{"id":5374,"date":"2019-04-28T14:11:00","date_gmt":"2019-04-28T06:11:00","guid":{"rendered":"https:\/\/pnl-law.com\/blog\/?p=5374"},"modified":"2020-05-02T02:11:41","modified_gmt":"2020-05-01T18:11:41","slug":"the-trust-fund-doctrine-in-corporate-law","status":"publish","type":"post","link":"https:\/\/pnl-law.com\/blog\/the-trust-fund-doctrine-in-corporate-law\/","title":{"rendered":"The Trust Fund Doctrine in Corporate Law"},"content":{"rendered":"\n<p>First enunciated by the Supreme Court in the 1923 case of <em>Philippine Trust Co. vs. Rivera,<\/em> provides that subscriptions to the <a href=\"https:\/\/pnl-law.com\/blog\/glossary-for-the-revised-corporation-code\/#Capital-Stock\">capital stock<\/a> of a <a href=\"https:\/\/pnl-law.com\/blog\/glossary-for-the-revised-corporation-code\/#Corporations\">corporation<\/a> constitute a fund to which the creditors have a right to look for the satisfaction of their claims.<\/p>\n\n\n\n<!--more-->\n\n\n\n<p>This doctrine is the underlying principle in the procedure for the distribution of capital assets which allows the distribution of corporate capital only in three instances:\u00a0<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>(1) amendment of the <a href=\"https:\/\/pnl-law.com\/blog\/glossary-for-the-revised-corporation-code\/#Articles-Of-Incorporation\">Articles of Incorporation<\/a> to reduce the <a href=\"https:\/\/pnl-law.com\/blog\/glossary-for-the-revised-corporation-code\/#Authorized-Capital-Stock\">authorized capital stock<\/a>;<\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li>(2) purchase of <a href=\"https:\/\/pnl-law.com\/blog\/glossary-for-the-revised-corporation-code\/#Redeemable-Shares\">redeemable shares<\/a> by the <a href=\"https:\/\/pnl-law.com\/blog\/glossary-for-the-revised-corporation-code\/#Corporations\">corporation<\/a>, regardless of the existence of unrestricted retained earnings; and\u00a0<\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li>(3) dissolution and eventual liquidation of the <a href=\"https:\/\/pnl-law.com\/blog\/glossary-for-the-revised-corporation-code\/#Corporations\">corporation<\/a>.\u00a0<\/li><\/ul>\n\n\n\n<p>Furthermore, the doctrine is articulated in Section 41 [now <a href=\"https:\/\/pnl-law.com\/blog\/title-iv-powers-of-corporations-revised-corporation-code-of-the-philippines-republic-act-no-11232\/\">Section 40<\/a> under the <a href=\"https:\/\/pnl-law.com\/blog\/revised-corporation-code-of-the-philippines-republic-act-no-11232-full-text\/\">Revised Corporation Code<\/a>] on the power of a corporation to acquire its own shares and in Section 122 [now <a href=\"https:\/\/pnl-law.com\/blog\/title-xiv-dissolution-revised-corporation-code-of-the-philippines-republic-act-no-11232\/\">Section 139<\/a> under the <a href=\"https:\/\/pnl-law.com\/blog\/revised-corporation-code-of-the-philippines-republic-act-no-11232-full-text\/\">Revised Corporation Code<\/a>] on the prohibition against the distribution of corporate assets and property, unless the stringent requirements therefor are complied with.<\/p>\n\n\n\n<p>[Source: Ong vs. Tiu, G.R. No. 144476, 8 April 2003]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>First enunciated by the Supreme Court in the 1923 case of Philippine Trust Co. vs. Rivera, provides that subscriptions to the capital stock of a corporation constitute a fund to which the creditors have a right to look for the satisfaction of their claims.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1361],"tags":[1255,234,235,90,1254,1253,1312],"class_list":["post-5374","post","type-post","status-publish","format-standard","hentry","category-corporate-law","tag-corporate-law","tag-corporation","tag-corporations","tag-philippines","tag-republic-act-no-11232","tag-revised-corporation-code","tag-trust-fund-doctrine"],"_links":{"self":[{"href":"https:\/\/pnl-law.com\/blog\/wp-json\/wp\/v2\/posts\/5374","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pnl-law.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/pnl-law.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/pnl-law.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/pnl-law.com\/blog\/wp-json\/wp\/v2\/comments?post=5374"}],"version-history":[{"count":1,"href":"https:\/\/pnl-law.com\/blog\/wp-json\/wp\/v2\/posts\/5374\/revisions"}],"predecessor-version":[{"id":5377,"href":"https:\/\/pnl-law.com\/blog\/wp-json\/wp\/v2\/posts\/5374\/revisions\/5377"}],"wp:attachment":[{"href":"https:\/\/pnl-law.com\/blog\/wp-json\/wp\/v2\/media?parent=5374"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/pnl-law.com\/blog\/wp-json\/wp\/v2\/categories?post=5374"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pnl-law.com\/blog\/wp-json\/wp\/v2\/tags?post=5374"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}