What is the Peak Indebtedness Rule?
The purpose of the peak indebtedness rule is to increase the chance of substantiating an unfair preference claim. It allows liquidators who are experiencing a running account to decide on the best peak of the Company’s indebtedness to the creditor and use it as the beginning for each singular transaction. A running account can further be explained as a principle whereby the company that has entered into liquidation maintains a business relationship with the supplier.
The purpose of this is to ensure that all transactions between the two parties are considered a single transaction making it easier to establish when an unfair preference has occurred. The running account principle is outlined in…
