Brought to you by John Myburgh
It appears the Administrator of Caterham Sports Ltd, is getting some undeserved flack in the accredited F1 press.
Contrary to the assertion of others who have spoken on this matter, TJ13 would like to explain the legal position of the Administrator in relation to the Caterham F1 team.
Today’s actions which saw the staff locked out of their place of work reveal that fairly quickly, the Administrator has established the view that despite Kolles’ and Manuel’s assertions to the contrary – and the emergence of a new company CF1 – that Caterham Sports Ltd, who the Administrator is legally responsible for – own the race cars together with factory-based assets to build the cars, has not been shut down – yet.
The lock out today of all employees (including management) involved in Caterham Sports Ltd is merely the Administrator ensuring that there is no possibility that the assets of this company from being secreted away.
The staff have not been dismissed, this is all part of the Administrator forcing those responsible for the day to day running of Caterham Sports Ltd to ‘prove’ the entity is a ‘going concern’ and is not simply racking up more and more debt.
The role of the Administrator is to protect the interests of the creditors, whilst ascertaining whether the business can be funded properly to continue – WITHOUT – incurring further debt, which would dilute the current creditors/employees claims for payment against the known assets of the company.
These assets are valued not at cost, but estimated realisable value. This means that despite an F1 front wing having a cost of say $100,000 associated with it, it may merely be capable of generating to anyone other than the Caterham F1 team (or Caterham Sports Ltd) a memorabilia value of substantially less than its cost.
Administrators perform this role on every kind of company in every kind of sector possible, and need NO specialist knowledge of every global cottage industry or international empire to deliver their obligations in a proper manner.
They add up the recoverable value of what is owned; subtract the value of what is owed to creditors/employees and if the result is positive, the company is ‘solvent’, if negative – it is not.
The first duty of obligation to which the Administrator of Caterham Sports Ltd is beholden is to ensure that the assets of the company are safeguarded; they are the security for the employees and the creditors and they must not be placed at any risk which will diminish the result of either parties’ claims for monies owed.
So if the Administrator believes there is a possibility that the Caterham F1 race cars and race equipment will disappear off to Austin and beyond, never to return, he is forced to disallow this course of action. The exception is, should sufficient collateral be lodged with the Administrator, to an amount equal or greater than the recoverable value of the assets at risk of flight, he MAY allow them to be removed from his jurisdiction.
That said, he would almost definitely also wish personal guarantees to be provided (enforceable in law, and recoverable) by the director(s) of Caterham Sports Ltd, should the assets never return.
This presents the current Administrator with questions to be answered; due to the fact that Colin Kolles recently sacked/removed his father from the board of directors of Caterham Sports Ltd, and appointed the Leafield Romanian cleaner – Constantin Kojocar (affectionately nicknamed ‘Mario’ by the Leafield employees) – as the sole director of Caterham Sports Ltd.
‘Mario’ does not appear to have a substantial investment or ownership in any company such as GCC Facilities (http://www.gccfm.com/), hence the Administrator’s concern is not unreasonable.
Further, the recent plan which conspired to send the cars to Germany direct from Sochi gives the Administrator no choice but to believe the ‘flight of the assets’ is a more than remote possibility.
The second role of the Administrator is to establish whether the company is funded properly to continue its operations, whilst the matters of creditor and employee claims for payment are properly negotiated.
The director(s) of the company, which is under the Administrator’s jurisdiction, are required to ‘prove’ the likely income of the company for the foreseeable future, together with the likely expenses.
This is the business plan which the Administrator will assess as viable, should income be greater than expenses, or not viable should the expenses be greater than the income.
The Administrator will then do two things. Firstly, assesses whether he believes the expenses are a reasonable forecast, and if he believes this to be the case, the company will be run on this exact expenditure budget – without exception.
They will also assess the ‘projected income’ to the extent they will speak to those who the director(s) of the company claim will be providing these funds to establish the certainty of the director(s) claims.
Having established a reasonable view on the expenditure and income, it is a simple task of ascertaining whether the latter is equal or greater than the former.
It has been argued that “the Administrator has not had the time or the opportunity to read and understand all the different agreements related to the team (basically the equivalent of the Concorde Agreement) because if he thinks that quibbling over the rent at Leafield and not looking at the big picture of what happens if the team misses Austin, then there’s not much hope and the creditors are probably not going to get much.”
The accusation against the Administrator is that he simply doesn’t ‘get’ how Formula One works. “if the team does not keep trying to win World Championship points in the final three races. The team is unlikely to succeed, but if it’s not at the races, it is 100 percent certain to fail and that will guarantee 11th place for the second year running and a dropping revenues of cataclysmic proportions. One hopes that someone has told him this already.”
As already stated above, the Administrator is legally obliged to examine the likely nature of future revenues and ensure they exceed proposed future liabilities.
Therefore, the question is, if the above ‘possibility’ is the basis for the Administrator to agree the ‘likely income’ that Caterham Sports Ltd will receive, should he allow the company to sink further into debt with the hope this income will be achieved?
Given the fact that Caterham have spent more cash than any other F1 team in history and achieved the dubious record of doing so yet at the same time failing ever to score 1 point in the Formula One championship, how should the Administrator assess the likelihood of the team outscoring Marussia in the final three races and earning the $35m the tenth placed competitor team in 2014 will receive for their entrant status at the start of the following year’s competition?
Mario is indeed an impressive individual at what he does; and today Caterham staff revealed that since his promotion to director of the company, the toilets at Leafield have degenerated into a vile place of desolate abomination.
However, more importantly, does Mario’s proposition that the Caterham F1 team will almost definitely score points in the remaining three F1 races carry much weight with the Administrator?
Suffice to say for now, this is as remote a possibility as this writer’s whimsical fantasy that would see Japan relocated from its current location to a place off the East coast of England, providing a duel purpose of a land bridge to Eastern Europe together with the fact that the fabulous F1 circuit of Suzuka would be more accessible to the British and European F1 fans.
Despite Ecclestone’s chameleon-esque assertions today that he would like to help Caterham F1, we but all remember his consistent assertions of old, that for him, a 10 team Formula One competition is preferable to one which includes 11 entrants.
So, can Caterham be saved? The answer is yes, but the cars must make the FOM freight flight on Saturday bound for Austin. If this does not occur, the team will be in breach of their commitments to the commercial rights owner to attend every F1 event on the annual calendar and be thrown out of this year’s competition and effectively the sport.
This will require the ghost ‘Swiss based Arab investors’ to stump up an appropriate amount of cash and lodge it with the Administrator of Caterham Sports Ltd; this is presuming they’ve not lost all their petro dollars on a gamble on Daimler Benz future share price, as did Aabar
This is THE ONLY way, as Ravetto has asserted is their wish, continue in the vain hope that their Caterham adventure – as they state – will earn them a profit from their ‘investment’ in the Caterham F1 team.
Further, F1 fans should always ask themselves this question when they read an article which is an apologetic, defending or appealing on behalf of the intentions of F1 characters or companies; Is there any reason this writer could be influenced to express the vicariously imbibed view that he/she expresses?
Do this, and in most cases, the credibility of the information purported will be appropriately qualified.