Is Alpine F1 up for Sale? A Companies Law Perspective

There has been a lot of speculation with respect to Renault’s commitment to Formula 1 with their works Alpine F1 outfit. Recently, Renault shut down its Viry-Châtillon factory, marking at least the end of a works Renault engine deal with Alpine. This news came against the backdrop of reports that Alpine would enter into a technical partnership with Mercedes for their Power Units as well as gearbox components and suspension from 2025 onward. Underlining these developments, and alongside the massive organizational changes afoot within the team, there is a strong inkling that Renault might quit the sport altogether by selling their stake in Alpine F1 to a proposed buyer. While there are many names in the hat with respect to who might end up buying the team, Renault Group CEO, Luca De Meo has categorically denied these reports, instead suggesting that the team is not for sale.

This article will attempt to analyze the team’s dealings in the public domain with respect to a recent re-classification of their shareholding structure. At the outset, it is represented that a prima facie perusal of the discussions carried hereunder shall demonstrate that at the very least, Renault is setting themselves up for a possible sale.  

What has Renault been up to in terms of regulatory housekeeping to potentially set up a sale?

The Alpine Formula 1 team has been competing in the Formula 1 World Championship under the banner of Alpine Racing Limited (‘Company’), incorporated as a Private Limited Company and functioning under the aegis of the Companies Act, 2006 (UK).

A perusal of the documents uploaded by the Company in the public domain with the Companies House, it is seen that amid the speculations of a potential buy-out, Alpine Racing Limited amended their share class designation on 31.01.2024, pursuant to duly filing the requisite special resolution passed by the members. Before such reclassification, the Company had 176,418,555 A Ordinary Shares having nominal value of GBP 1 each (being in the nature of equity shares having full voting rights) and 15,834,643 B Ordinary Shares having nominal value of GBP 1 each (being in the nature of preference shares having no voting rights), totaling to a share capital of GBP 192,253,198. Pursuant to filing of the requisite Companies House Form SH08, the preference shares and equity shares were essentially clubbed together into one class i.e., ‘Ordinary Shares’ being in the nature of equity shares having full voting rights.

To understand the significance of this move, we must first understand the proportional distribution of the shareholding pre-and-post the aforementioned reclassification. As per the Confirmation Statement filed by the Company on 28.06.2022, Grigny (UK) Limited / Renault owned the entirety of the preference share capital of Alpine Racing Limited (15,834,643 B Ordinary Shares having nominal value of GBP 1 each) as well as the equity share capital. Hence, at this point in time, it can be deduced that Renault were the only members of the Company holding 100% control. However, as we are aware, late last year a consortium of investors, including Hollywood actor, Ryan Reynolds, purchased a 24% stake in the team (Forest Intermediate Holdings UK Limited (‘Forest’)). Under this background, a tabular representation of the change in the shareholding structure of Alpine Racing Limited, upon reclassification, is furnished below:

	Pre-reclassification	Post-reclassification
Grigny (UK) Limited / Renault	Equity Shares held: 130,286,904 (68% of total share capital and 74% of total voting rights) Preference Shares held: 15,834,643 (8% of total share capital)	Equity Shares held: 146,121,547 (76% of total share capital and voting rights) Preference Shares held: 0 (N/A)
Forest Intermediate Holdings UK Limited	Equity Shares held: 46,131,651 (24% of total share capital and 26% of total voting rights) Preference Shares held: 0 (N/A)	Equity Shares held: 46,131,651 (24% of total share capital and voting rights) Preference Shares held: 0 (N/A)
TOTAL	192,253,198 (100%) Two classes of shares	192,253,198 (100%) Single class of shares

Referencing the table above, it is evident that the reclassification of the share capital of Alpine Racing Limited essentially upped the controlling stake of Renault by 2% i.e., the controlling stake of Renault now stands at 76%. This is crucial in the context of reports that Renault is looking for an exit. In a scenario where Renault is looking to sell its shares to an intended buyer, the resulting transaction would lead to a substantial change in the share structure of the Company. Moreover, such a sale of shares would also tantamount to restructuring of Alpine Racing Limited. Under the Companies Law regime in the United Kingdom, such a change in the share structure of a Company is to be ratified by the members by way of a Special Resolution. According to Section 283 of the Companies Act, 2006, Special Resolutions are resolutions passed “by a majority of not less than 75%” of the total voting rights of eligible members. Therefore, this reclassification of the share capital of the Company and the resultant controlling stake of Renault increasing from 74% to 76% can be construed as abundant caution on part of the Renault Group to ensure that if a deal does indeed fructify, then, the dexterity of the regulatory compliance is reduced as they would be able to pass a Special Resolution to ratify the share transfer without added complexities. One such consideration, on part of Renault, could have been to avoid a situation where Forest could have blocked a potential deal – which is now not possible as Renault have the requisite majority.

