trust fund doctrine

Definition of "trust fund doctrine"
  1. A legal principle that asserts that if the assets of a corporation facing insolvency are transferred to shareholders, these shareholders become accountable to the creditors if the corporation is dissolved
How to use "trust fund doctrine" in a sentence
  1. The court enforced the trust fund doctrine when the corporation became insolvent and its assets were transferred to its shareholders.
  2. When the business declared bankruptcy, its creditors invoked the trust fund doctrine to hold the shareholders accountable for the debts.
  3. Because of the trust fund doctrine, shareholders can be held liable for the debts of an insolvent corporation if it dissolves.

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