shown to the contrary, at the expiration of 3 months from the above date the name of Force India Formula One Team limited will be struck off the register and the company will be dissolved." On the same date the notice was posted in the London Gazette which is a statutory source of information for the credit reference industry.
The reason for publishing this first notice in the Gazette is to make lenders, suppliers and employees aware that the company will be dissolved in three months if nothing is done to avert it. Force India's chief operating officer Otmar Szafnauer says "we have been discussing an extension to that filing deadline with Companies House because we needed more time to get the accounts in order. On January 28 we got written confirmation of a deadline extension to February 25. If we don't make this the question is then what happens."
Szafnauer stresses that "our accounting team said we don't need longer than February 25." Nevertheless, since the team was acquired in October 2007 by Orange India Holdings, the investment vehicle owned by Mallya and former Spyker cars CEO Michiel Mol, it has had a track record of filing late accounts. Its 2006 and 2007 results were both delivered last year a total of 28 months late.
A Companies House representative confirms that "if they do submit their accounts by February 25, there will be time for us to suspend the dissolution process. The ball is in their court. It is only going to be suspended when the accounts are received. If we don't receive any accounts in the next three months we are going to strike the company off."
In a nutshell, if Force India does not file its accounts within the next three months then the company's closure will be completed it would cease to exist. This would certainly put the brakes on it competing in F1 and its assets would become Crown property. To make matters worse, the company is believed to be the direct signatory to the Concorde Agreement so if it is struck off its slot in F1 would revert to the FIA. Failure to file accounts is also a criminal offence and all the company's directors risk prosecution.
In an embarrassing turn of events several news outlets, including Autosport.com, printed verbatim a statement in response to this from Vijay Mallya seemingly without checking its accuracy beforehand. An article on Autosport.com entitled 'Force India: Participation not in doubt' written by Edd Straw earlier today claimed that Mallya had told the website that "it is not unknown for companies to file their annual returns late the reasons for which are varied." Not only is this inaccurate but it doesn't instil confidence in Mallya resolving the situation since Force India's annual return is not late, it is the company's accounts which are overdue and have led to the dissolution process starting.
The Autosport.com article adds the further comment from Mallya that "Force India F1 Team has been in constant communication with Companies House and an extension to file was granted on 27 January 2010, with a grace period to 25 February 2010. This is a standard procedure and not uncommon in any industry." In reality, it certainly is uncommon for an F1 team to be served with a first Gazette notice with none of the five other UK-based teams receiving one in the past five years.
Furthermore, the Autosport.com article adds that Mallya told it "we are taking all the necessary steps to ensure filing is made on or before that date. Therefore Force India's participation within the F1 championship has not, and will not, be in jeopardy." Again this does not seem to be accurate. When asked if it is fair to say that a company which has received a first Gazette notice is in jeopardy a representative of the London Gazette said "yes indeed."
Giving an indication of how far advanced the dissolution process is, the representative adds that "the second Gazette notice is called a final notification of striking off... after which the company will be struck off the register of Companies House... it will need to wind up itself as in close off everything."
Just in case anyone has any doubts about the significance of this, the representative adds that the London Gazette "is an official government publication." So one wonders why Autosport.com chose to trust Mallya over a government official unless of course the website didn't bother checking with the Gazette as Sylt has done.
This little episode makes one wonder what on earth is in these accounts that Force India has been fiercely guarding from Companies House. If they show worse results than the previous set of accounts, they will be nothing short of sensational.
Its accounts to December 31, 2007 show a net loss of £12.5m on turnover which was down 22% to £29m. The company's liabilities exceeded total assets by £47m leading its auditor Grant Thornton to remark that "the continued support of the company's ultimate parent, Orange India Holdings Sarl, is necessary if the business is to continue as a going concern. The lack of publicly available information about that entity gives rise to a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern."
Indeed.