trust fund doctrine
trust-fund doctrine. The principle that the assets of an insolvent company, including paid and unpaid subscriptions to the capital stock, are held as a trust fund to which the company’s creditors may look for payment of their claims. • The creditors may follow the property constituting this fund, and may use it to reduce the debts, unless it has passed into the hands of a bona fide purchaser without notice. — Also termed trust-fund theory. [Cases: Corporations 544(2). C.J.S. Corporations § 743.]
