Huboo Technologies Limited began trading as Hub Realisations Limited Company with the Company number 09727464 when it experienced collapse. The pre-pack administration method provided a path to allow the business to transfer assets to a newly created entity called Huboo Tech Limited. The business performed an ethically questionable action that used legal loopholes for its advantage.
What is a Pre-Pack Administration?
A pre-pack administration process enables an insolvent business to transfer its assets to a new entity before starting its formal administration process. This can:
Business continuity allows job preservation because the operation remains intact.
Business preservation mechanisms safeguard existing supply chain and contracts.
A fresh start becomes available to the business through this process despite outstanding financial responsibilities.
The ethical issues surrounding this practice are significant.
The Problems with Pre-Packs
The business benefits from pre-pack administrations yet these arrangements typically result in harm to suppliers and investors and creditors. Key issues include:
Companies can escape liability for paying millions of unpaid debts through this practice.
The procedure lacks transparency because creditors and customers find out only after the process has finished.
The new company operates without the financial constraints that affect its competitors during its business operations.
How Huboo Used a Pre-Pack
Huboo obtained £9 for its assets which enabled the business to start operations under a new name and escape significant debt obligations including:
The total investment losses exceeded £118 million.
The business failed to pay its staff members and suppliers as well as their suppliers.
HMRC along with other creditors have ongoing disputes with the company.
The legal procedures used by Huboo raised concerns about the just treatment of its customers and creditors.
Should Pre-Packs Be Reformed?
Many experts claim pre-pack administrations need enhanced rules to stop companies from taking advantage of these processes. Potential reforms include:
The system requires creditors to receive complete disclosure about the process.
A new business agreement must include some payment toward past financial obligations.
Directors who run failed companies should not be able to establish new businesses right away.
Conclusion
The pre-pack administration used by Huboo exposes several moral problems that exist in this business practice. The job-saving procedure allowed the company to continue operations but completely abandoned its obligations toward investors and creditors. Does the current state of business debt forgiveness require reform because companies should not easily escape their financial responsibilities?
