trust fund doctrine
- 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
- The court enforced the trust fund doctrine when the corporation became insolvent and its assets were transferred to its shareholders.
- When the business declared bankruptcy, its creditors invoked the trust fund doctrine to hold the shareholders accountable for the debts.
- Because of the trust fund doctrine, shareholders can be held liable for the debts of an insolvent corporation if it dissolves.