Trust Fund Doctrine

The Trust Fund Doctrine is a legal concept that protects the funds a corporation raises from investors, typically through stock sales. According to this doctrine, once a corporation receives money from shareholders, those funds must be treated as a trust for the benefit of the shareholders and creditors. This means that the company cannot misuse these funds for inappropriate purposes, such as paying off debts or personal expenses. Essentially, the doctrine ensures accountability and protects the investors' contributions, reinforcing the idea that shareholder investments should be handled responsibly.