So often associated with the rich and famous, with races staged in glamorous locations across the globe, the Formula One (“F1”) race calendar has long since attracted the super wealthy to its showcase events.  Nowadays, countries looking to establish themselves on the world scene are bidding for spots on the race circuit as a way to attract attention, whether for political or economic reasons.

In a sport of such wealth and power, it is somewhat surprising that F1 saw yet another financial casualty earlier this month when Just Racing Services Limited (“JRSL”), the operational arm of Manor Racing (“Manor”), entered administration.  For a sport where the governing entity generated a $1.8bn operating profit last year, it is sad that the only certainty staff at JRSL have at present is that the administrators have agreed to pay their wages until the end of January 2017.

The Oxfordshire-based company entered administration following a season in which Manor finished last place in the Constructors’ Championship, which led, in turn, to a funding shortfall within the business.

Manor’s administrators have now received an offer for the business as part of a wider bid to take over the company group, including Just Racing Ltd and Manor Grand Prix Racing Ltd.  Whether this bid is successful or not remains to be seen, with the (as yet unidentified) bidder anxious to receive a response from the administrators as soon as possible, in order to allow them sufficient time to have a car ready for the start of the new season. Whilst the administrators confirmed on Friday that they had the “start of the season firmly in mind“, Manor reportedly require more than £500,000 to be able to take part in the requisite pre-season testing, funds that need to be secured before 3 February 2017.

So how has a company operating within one of the richest sports in the world ended up in this position?

The manner in which central funding is distributed between the big beasts of F1 and those seeking to establish themselves means that, in insolvency terms, Constructors’ Championship points are a matter of life and death. Manor surrendered their 10^th placed position in the Constructors’ Championship to Sauber following the penultimate race of the last championship season in Brazil, during which Sauber gained a single point by virtue of the ninth place finish of its driver Felipe Nasr.  Afterwards, Manor owner Stephen Fitzpatrick bemoaned the consequences of their rival Sauber winning that crucial point stating that “For much of the season we were on track … But the dramatic race in Brazil ended our hopes of [finishing 10th] and ultimately brought into doubt the team’s ability to race in 2017“.

These are stark words, with Fitzpatrick making it painfully clear that the fate of an entire business and hundreds of jobs rested on not even the outcome of one race, but on one point being secured by the better placed finish of their nearest rival.

To put this in context, the present Constructors’ Championship consists of 11 teams, with all but the last placed team sharing in a pay bonanza which, in 2016, was a pot of some $900M.  This pot is split into two elements – part is an equal payment to each of the top ten teams ($42.7M in 2016) and part based on performance.  There is then a third element, a payment of $10M, which is only paid to the team finishing in 11^th place.

How do the likes of a Manor or a Caterham survive in a world of such financial disparity?  The answer is that it can be extremely difficult to do so.  When Caterham entered administration it had no less than 56 county court judgments to its name and bailiffs had seized the test car, whilst this is Manor’s second administration, after Fitzpatrick acquired the business out of administration in 2015 under its previous guise of Marussia.

In contrast, whilst teams which are relegated from the English Premier League undoubtedly face a financial cliff edge and have to cut their cloth accordingly, there are substantial parachute payments to ease the pain and the tribal allegiance that supporters have to their team.

From an insolvency perspective, the administration of JRSL is notable because it highlights the harsh reality that insolvency and sport can, so often, go hand in hand.  Given the huge rewards that can accompany success, there is an everlasting incentive to push your financial boundaries and take risks with investment in order to achieve success, even if there may not be sufficient money to do so.

It seems that, despite the financial travails of other sporting teams in the past, and as we have seen with numerous football clubs down the years, the glitz and glamour of F1 will not dissuade teams and their owners from continuing to roll the dice in pursuit of success.