It may also be understood that, the consolidation of the share capital of the Company into a single class of shares gives a handy exemption to Renault to potentially set up an easy transition of ownership. As per Section 550 of the Companies Act, 2006;

550. Where a private company has only one class of shares, the directors may exercise any power of the company–

(a)to allot shares of that class, or

(b)to grant rights to subscribe for or to convert any security into such shares,

except to the extent that they are prohibited from doing so by the company’s articles.

Section 550, as reproduced above, exempts the need for the directors to obtain authority from the members of the Company, as per Section 551, for the directors of the Company to allot shares if the share capital of the Company comprises of only one class of shares.

Is Renault in a position to sell its stake in Alpine Racing Limited?

Alpine Racing Limited’s Articles of Association (AoA), has certain pointed provisions that enables the controlling shareholder – in this case the Renault Group, post reclassification of the Company’s share capital, to set-up a sale of the controlling stake with minimal regulatory fuss.

As per Clause 10 (Residual allotment powers of the directors) of the Company’s AoA, the directors of the Company have “all the shares for the time being in the capital of the Company (whether forming part of the original or any increased share capital)” at their disposal. Further, sub-clause (b) gives unfettered discretion to the directors of Alpine Racing Limited to “allot, grant options over, or otherwise dispose of” the shares of the Company “to such persons on such terms and conditions and at such times as they think fit”.

Per contra Clause 36 (Forest consent for company exit)of the Company’s AoA places restrictions over the members’ rights to deal with the shares of the Company. The relevant extract of the Clause is replicated below;

“36. No member may initiate, negotiate, implement or complete a sale (whether by way of share sale, asset transfer, merger or other similar transaction), Listing or winding up of the Company unless prior approval of Forest has been obtained.”

A perusal of the above indicates that the members of the Company cannot effectuate a transaction that amounts to the sale, listing or winding up of the Company – and which in turn would affect the stake of Forest – without taking the consent of Forest first.

To sum it up, it can be seen that the Articles of the Company allow the directors to sell the shares of the Company pursuant to a requisite resolution passed by the members. This resolution can now be passed solely by Renault, once the proposed transaction is finalized, as discussed above. However, the members of the Company (in this case Renault and Forest) cannot alienate the shareholding of Forest without taking its consent first. The overarching theme of these provisions in the Articles of the Company are to (a) allow Renault to dispose off their stake as easily as possible and (b) to protect the minority stake of Forest in the Company. The distribution of these rights can be seen as a way to balance the interests of both, Renault and Forest by the means of drafting the Articles of the Company to go hand-in-hand with the Companies Act. That is to say, as far as the members of the Company are concerned, the Companies Act, 2006 does not impose any restrictions or duties upon them to act in the interest of other members. Hence, the Articles of the Company take charge of this fact to limit the rights of the members to only deal with their part of the shares and protect the minority interest of the others. On the other hand, Section 172 of the Companies Act, 2006 places an explicit duty on the shoulders of directors of Companies to promote the success of the Company keeping in mind the benefit of its members as a whole and also the need to act fairly as between the members of the Company. Therefore, the unfettered rights of the directors to sell the shares of Alpine Racing Limited are always monitored by the principles of good faith and the provisions of the Companies Act – thus, ensuring that Forest shall be protected at all times whilst giving Renault the option to sell its stake in its entirety.

In terms of an illustration, Renault can now sell its stake in Alpine Racing Limited in the following way;

Once a proposed buyer has been identified, Renault’s stake can be disposed off by the directors in pursuance of Clause 10 of the Articles of the Company. To ratify such sale, a special resolution can be obtained solely by Renault as they now hold 76% controlling majority in the Company. And all the while this transaction is fructifying in the background, Forest can rest assured that as per Clause 36 of the Articles read with Section 172 of the Companies Act, neither Renault nor the directors can alienate their stake in Alpine Racing Limited while keeping them in the dark or unprotected.

Conclusion

In summation, Alpine Racing Limited’s share re-classification could be seen as an effort by the Company to set up a transfer of Renault’s stake in the team. Alternatively, and at best, as there is no concrete confirmation in this regard, the team could be keeping their options open in case an eventuality arises where the top brass of the French manufacturer decides to pull the plug on its F1 operations completely. In light of the recent appointment of Hitech Grand Prix’s Oliver Oakes as the team principal of Alpine, and Hitech’s initial interest in joining the sport, the former could be seen as the most probable hypothesis.